TaxTMI 
TaxTMI 
2019 (8) TMI 1528
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Corporate Debtor. It is alleged that the Corporate Debtor has defaulted in payment of rent of aforesaid machinery. 2. At the outset, the RP states that the Applicant has filed the claim in the capacity of a Financial Creditor, however, the rental dues fall under the category of 'Operational Debt'. The Applicant was given ample opportunity to file its claim in the correct form, but it failed to do so, and therefore no such claim pertaining to outstanding rentals persists as on date. 3. Regardless of other contentions of the Operational Creditor, the RP's submissions are that one of the Directors of the Operational Creditor i.e. Mr. Anand Narayan Kadam was a General Manager of the Corporate Debtor at the relevant time, and thus falling under the head "key managerial personnel" of the Corporate Debtor as stated in section 5(24)(b) of the I&B Code defining the primary term "Related Party". Section 5(24)(b) of the I&B Code says that "related party" in relation to a corporate debtor means: "(a) ..... (b) a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor". 4. To this contention of RP, it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... V. Ms. Vandana Garg & Ors. [Company Appeal (AT) (Insolvency) No. 461 of 2018], wherein the Hon'ble Appellate Court had held that CoC once voted in favour of the Resolution plan, cannot change its views later. Respectfully following the ratio-decidendi , I am of the view that the Resolution Plan of the Corporate Debtor cannot be entertained by the coC at such belated stage. Time is the essence of the Code. The main object of the code is revival of sick companies in a time-bound manner and hence, by allowing this application I am conscientiously not inclined to set a wrong precedent for the implementation of the provisions of the Code. The timelines prescribed in the Code have to be adhered to in order to achieve the object of the Code. The Applicant cannot be allowed to file the Resolution plan after the completion of 270 days, that too after the application for approval of Resolution plan has already been filed before this Bench, as well as , when there is no CoC in existence. The CoC has already taken a decision in its commercial wisdom, which cannot be changed or altered. Hence, MA 2104/2019 is hereby rejected. C. Miscellaneous Application No. 662/2019 8. An Application ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1956, and existing under the Indian Partnership Act, 1932, having its principal office at Gat No. 892, Near Ingavale Mala Alate, Hatkanangale, Kolhapur, Maharashtra, 416109, was approved. 13. As per the Resolution Plan, the Resolution Applicants undertook to induct funds, either by way of additional equity or by way of debt, to implement the Resolution Plan. In compliance of Section 29A of the I&B Code and Regulation 38(2) of the IBBI (Insolvency Resolution process for Corporate persons) Regulations, 2016, a declaration has been submitted that the Resolution Applicants do not suffer from any of the disqualifications contemplated under section 29A and further under Regulation 38(2), they have submitted a term of the plan as well as an implementation schedule thereof. 14. The RP states that Bharat Co-operative Bank (Mumbai) Ltd. has issued a Letter dated 06.02.2019 bearing reference no. BCB/DHK/412/2019 in favour of the Resolution Applicant for granting an in-principle sanction for a term loan and cash credit for the amount of INR 20,00,00,000/- and INR 11,00,00,000/- respectively. The Balance Sheet and Profit & Loss Statements of the Resolution Applicant as on 31.12.2018 have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Sai Agro (India) Chemicals is Ethanol manufacturing firm, incorporated as on 31st October, 2003. Company mainly manufactures Ethanol and supplies it to the outside parties. Company has one of the best market goodwill for manufacturing and supplying Ethanol. Sai Agro (India) Chemicals chaired by Mr. Vijay Prakash Nade and Mr. Satish Satyanarayan Dandnaik. Some brief about Partners - 1) Mr. Vijay Prakash Nade - Mr Nade, having age 41, currently hold position of Chairman and Managing Director of DDN SFA Ltd. DDN SFA has a 1000 TCD Jaggery production plant in Osmanabad, Maharashtra. He has more than 15 years of experience in the Sugar Industry Business. Mr. Nade has also vast experience in agro products. Mr. Nade associates with many firms and company like - * M/s. DDN SFA Ltd. Mr. Nade has also best experience in turning around business. Recently DDN SFA Ltd took over Sri Shambhu Mahadev Shakari Sakhar Karkhana Tal. Kalmb, Dist. Osmanabad, which was closed for last 2 years. The said plant now merged into DDN SFA Ltd. 2) Mr. Satish Satyanarayan Dandnaik - Mr. Dandnaik, having age of 46, currently hold position of Cha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sal will facilitate to infuse the fresh shares capital amounting to Rs. 14 Cr. in the company by the resolution applicant. The revised capital structure of the company shall be as given below Name of the Shareholder Number of Shares Face Value Share Capital Shareholding % Mr. Vijay Prakash Nade 70,00,000 10 7,00,00,000 50 % Mr. Satish Satyanarayan Dandnaik. 