TaxTMI 
TaxTMI 
2019 (4) TMI 910
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....mitted by the Ld. Counsel on behalf of RP as well as CoC that the CP(IB)No. 88/2017 was filed by one Neeraj Papers Pvt. Ltd., the Operational Creditor under section 9 of the Code seeking initiation of Corporate Insolvency Resolution Process against Rainbow Papers Ltd (hereinafter referred to as "Corporate Debtor" having registered office at 801, Avdesh House, 8th Floor, Opp. Gurudwara Govinddham, S.G. Highway, Thaltej, Ahmedaba. 3. The said CP(IB) No. 88/2017 was admitted on 12.09.2017 by this Adjudicating Authority appointing IRP, on obtaining the recommendations from IBBI, Shri George Samuel on 22.09.2017. 4. On appointment of IRP, public announcement was made as per the provisions of section 15 of the Code calling upon the claims from the creditors. The public announcement was published in leading newspapers i.e. "Economic Times" and "Divya Bhaskar" on 26.09.2017, keeping the last date for submission of claims as 05.10.2017. 5. That on receipt of claims by 05.10.2017, Committee of Creditors was/is constituted on 10.10.2017 and the list of creditors is filed before this Bench as Annexure-D. Thereafter, IRP prepared Interim Information Memorandum dated 16.10.2017 on the b....
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....found that Resolution Applicant has not made sufficient improvement in the resolution plan dated 31.03.2018. Hence Resolution Applicant was also directed to proceed with the forensic audit of the Corporate Debtor. 12. It is submitted that in the 7th meeting of CoC dated 03.05.2018, the scope of the forensic audit was decided and the revised resolution plan was further discussed and accordingly, the Resolution Applicant was directed to submit the improved resolution plan removing some of the legal defects as observed in the plan. 13. The Resolution Applicant again filed the amended resolution plan on 26.05.2018. On scrutiny RP issued certificate on 28.05.2018 in compliance of the Regulation 39(2). Accordingly, RP/the applicant issued notice dated 29.05.2018 for convening the eighth and final meeting of the CoC on 04.06.2018. In the said meeting, CoC sought certain changes in the plan. In view of that, the Resolution Applicant was permitted to provide the addendum to the revised plan within a period of one (1) day which was accepted and duly acted upon by the Resolution applicant. 14. The said amended revised resolution plan along with the addendum dated 05.06.2018 was place....
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....of the offer amount (refundable, if resolution plan is not accepted), to the credit of a specified Bank Account of Corporate Debtor or by way of demand draft along with the submission of the resolution Plan. (v) The minimum offer amount shall be Rs. 535 Crores or more towards payment to the financial creditors; (vi) In case, if Resolution Applicant is ARC/PE, the Assets Management Portfolio of such ARC/PE shall be Rs. 2500 Crores or more. 21. In view of the publication of announcement calling EoI, two EoI were received in relation to eligibility of resolution of the applicant, which were discussed in the CoC. The Resolution Plan of Kushal Limited jointly with Mr. Sandip Agrawal did not meet with the criteria of the initial deposit of 5% as on stipulated date. Hence the CoC rejected the Resolution Plan. The letter received from M/s. M.R. Agarwal Industries Ltd. was also discussed. To receive the better plan, CoC decided to revise EoI by relaxing certain conditions. The revised conditions are as under: 1. The Net worth (NW) of the Resolution Applicant as on 31.03.2017 (as per the Audited Balance Sheet of Resolution Applicant) shall be INR 200 Crores; ....
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.... applicant may submit a resolution plan to the resolution professional prepared on the basis of the information memorandum. Prepared on the basis of information provided into the Information memorandum 136-137 (2) The RP shall examine each resolution plan received by him to confirm that each resolution plan :- A Provides for the payment of the IPR costs in the manner specified by the Board in priority to the repayment of other debts of the corporate debtor. CIRP cost of Rs. 2 crores has been provided into the resolution plan. 147 B Provides for repayment of debts of operational creditor in such manner as specified by the Board which shall not be less than the amount to the paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53 155-156 C Provides for management of the affairs of the Corporate Debtor after approval of the Resolution Plan Resolution Applicant has provided the detail of management of the affairs of the corporate debtor after approval of resolution ....
