TaxTMI 
TaxTMI 
2019 (11) TMI 1517
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....m as agreed upon with the requisite majority of the Committee of Creditors (hereinafter referred to as CoC) by 67.08% votes in favor of the Resolution Plan as per the provisions of the Code. 2. For the sake of convenience, it is mentioned herein that: 2.1 CP(IB) No. 162/2018 was filed by SMC Industries Pvt. Ltd., the Operational Creditor under Section 9 of the Code seeking initiation of Corporate Insolvency Resolution Process against Shaifali Rolls Limited (hereinafter referred to as "Corporate Debtor") having registered address at Block No. 1563, Sola, Kalol, Village Santej, Kalol in the State of Gujarat. 2.2 The said CP(IB) No. 162/2018 was admitted on 14.09.2018 by this Adjudicating Authority and appointed Shri Parag Sheth, as the Interim Resolution Professional (hereinafter referred to as "IRP") under Section 13(1) of the Code, in respect of the Corporate Debtor 2.3 The Resolution Professional, so appointed, made a public announcement inviting claims from all the creditors in Form A of the Schedule II as per Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as....
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....e decision of CoC taken in its third meeting held on 23rd January, 2019. 3.2 It is stated that in the third meeting of CoC held on 23rd January, 2019 it was decided to apply for extension of CIRP under Section 12A of the Code for further 90 days beyond 180 days and accordingly, the application was filed before this Adjudicating Authority on 25th February, 2019. This Adjudicating Authority vide its order dated 28th March, 2019 extended the CIRP period by 90 days beyond 180 days which expired on 12.03.2019. 4. It is stated that RP received two resolution plans, one from Legend Trade Corp and the other from M/s. Fitcast. The Resolution Plan received from Legend Trade Corp was rejected by the CoC whereas the Resolution Plan received from M/s. Fitcast (hereinafter referred to as "RA") was discussed and deliberated upon by the CoC. In the said fourth meeting of CoC, RP informed the CoC that Central Bank of India has declared Corporate Debtor and its directors Mr. Prakash Shah and Mr. Sangeeta Shah as willful defaulters who are also shareholders of M/s. Fitcast, i.e. the RA and which may frustrate the chances of M/s. Fitcast being an eligible RA. However, the notarized affidavit sub....
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.... 3.25 5. Edelweiss Asset Reconstruction Company Limited 0 0 7.67 7.67 6. Omkara Assets Reconstruction Pvt. Ltd. 1.57 0 0 1.57 7. Invent ARC Pvt. Ltd. Trust Invent/1516/S61 20.19 0 0 20.19 8. Union Bank of India 5.54 0 0 5.54 Total Count 67.08 0 32.92 100 5.2 The RP, the Applicant confirms the compliance of the Resolution Plan, as under Section 30(2) of the Code and Regulation 38A of the CIRP Regulations and provided a compliance checklist for seeking approval of the Resolution Plan from this Adjudicating Authority. The compliance of the Resolution Plan: Section of the Code Regulation No. Requirements with respect to Resolution Plan Clause of Resolution Plan Compliance (Yes / No) 25(2)(h) Where the Resolution Applicant meets the criteria approved by the Committee of Creditors having regard to the complexity and scale of operations of business of the Corporate Debtor? Clause No. 10. Page No. 43 Yes Section 29A Whether the Resolution Applicant is eligible to submit resolution plan as per final list of Resoluti....
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....ement and control of the business of the corporate debtor during its term? Yes (c) adequate means for supervising its implementation? Yes 38(3) Whether the resolution plan demonstrates that- (a) it addresses the cause of default? Clause10, Page No. 42 Yes (b) it is feasible and viable? Yes (c) it has provisions for its effective implementation? Yes (d) it has provisions for the approvals required and the timeline for the same? Yes (e) the resolution applicant has the capability to implement the resolution plan? Yes 39(2) Whether the RP has filed application in respect of transactions observed, found or determined by him? Yes 6. The present application is filed for approval of the Resolution Plan under section 30(6) of the Code submitted by Consortium between Fitcast Founders & Engineers Pvt. Ltd. & Omkara Assets Reconstruction Pvt. Ltd., in respect of the Corporate Debtor. 6.1 The applicant i.e. RP, deliberating the sequence of events right from calling ....