70,00,000 10 7,00,00,000 50 % TOTAL 1,40,00,000 10 14,00,00,000 100 The necessary changes to the memorandum and articles of the company shall be made appropriately, if required. e. Raising fresh debt in the Company The Company shall avail fresh working capital limit of Rs. 10 Cr. In the event of infusion of debt, such debt shall be arranged without any obligation on members of CoC to provide such funds. Summary of the proposed funds infusion; Source of Funds First 30 -180 days Equity 14,00,00,000 Debt 21,00,00,000 Working Capital Limits 10,00,00,000 Total Sources of Funds 45,00,00,000 It is understood that in order to raise working capital limits of Rs. 10 Cr. as indicated above, the existi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs is Rs. 18.53 Cr. inclusive of CIRP cost. It will be paid within 180 days from the effective date. i. Payment to Unsecured financial creditors As per the Books of Accounts of the Company, claim submitted to Resolution professional and statistics contained in Information Memorandum there are no unsecured financial creditors. j. Payment of dues to related parties Debts from related parties amount to Rs. 2. Cr as per the last audited balance sheet. Any related party payables shall not be paid and shall be extinguished in full. k. Summary of proposed recovery to the financial creditor Particulars Claims (Rs. Cr.) Total Recovery (Rs. Cr.) % Recovery (Approx) Karad urban Co-op Bank Limited 30.27 18.16 60 Janakalyan Nagari Sah. Patasanstha 0.62 0.37 60 Total 30.89 18.53 60 l. Treatment of claims of various stakeholders and operational creditors As per Regulation 38(1) of Insolvency and Bankruptcy Regulations 2016, the amount due to the operational creditors shall be paid in priority to the financial creditors which shall in any event be made before expiry of 30 days after the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Creditors The Resolution Applicant is proposing to pay claims of Other Creditors the amounts stated above which is higher than the recoveries that they are likely to make in case of liquidation. The proposed payment towards trade payables dues under the plan is 40% as against NIL payment in liquidation scenario. Currency of Payment - All payments proposed to be made pursuant to this Proposed Plan will be in Indian Rupees (Rs.). m. Balancing the interest of all stakeholders The proposed plan balances the interests of all the stakeholders of the company as explained above. Although, as per the provisions of the code, no liquidation value is payable to any creditor other than secured creditors and workers, the Resolution Applicants propose to pay all other creditors in a manner explained above. Additionally, all workers and employees will continue to be employed with the company. This makes this proposed plan balanced. n. Claims after approval of the Proposed Plan The Code and the CIRP Regulations entitle all creditors of a corporate debtor to submit their claims to the RP on or prior to the date on which the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry (Rs. Cr.) & % Terms of Payment Liquidation Value (Rs. Cr.) 1 Employees and workers 0.70 0.70 Cr. (100%) To be paid Within 180 Days from the effective date NIL 2 Statutory Dues 0.24 0.24Cr. (100%) To be paid Within 180 Days from the effective date NIL 3. Secured financial creditor 30.89 18.53 Cr. (60%) Payment to secured financial creditors of Rs. 18.53 Cr. Shall be made within 180 days from the Effective date Gross amount Rs. 13.53 (43.8%) 4. Trade Payable 1.50 0.60Cr. (40%) To be paid within 180 days from the effective date NIL 5. Other Creditors 24.16 9.67Cr.(40%) To be paid within 24 months from the effective date NIL Total 57.49 30 13.53 The CIRP cost including all taxes shall be paid in full and shall have priority over all other payments. This cost shall be paid in priority within 30 days from the effective date. Any change in the actual CIRP Cost will not affect the total pay-out of Rs. 18.53 Cr. as provided in the Resolution Plan. The CIRP Costs shall include (but not be limited to) the professional fees for services rendered by R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Plan will be implemented in accordance with such approvals and changed timelines. 7. MANAGEMENT OF THE COMPANY The Company shall continue as a going concern and operate in its normal course of business upon implementation of the Proposed Plan. The management of affairs of the Company after approval of the plan would be done as follows. a. Formation of New Board It is proposed that the Company shall be a Board managed company upon approval of the Proposed Plan. A Board would be formed within 90 days from the effective date and would be accountable for the day to day operations of the Company and shall be bound as per applicable law to protect and preserve the value in the Company. b. Operations of the Company The resolution applicant and its management shall have following roles and responsibilities; image c. Appointment of Statutory Auditors The resolution applicants will appoint M/s Sushant Phadnis & Co. as new statutory auditors and existing auditors will vacate their office after approval of resolution plan and handover all the requisite documents including soft copies of books of accounts of corporate de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of resolution plan as approved by NCLT, by the new management of the Company; ii. To provide regular updates to the consortium formed by the lenders; iii. To provide updates to Insolvency and Bankruptcy Board of India (IBBI) as and when required; iv. To ensure disbursement of dues to financial and operational creditors as per the approved plan; The Resolution Applicants agree pay fees to monitoring agency based on mutual consent. The Monitoring Agency shall be allowed to use legal counsel of their choice for any legal advice that it may need. Legal fees shall be paid over and above the monitoring agency fee. The resolution applicant shall pay fees of the monitoring agency in priority to all other liabilities. It is clarified that in the event the Company is liquidated, the fees of the Monitoring Agency shall form part of the liquidation process costs and shall have priority in terms of the payment under the waterfall mechanism stipulated under the Code, The tenure of the monitoring agency shall continue till the payment of dues of the secured creditors is complete. 