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....ed into the plan 171 (c) Adequate means for supervising its Implementation Same has been Provided into the Plan 171 3 [3rd Amendment - 07-11-2017 A resolution plan shall contain details of the resolution applicant and other connected persons to enable the committee to assess the credibility of such applicant and other connected persons to take a prudent decision while considering the resolution plan for its approval. Explanation: for the purposes of this sub-regulation - (i) 'details' shall include the following in respect of the resolution applicant and other connected person, namely :- ............ The word connected person is also defined there. Detail of Resolution Applicant and other connected persons are included in the resolution plan Certificate of Resolution Professional u/s 29A. 26. It is found that RP/the applicant is duly authorized to submit the approved resolution plan before this Bench for approval in accordance with the provisions of the Code. Though resolution plan was approved by CoC by 72.79% of voting, however, in view of the amendment in Section 30 of the Code, 2018 which came i....
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....e of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection". "35. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not confirm to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of Insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referre....
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....rant, which is 25%, is a credit given by the Resolution Applicant to the applicant, the operational creditor. However, this provision is not compulsive and the applicants, the operational creditors are not compelled to take the shares. It is submitted by the applicant, the operational creditor, that by this arrangement, the operational creditor will lose 65% of the amount, if the applicant subscribes the shares. 28.2 IA 272 of 2018 - Swastik Coal Corporation Private Limited It is stated that the applicant submitted the proof of the claim for Rs. 4,94,71,355/1 to the IRP along with the affidavit dated 30.09.2017 with all the relevant documents. The total amount of the claim included interest as on the insolvency commencement date. However, the Resolution Professional reduced the claim to Rs. 3,22,51,656/- without giving any explanation. It is stated by the applicant that as per the resolution plan, applicant, the operational creditor will get cash payment of the 10% of the total outstanding amount in five equal installments from the 3rd to 7th year after the effective date. It is also stated by the applicant that apart from 10% of the outstanding amount, the Resolution Plan....
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.... the applicant from the category of Secured Financial Creditor to Unsecured Financial Creditor. It is stated by the applicant that respondent No. 1 had considered the claim of the applicant as Unsecured Financial Creditor on the basis of Form C and legal opinion that had been sought from an advocate. 28.4 IA 337 of 2018 - Virat Enterprises It is stated that the applicant submitted the proof of the claim for Rs. 41,01,098/- to the IRP along with the affidavit dated 29.09.2017 with all the relevant documents. The total amount of the claim included interest as on the insolvency commencement date. However, the Resolution Professional reduced the claim to Rs. 29,38,689/- without giving any explanation. It is stated by the applicant that as per the resolution plan, applicant, the operational creditor will get cash payment of the 10% of the total outstanding amount in five equal installments from the 3rd to 7th year after the effective date. It is also stated by the applicant that apart from 10% of the outstanding amount, the Resolution Plan provides for issue of share warrant with an option to purchase the shares by paying 75% of the offer price within the next 18 months at thei....
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....he applicant that RP in reply to his letter dated 22.10.2018 has informed the applicant as under: "Applicant's claim has been shown under the head "Proposal for Contingent liabilities of the Corporate Debtor' and all the above contingent liabilities which may or may not have been confirmed in the past, during or before the CIRP or even may be confirmed in the time to come are proposed to waived off fully. Even any other known or unknown (whether recorded or not recorded in books) are proposed to be waived of fully". 29.4 Being aggrieved with the reply received from the RP of the Corporate Debtor, the applicant has filed this P-01 of 2019 stating that Resolution Plan submitted to this Bench of NCLT is clearly in contravention of provisions of Section 30(2)(e) of the Code as it contravenes the provisions of the law being in force, being Gujarat Value Added Tax, 2003 and Central Sales Tax Act, 1956 by waiving off the dues of the Gujarat Value Added Tax and Central Sales Tax as payable to the Applicant as suo moto. 29.5 The applicant admittedly filed this application before this Bench on 19.12.2018 and on perusal of the records, it is observed that the applicant ....
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....applicant vide email dated 24.11.2017 and filed this Interlocutory Application with this Tribunal on 24.07.2018 after a lapse of 9 months for the reasons best known to the applicant. 30.2 It is submitted by the Resolution Professional that as far as IA No. 272 of 2018 is concerned, the claim of the applicant for Rs. 4,94,71,355/- (Four Crores Ninety-Four Lakhs Seventy-One Thousand Three Hundred Fifty-Five Only) was examined with all professional diligence and documents examined in support of the claim and the books of account of the corporate debtor. It was found that there was discrepancy in the amount claimed and the amount legally due and payable. The account was reconciled and the claim was admitted at Rs. 3,22,51,656/- and the same was informed to the applicant vide email dated 24.11.2017 and filed this Interlocutory Application with this Tribunal on 24.07.2018 after a lapse of 9 months for the reasons best known to the applicant. 30.3 With respect to the averments made in paragraph 4(viii), the respondent, the Resolution Professional denies that during the course of meeting of CoC held on 04.06.2018, it was casually informed to the applicant by the Resolution Profession....