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....added to the payment being made to the Financial Creditors & if CIRP Cost is more than Rs. 25,00,000/- then RA shall provide fresh fund. 25,00,000/- Within T+2 Days Para 7.2 in Page No. 30 The RA will infuse Rs. 0.25 Crore and will get Equity Shares of Corporate Debtor worth Rs. 0.25 Crore in the name of Fitcast Founders & Engineers Private Limited. Payment of Workmen & Employees Dues Payment towards discharge of the Operational Creditors being the liabilities pertaining to the Workmen and Employees Dues in full and final settlement: 1.17 Crores (workers / employees have not made any claim but as per B/S as at 31.03.2018, an amount of Rs. 1.17 Cr. was payable which has been provided in the plan) 1,17,00,000 Within T+180 Days Para 7.3 in Page No. 30 The RA will infuse Rs. 1.17 Crore and will get Equity Shares of Corporate Debtor, worth Rs. 1.17 Crore in the name of Fitcast Founders & Engineers Private Limited. Payment towards the remaining Operational Creditors being towards the Statutory Dues of the Corporate Debtor and Other Creditors (excluding Related Party Creditors) (other than the Workmen and Employees Dues). 78,00,000 Within T+....
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.... offered to the consortium of bankers shall be assigned to Omkara ARC. Also, all the suits filed against Corporate Debtor including suit filed in DRT, under Negotiable Instruments Act, shall be withdrawn. Further, the RA proposes that if required, the RA shall furnish a Performance Bank Guarantee (PBG) of Rs. 3.05 crores (i.e. 25% of Rs. 19.20 crores i.e. 4.80 crores less 1.75 crores as down payment). After due repayment by Omkara ARC of Rs. 10.00 crores, all the existing bankers shall assign their respective debt to Omkara ARC and shall extinguish their existing rights after the assignment. Further, all the Security Interest including personal as well as corporate guarantor's security and charge on the primary as well as collateral properties shall be transferred/assigned to Omkara ARC. 6.6 Payment to Unsecured Financial Creditors: RA has proposed payment of Rs. 10 Lacs to Union Bank of India (UBI) & Invent ARC (who had been offered Corporate Guarantee of Corporate Debtor against the debt of Group concern viz. Shaifali Steel Ltd.) and Rs. 2.00 lacs to Omkara ARC against the unsecured loan originally granted by ICICI Bank whose debt has been acquired by Omkara AR....
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....ll have to assign their entire debt due from the Corporate Debtor to the Omkara Assets Reconstruction Private Limited. The entire security lying with the bank/ARC including of personal and corporate guarantor's security are required to be assigned in favor of the Omkara ARC. 6.15 Monitoring Committee: A monitoring Committee shall be formed having the members of the new management with the present RP as Chairman till the final payment as proposed in the Resolution Plan and the Chairman shall monitor the activities of the Corporate Debtor. One authorized representative of CoC members shall be part of the Monitoring Committee. 6.16 Share Capital: The existing equity shares and preference shares shall be de-rated and the equity shares and preference shares shall be reorganized. The existing equity shares and preference shares shall be acquired by the new promoters at a token value of Rs. 1/- 7. At this stage, it is appropriate to go through Section 53 of IB Code which reads as under: Section 53(1) Notwithstanding anything to the contrary contained in any law enacted by the parliament or any State Legislature for the time being in force, the proceeds fr....
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....aning as assigned to it in section 326 of the Companies Act, 2013 (18 of 2013). 8. Thus, Section 53 of the Code lists the priorities to be given to the beneficiaries, of liquidation value of the assets of the Corporate Debtor. The provisions of Section 53 make it amply clear that Operational Creditors are at the end of the list of beneficiaries as the Secured Financial Creditors have edge over the others. 9. It would also be pertinent to mention here that Operational Creditors have no locus standi as far as approval of the Resolution Plan by the CoC is concerned. 10. To decide the issue, it will also be pertinent to notice the very object of the 'IB Code', 'Resolution' and Role of CoC. The objective of the 'I&B Code' "The objective of the Insolvency and Bankruptcy Code, 2016 is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in time bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit, and balance the interests of all stakeholders including alteration in the priority of the pa....
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....any interference. On perusal of the Resolution Plan, it is found that it meets the requirement of Section 31 r/w Section 30(2) of the Code. Therefore, the present application IA 352 of 2019 is allowed subject to certain observations. To make the provisions clearer, Section 30 of the IBC is reproduced hereunder: Section 30: Submission of resolution plan: "30. (1) A resolution applicant may submit a resolution plan 1[along with an affidavit stating that he is eligible under section 29A] to 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) prov....
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....lution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.]span> (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. (6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority." 12. Reliefs Sought: In this regard, we are of the view that approval of the Resolution Plan does not mean automatic waiver or abetment of any legal proceedings which are pending by or against the Company/Corporate Debtor as those are the subject matter of the concerned Competent authorities having their proper/own jurisdiction to pass any appropriate order as the case may be. The Resolution Applicant on approval of the Plan may approach those Competent Authorities/Courts/Legal Forums/Offices - Govt. or Semi Govt. / State or Central Govt, for appropriate relief(s) sought for in Clause ....