TaxTMI 
TaxTMI 
2019 (6) TMI 1152
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appointed by order dated 30.01.2018. The resolution plan has been approved by the Committee of Creditors (CoC). CA No.339/2018 for sanction of the plan has been filed by the resolution professional. 2. The CA No.477/2018 is filed by Shri Rajit Mehra, ex-Director of the corporate debtor under Section 60(5) and other applicable provisions of the Code for impleadment as respondent/objector in CA No.339/2018 filed by the Resolution Professional for approval of resolution plan (supra) and for placing on record the objections of the ex-Director to the resolution plan purportedly approved in the meeting of CoC held on 30.06.2018. 3. Learned counsel for the applicant has pleaded that he is entitled to attend the meeting of CoC and is a shareholder of the corporate debtor and therefore, his application for impleadment as respondent/objector be accepted. 4. We have carefully considered the submissions of the learned counsel for the applicant at the preliminary stage and have also perused the record. We find that as per Section 24 of the Code, the ex-Director is entitled to attend the meeting of CoC but has no right to vote in the decision of the CoC. The perusal of the minutes of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition on 03.02.2018 thereby inviting claims from the creditors of the corporate debtor as envisaged in the Code. 3. It is submitted that in pursuance of the public announcement, claims were received from the financial as well as operational creditors, which were verified and after collation, the IRP constituted the CoC as per the provisions of Section 21 of the Code. It is stated that initially, the CoC was constituted with two financial creditors i.e. Punjab National Bank having a voting share of 62.4% and Oriental Bank of Commerce having a voting share of 37.6% and later on, Kotak Mahindra Bank also filed their claim as one of the financial creditors which was approved by the RP, in view of unamended Regulation 12 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 on 29.06.2018 with 0.86% voting share and constitution of the Committee of Creditors and their voting share was amended accordingly and intimation in this regard was intimated to this Tribunal vide diary No.2703 dated 04.07.2018. After accepting the claims of Kotak Mahindra Bank the changed voting share of the financial creditors is Punjab National Bank 61.86%, Oriental Bank of Commer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....revised as per provisions of Regulation 36 (A) of the Regulations with the approval of CoC in their fifth meeting held on 04.05.2018 and the revised evaluation matrix was duly shared with the prospective resolution applicants as per Regulation 36 (A) of the Regulations. 9. It is submitted that all the resolution plans were opened in front of the CoC in the sixth meeting held on 14.05.2018 and it was resolved to defer the approval of resolution plan for further evaluation. 10. It is stated that in seventh meeting of CoC held on 05.06.2018 an agenda was put forward for adoption of Swiss Challenge Method for maximisation of the value of CIRP process and in the eighth meeting of CoC held on 12.06.2018, CoC resolved to decline the Swiss Challenge Method but in the ninth meeting of CoC held on 25.06.2018, they reconsidered their earlier decision and all members of the CoC resolved to adopt the Swiss Challenge Method for maximisation of the CIRP value and also resolved that in accordance with the Swiss Challenge Method, the H2 and H3 bidders would be given one final opportunity to make a revised/final/binding bid in their resolution plans by 27.06.2018 and if this revised/final/bind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e ex-Directors of the suspended Board of Directors and in case they want to represent themselves, an application for intervention may be filed which shall be disposed of on its own merits. Notice of the application was, however, directed to be issued to the resolution applicant and the RP was also required to file certificate to the effect that the contents of the resolution plan fulfil all the requirements of the Code and the Regulations and that the Resolution Plan stands duly approved by the CoC. The RP was also directed to file compliance certificate in Form H. 14. Vide diary No.3415 dated 10.09.2018, the copy of certificate/undertaking that the contents of the resolution plan fulfil all the requirements of the Code and Regulations and that the resolution plan stands duly approved by the CoC was filed as Annexure A-2 and copy of the Form H was filed as Annexure A-3. During the course of hearing on 11.09.2018, the compliance affidavit was taken on record and the application was directed to be listed on 15.10.2018. 15. CA No.399 of 2018 was filed by the financial creditor Punjab National Bank for preponing the date of 15.10.2018 on the ground that the period of time after t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of land on which the power plant of the corporate debtor is situated has been ordered to be vested with the State Government; no care has been taken for the dues of operational creditors and statutory dues. 18. During the course of the hearing, the learned Senior Counsel for the resolution applicant stated on instructions that the resolution applicant undertakes to abide by any of the directions/judgements/orders/interim orders or otherwise subject to right to challenge these orders in respect of the assets/properties of the corporate debtor unconditionally and the undertaking was taken on record. It was also submitted that a Writ Petition was pending in the Hon'ble High Court of Uttrakhand. It was submitted by the learned Senior Counsel for the resolution applicant that an amount of Rs. 50,00,000/- in addition to the revised bid amount of Rs. 45.12 crores shall be kept apart and deposited in a separate account in consultation with the monitoring agency within a period of seven days from the date of receipt of certified copy of the order that may be passed in this case. 19. The learned counsel for the RP submitted on instructions that no claim with regard to statutory du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....follows:- (Amount in Rs. Crs) Sl. No. Category of Stakeholder* Amount Claimed Amount Admitted Amount Provided under the Plan# Amount Provided to the Amount Claimed (%) 1. Dissenting Secured Financial Creditors NIL NIL NIL NIL 2. Other Secured Financial Creditors (i) Punjab National Bank 98.76 98.76 27.48 27. 83 (ii) Oriental Bank of Commerce 59.51 59.51 16.56 27. 83 (iii) Kotak Mahindra Bank 1.37 1.37 0.38 27.73 3. Dissenting Unsecured Financial Creditors NIL NIL NIL NIL 4. Other Unsecured Financial Creditors NIL NIL NIL NIL 5. Operational Creditors (M/s. Mecamidi HPP India Private Limited) 4.71 4.71 0 0 Government NIL NIL NIL NIL Workmen NIL NIL NIL NIL Employees NIL NIL NIL NIL ..... 6. Other Debts and Dues NIL NIL NIL NIL Total 164.35 164.35 44.42 - 24. The compliance of the resolution plan has been given in para No.9 of Form H (supra) as follows:- Section of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....age 338. Yes Regulation 38 (1) Whether the Resolution Plan identifies specific sources of funds that will be used to pay the - (a) insolvency resolution process costs? (b) liquidation value due to operational creditors? (c) liquidation value due to dissenting financial creditors? Undertaking dated 06.06. 2018 Yes Regulation 38(1A) Whether the resolution plan includes a statement as to how it has dealt with the interests of all stakeholders? Mentioned in the Resolution Plan on Page 242 of paper book. Yes Regulation 38(2) Whether the Resolution Plan provides: (a) the term of the plan and its implementation schedule? (b) for the management and control of the business of the corporate debtor during its term? (c) adequate means for supervising its implementation? Mentioned in the Resolution Plan on Page 244 of paper book. Yes 38(3) Whether the resolution plan demonstrates that - (a) it addresses the cause of default? (b) it is feasible and viable? (c) it has provisions for its effective implementation? (d) it has provisions for approvals required and the timeline for the same? (e) the resolution applicant has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... matrix and to the mind of the CoC is the most suitable applicant to ensure the maximisation of the value of the assets of the corporate debtor. The scoring table of resolution applicant for evaluating their resolution plan as per the evaluation matrix is in item No.5 of the minutes of the tenth meeting of the CoC held on 30.06.2018 as under:- Sl. No. Basis of Scoring Maximum Points Scores Earned Kundan Care Products Limited Ajanta Energy Private Limited Agam Pulp & Paper Private Limited 1. Payment basis 90 90 90 90 2. Financial Strength I. Time for completion and making the Project Operational 6 6(12 Months) 3(24 Months) 5(16 Months) II. Means Available for Acquisition & Operating 4 3 4 3 10 9 7 8 Total 100 99 97 98 28. The score and the criteria adopted in the evaluation matrix as well as the other discussions in the CoC meeting would show that the feasibility and viability were taken into consideration. 29. The objections raised by the learne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 ..... 31. The compliance of Section 30(2) of the Code is given in para No.9 of Form H (supra). The same is being further examined as under:- Section 30(2)(a): The resolution plan (page 242 of the application) states that after paying cost of resolution process costs, the balance amount shall be distributed amongst the creditors; Section 30(2)(b): It is stated in Form H that the liquidation value is Rs. 15.38 crores. In view of the debts of the secured financial creditors being Rs. 159.64 crores, the liquidation value available for the operational creditor would be NIL. The resolution plan however, provides for payment of Rs. 50,00,000/- to operational creditors on the ground that many operational creditors did not file their claims to the RP in time but being the local area operational creditors, they are in a position to create hurdles for project work and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terim orders or otherwise subject to the right to challenge these orders in respect of the assets/properties of the corporate debtor unconditionally and the undertaking has been taken on record. The learned Senior Counsel for the ex-Director has disputed the valuation of the assets of the corporate debtor on the ground that the liquidation value is Rs. 15.39 crores, whereas the financial bids of Rs. 45.11 crores, Rs. 45.12 crores are three times higher. We find that in para 2 of Form H (supra), the fair value is stated to be Rs. 25.90 crores (average of both the valuation reports). Moreover, the quantum of the financial bids shows that the bidding process conducted achieved good results. As regards the plea of conflict of interest between valuer and debris removal agency, we find that the valuer is R.K. Associates Valuers and Techno Engineering Consultants Private Limited and debris removal agency is R.K. Associates (refer Item No.4 of 10th meeting of CoC at Annexure A-14 of the petition). Section 30(2)(c) & (d): At page 10 of the resolution plan (page 244 of the application), it is stated that the proposal is for outright purchase of the unit by way of 100% takeover of share....
X X X X Extracts X X X X
X X X X Extracts X X X X
....30(3) of the Regulations have been by and large taken into consideration by the CoC while approving the Resolution Plan and largely form part of compliance desired under other Regulations and Sections of the Code. We may add that the time frame proposed for obtaining relevant approvals is given in para 11 of Form H (supra) 32. We are now examining the compliance of the proviso to Section 31(1) of the Code that the resolution plan has provisions for its effective implementation. The resolution plan states that the proposal is for outright purchase of the unit and as per page 246 of the application, the maximum net worth as on 31.03.2018 of M/s. Kundan Care Products Ld. is stated to be more than Rs. 95.00 crores and revenues Rs. 21970 crores, EBITDA Rs. 86.30 crores (provisional) for the financial year 2017-18. Page 250 of the application is a solvency certificate issued by M/s. ANV & Company, Chartered Accountants certifying that M/s. Kundan Care Products Ltd. is solvent to the extent of Rs. 95.00 crores as disclosed by the information and records (provisional balance sheet as on 31.03.2018) which are supplied and available to them. General profile as well as financial profile of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the Code and CIRP Regulations made thereunder and after considering the feasibility and viability and other requirements specified by the CIRP Regulations. The final consideration payable by the resolution applicant M/s. Kundan Care Products Ltd. is up front payment of Rs. 45.12 crores towards insolvency resolution process costs and secured financial creditors and Rs. 50,00,000/- for the operational creditors within a period and for the purpose discussed above. The members of the CoC were given an opportunity of being heard and have stated that all the three financial creditors have approved the plan and no objections are to be filed. We have already pointed out above that the consideration of Rs. 45.12 crores plus Rs. 50,00,000/- is more than that of the fair value of Rs. 25.90 crores and liquidation value of Rs. 15.38 crores (para 2 of Form H) (supra). We have discussed above that CA No.477/2018 was filed by the ex-Director of the suspended Board of Directors Shri Rajit Mehra and his plea for impleadment was not accepted but in the interest of justice, the objections raised by the learned counsel have been considered above. We may add here that an application (CA No.442/2018....