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....es (Rupees Six Hundred Thirty-Two Crores and Sixty-Seven Lakhs Only) which is way beyond the liquidation value of the Corporate Debtor. It is pertinent to mention here that the total outstanding amount due to the financial creditors is around Rs. 1468.25 crores, whereas the total amount due to the operational creditors is to the tune of Rs. 139.40 crores. 31.2 It is further submitted by the Resolution Professional, that liquidation value due to the applicant(s) shall be NIL as per Section 53 of the IBC, which provides for the distribution of the proceeds from the sale of the liquidation assets of the Corporate Debtor. The liquidation value of the Corporate Debtor is Rs. 424 crores, whereas the outstanding dues of the Financial Creditors, is around Rs. 1437.11 crores. Therefore, the applicants shall not be entitled for any stake from the proceeds of the liquidation of estate of the Corporate Debtor. The percentage wise stake of all the stakeholders is presented in a tabular form: S. No. Type of Stakeholder/Creditor Total claim of Stakeholder (Rs. In crores) % age of Stakeholder in total claim 1 Secured Financial Creditors 1437.11 88.85 2 Unsecured....
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....Requirements) Regulations, 2009. 3. If the Unsecured Financial Creditors exercise the option to convert Share Warrants into Equity Share they will be required to pay the balance subscription amount of Rs. 13.80 crores i.e. 3X (three times) of Initial subscription amount out of the total amount of Share Warrants, on payment of which the Share Warrants will be converted into Equity Shares by allotment. 4. If the Unsecured Financial Creditor do not exercise the option to convert Share Warrants into Equity Shares, the initial amount of 25% as adjusted or appropriated shall stand forfeited in accordance with Regulation 77(4) of the Chapter VII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Notwithstanding such forfeiture, the liability of the resolution Applicant/Corporate Debtor against the unsecured Financial Creditor would stand discharged in full pursuant to this Resolution Plan. 5. The time period allowed for exercising the option for conversion of Share Warrants into Equity Shares shall be 18 months from the date of allotment of warrants as per Chapter II of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.....
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....ebts owed to unsecured creditors; (e) The following dues shall rank equally between and among the following: - (i) Any amount due to the Central Government and the State Government including the amount to be received on account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date; (ii) Debts owed to a secured creditor for any amount unpaid following the enforcement of security interest; (f) Any remaining debts and dues; (g) Preference shareholders, if any; and (h) Equity shareholders or partners, as the case may be. (2) Any contractual arrangement between recipients under sub-section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator. (3) The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipients shall be distributed after such deduction. Explanation - Fo....
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.... the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the 2[payment] of other debts of the corporate debtor; (b) provides for the 3[payment] of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53; (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. 4[Explanation - For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013(18 of 2013) or any other la....
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....lution plan as approved by the committee of creditors to the Adjudicating Authority." Section 31: Approval of resolution plan: "31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. 1[Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the res....
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....lan by this Adjudicating Authority is rule as per the Apex Court's decision in the matter of K. Sashidhar (supra) as discussed above. Furthermore, the Resolution Plan not only meets the requirements of sub-section (2) of section 30 of the Code, but the offer made by the Resolution Applicant amounting to Rs. 632.67 crores as against the liquidation value of Rs. 424 crores which is much higher than the liquidation value. 38. Under the facts and circumstances as narrated hereinabove, we are of the considered opinion and also satisfied that Resolution Plan as approved by the Committee of Creditors "CoC" meets the requirements as referred to under section 30(2) of the Insolvency and Bankruptcy Code, 2016 and therefore, IA 224 of 2018 is liable to be allowed as prayed for. Accordingly, we hereby approve the Resolution Plan dated 26.05.2018 along with Addendum dated 05.06.2018 submitted by the RP with approval of the CoC with following observations: (i) The Resolution Plan dated 26.05.2018 along with Addendum dated 05.06.2018 which is approved by the financial creditors of the CoC with voting share of 72.79% is hereby approved under the provisions of Section 31(1) of the C....