9. OTHER TERMS & CONDITIONS a. Amendment in const....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for appropriate modification of such provisions of the Proposed Plan, in satisfaction of the NCLT, and such invalidity and/or unenforceability of the provision of the Proposed Plan shall not render the whole Proposal Plan ineffective, unless otherwise directed by the NCLT by order. In case any such modification is required in the Proposed Plan after the receipt of NCLT approval, to comply with any laws currently in force or to apply for certain approvals as required under the Proposed Plan or for any other requirements, not jeopardising the rights of the Creditors under the currents plan, the Resolution Applicants can do so only after approval of National Company Law Tribunal (NCLT). g. No Interest Clause No interest on dues as on January 1, 2018 - No interest shall be paid on the claims (financial, other creditors and operational) as on January 1, 2018 under the Proposed Plan. h. Assignment of Interest If any of the Creditors assigns its dues either partially or fully to any other Person/ entity any time after approval of COC, then this term sheet and the Proposed Plan shall be binding on the assignee. i. Validity of Proposed P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plan. Business Plan is annexed hereunder as Annexure - A 10. Compliance with laws in force Resolution Applicant hereby confirms that the terms provided in the resolution plan are in compliance with Applicable Law including any prospective change of such terms pursuant to discussions with CoC. The Resolution Applicants and the proposed plan agree to comply with all applicable laws under the proposed resolution plan, whether or not specifically provided in the plan. We understand that the members of the CoC have further right to renegotiate the terms of this Resolution Plan and the decision of the CoC in selection of the Successful Resolution Applicant shall be final and binding on us. 11. Mandatory contents and compliances of the resolution plan Section of the Code / Regulation Requirement with respect to Resolution Plan Clause of Resolution Plan Compliance (Yes / No) 25(2)(h) Whether the Resolution Applicant meets the criteria approved by the CoC having regard to the complexity and scale of operations of business of CD? Clause 4 Yes Section 29A Whether the Resolution Applicant is eligible to submit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses the cause of default? Yes b. it is feasible and viable? Annexure A Yes c. it has provisions for its effective implementation? 9 Yes d. it has provisions for approvals required and the timeline for the same? Clause 7 Yes e. the resolution applicant has the capability to implement the resolution plan? Clause 4 Yes 39(2) Whether the RP has filed applications in respect of transactions observed, found or determined by him? No DECLARATION OF SOURCE OF FUNDS AS PER THE APPLICANT REPRODUCED BELOW: "As part of your documentary requirements to submit a resolution plan under Insolvency and Bankruptcy Code, 2016, I/we understand that I/we am/are required to declare the source of the funds that I/we will be depositing into the special account/s including future escrow account which needs to be opened after approval of resolution plan by COC to deposit Rs. 4.75 Cr. whether in cash, cheque, EFT, RTGS, SWIFT or any other method. Accordingly, I/we wish to declare as follows: That I/We: Mr. Vijay Nade, and Mr. Satish Dandnaik, hereinafter known as Resolution Applicants for/on behalf of Sai Ag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....portions of the Resolution Plan, it has been brought to our notice that one of the justifications for approval of the Resolution Plan is that the Liquidation Value is less comparing the proposals made in the Resolution Plan. The records of the case have revealed that the valuers have valued the 'liquidated value' at Rs.13.53 Crores and the 'Fair Value' at Rs. 21.70 Cr. The Resolution Applicant is bringing in a sum of Rs.29.74 Crores to satisfy Financial Debt . It is noticed that Karad Bank had raised a claim of Rs. 30.27 crore. however only 60% i.e. Rs. 18.16 Cr. And Janklayan Patsanstha had a claim of Rs. 62 lakhs , against that proposed 60% i.e. Rs. 37 lakhs. 18. Regulation 35 of IBBI (CIRP) Regulations, 2016 prescribes that two registered valuers be appointed to give the RP an estimate of the fair value and the liquidation value, respectively assessed at Rs. 21.70 Cr and 13.53 Cr. 19. Further, case records were perused and noticed that the compliances of the insolvency Code have been fulfilled. The Procedure as prescribed under The Code is that a Resolution Plan is required to be submitted by a Resolution Application U/s 30 of The Code. On approval, the Resolution Professi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....above discussion, the Resolution Plan as approved by the Committee of Creditors is by and large hereby sanctioned by this Order in view of the recent judgement of the apex court in K Sashidhar & Indian Overseas Bank & ors.[Civil Appeal No. 10673/2018], Date of order: 05.02.2019. The Hon'ble Supreme Court in the said order has made the role of COC quite vital for deciding the fate of the company. It has been held that the Adjudicating authority is not required to go into the merits or reasoning of the decision taken by the COC for approval or rejection of a resolution plan. The only benchmark which is set up to be determined by the AA is to see whether the plan has been approved by 75% voting of the COC or not. Therefore, the commercial wisdom is not allowed to be interfered with. The relevant portion of the said judgement is reproduced herein below: "As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse ....