TaxTMI 
TaxTMI 
2021 (1) TMI 976
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....tion, which are relevant to the issue in question, are as follows: (1) C.P. (IB) NO.43/BB/2019 is filed by M/s. Sri Arumuga Sugars Limited, ('Petitioner/Financial Creditor') U/s 7 of I&B Code, 2016 R/w Rule 4 of the I&B (Application to Adjudicating Authority) Rules, 2016, by inter alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor i.e. M/s. Badami Sugars Limited. The same was admitted by the Adjudicating Authority vide Order dated 27-9-2019 by appointing Mr. Madhugiri Venkatarayappa Sudarshan as the Interim Resolution Professional and imposing moratorium in terms of section 14 of the Code, etc. (2) In compliance with the provisions of sections 13 and 15 of the Code r/w Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (in short 'Regulations 2016'), the IRP made a public announcement in Form-A on 10-10-2019 intimating the commencement of CIRP against the CD and calling upon the Creditors of Corporate Debtor to submit proof of claims on or before 23-10-2019. Upon receipt of claims, in due course of time, a Committ....
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....hri Sai Priya Sugars Ltd. and negotiated the resolution plan from Rs. 10.35 crore to Rs. 17.00 crore. Since the CoC consists of 5 District Cooperative Banks, 2 State owned Banks, 8 other Co-operative banks/societies and 1 corporate person, total CoC members are 16 in number, the members informed the RP that before any resolution plan is considered, approval from their respective Boards will be required. (7) The CoC in its 5th meeting held on 28-2-2020 inter alia discussed the two Resolution Plans of Shri Sai Priya Sugars Limited and Sri T Rajkumar and thereafter approved the Resolution Plan submitted by M/s. Shri Sai Priya Sugars Ltd., with absolute majority, after considering its feasibility and viability, taking into consideration the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a Secured Creditor. (8) It is stated that the RP, having complied with the protocol in all its procedural propriety, declared the need for E-voting considering that not all the members of the CoC were present. The CoC were ini....
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....C Bank as regards the modification of claims, on being placed before the COC, and the latter having no objections whatsoever (the same being a dispute amongst the consortium members of the Corporate Debtor), and having no bearing with the CIRP or the voting shares thereto warranted no further discussion. (12) The CoC duly appointed Resolution Professional M. V. Sudarshan as the Chairman of the meeting of CoC of Badami Sugars Limited with absolute majority by the members therein by way of both physical and electronic voting in the ratio of 47.63% and 53.37%, totalling 100%. (13) The members of the Committee were apprised that only the Resolution Plans of Potential Resolution Applicants who had complied with all the requirements - under the Code as well as the RFRP were evaluated and shared with the Committee, the Chairman presented the Compliance Checklist performed on the Resolution Plans submitted, and the details as to the compliances met by the Resolution Plan submitted by M/s. Shri Sai Priya Sugars Limited. The Chairman further brought to the notice of the COC the Revised Resolution Plan of M/s. Shri Sai Priya Sugars Limited pursuant to the discussion in that ....
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.... and value of the security interest of a Secured Creditor. (18) It is submitted that the COC examined the resolution plans with respect to the evaluation matrix based on the Evaluation Matrix approved in 3rd COC meeting held on 27-12-2019 and accordingly, prepared the Evaluation table as under: S. No. Evaluation Parameters Marks T Rajkumar Shri Sai Priya Amt. Rs. Crs. Marks Amt. Rs. Crs. Marks 1. Upfront cash recovery for financial creditors 60 9.10 (30% in 90 days & rest in 6 months) 45 16.50 (within 30 days) 60 2. NPV of residual loan 5 Nil 0 Nil 0 3. Equity upside offered to existing financial creditors NA NA NA 4. Upfront equity contribution by the Resolution Applicant 5 11 Cr. 5 17.00 5 5. Reasonableness of assumptions in the Resolution Plan 10 Good 5 Excellent 10 6. Track record of the Resolution Applicant in the banking system 10 Excellent 10 Excellent 10 7. Turnaround/transaction expertise of the Resolution Applicant 5 NA 0 2 cases $ 5 8. Financial strength of the RA 5 2 Good Excell....
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.... MRN Cane Power India Limited located at Kallapur(SK) - Khanapur(SK) Vill., Badami Taluk, all located in the backward district of Bagalkot. Despite frequent spells of drought, with 4 continuous years of drought since 2015, all the mills have promptly honoured the financial commitments to various banks and FIs. Shri Sai Priya Sugars Ltd has started its operations in 2015-16 and has returned with 90% capacity utilization in Sugar Season 2018-19 despite severe drought and production losses of sugarcane. The Company is implementing expansion program of increasing Distillery capacity from existing 120 to 240 KLPD with an outlay of Rs. 165.10 Crores for which financial closure is recently achieved. ii. Brief background of Promoters: (a) Shri Murugesh R Nirani: Besides what is stated herein above, Shri Murugesh R Nirani has also established a Cooperative Bank in the name of Vijaya Sourda Credit Society Ltd, which has over 46 branches in and around Mudhol. He has started MRN (Nirani) Foundation for serving the poor and indigent students, pregnant mothers, and socially backward people with various schemes for their upliftment through the Corporate S....
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....itself was a sick unit which was taken-over and turned around by the Promoters i.e. Mr Murugesh R Nirani & Family. Rathna Cement is another sick company which was acquired and turned around by the promoters. • Bringing on-board personnel with requisite expertise: The Resolution Applicant and its Group companies have good Technical and Industry sector experts available within the group. Specific experts will be deployed for revival of the Plant & Operations including filling in the requisite manpower required. • The Resolution Applicant and its promoter group being present in this geographical area with multiple sugar plants, have immense exposure of dealing with the local stakeholders including crane growing farmer. They have been engaging the farmer, administration and other local stakeholders successfully for more than a decade. (22) The restarting of the Plant would entail additional infusion of funds to the tune of Rs. 5-10 Crore in addition to the pay-out to the creditors. The Applicant and its Promotor Group have the requisite Financial capability to infuse funds for operations as well as upgradation of technology, capacity etc. (23....
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....expenses would be verified by Resolution Applicant and would be approved by CoC before the same is paid by the Resolution Applicant. ii. Section 30(2), IBC provides for payment of insolvency resolution costs in priority to the payment of other debts of the CD. iii. The funds infused by the Resolution Applicant shall be utilised first for payment of unpaid insolvency resolution costs and then for payment of claims of operational creditors, if any before making any payment to Financial Creditors. This will comply with the requirement of section 30(2) of the Code. (d) Debts owed to Secured financial creditors: After payment of the CIRP Costs, payment of the operational creditors and payment of the admitted workmen and employees' dues, the admitted Financial Debt of the secured Financial Creditors will be treated proportionately in the following manner: It is deemed that all the secured financial creditors would relinquish the security held by them, upon payment of full amount proposed to them under the Resolution Plan. The Resolution Applicant proposes to pay Rs. 16.50 Crores (Rupees Sixteen Crores and Fifty Lakhs only) to a....
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.... and Building, Plant and Machinery and floating charge on book debts and stock, spares and inventory) in favour of Secured Financials Creditors. There are no unencumbered assets in the company. However, it is apparent that the Liquidation Value of the company would not be enough to cover the debt of the Secured Financial Creditors of the Company in full and the liquidation value for Operational Creditor would be NIL under the circumstances. As per the Information Memorandum provided by the Resolution Professional, a debt of Rs. 36.25 Crores is claimed and admitted by the Unsecured Financial Creditors, from the Corporate Debtor. The resolution plan proposes to pay NIL to this class of Financial Creditors. (h) Proposal for dissenting members of the COC: In terms of IBC, and under Regulation 38 of the CIRP Regulations, it is proposed to provide for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the CD. In case, there ....
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....al Creditors of the Company in full, therefore, the Liquidation Value for Statutory dues of the Company is NIL. Hence, no amount has been proposed for payment under this Resolution Plan towards payment of statutory liabilities. (l) Claims of Related Parties - Operational Creditors: Liquidation Value of the Company is Rs. 854.07 Lakhs. The Applicant has assumed that the Liquidation Value of the Company is less than the Admitted Debt for Financial Creditors which aggregates to approximately INR 241.80 Crore. Accordingly, the Liquidation Value is not enough to cover the debt of the Financial Creditors of the Company in full. All claims on Company by any related party and all liabilities of CD towards any related party, as on and for the period prior to Effective Date, shall be deemed to be owed and due as of the Insolvency Commencement Date, the liquidation value of which is NIL. (m) Payment to Shareholders: The exact shareholding of the company has not been shared. But from the nomenclature it appears to be an unlisted public company. There may be large number of cane-growing farmer shareholders, but this need to be clarified and facts ....
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....king capital and partly for settlement of dues of creditors as proposed in the Resolution Plan; c. Resolution Applicant will continue to make payment to financial creditors, as envisaged in the plan unless otherwise agreed between Resolution Applicant and financial creditor; d. In order to ensure smooth implementation of the Resolution Plan, the Resolution Applicant shall induct Professionals to manage day to day affairs of the Company, whose terms of appointment and duties would be decided by the restored Board of Directors. e. On the Effective Date, an Insolvency Professional, may be appointed as the "Monitoring Professional" to monitor and supervise the implementation of the Resolution Plan on such fee as will be settled between the Insolvency Professional and Resolution Applicant. The period of implementation of the plan to be monitored by the monitoring professional is for a period of 1 (One) years. The fees for monitoring and supervision shall be agreed for term of appointment as per mutual agreement, between the monitoring professional and Resolution Applicants and will be paid by Resolution applicants/CD. (a) The Monitoring Professional s....
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....ne of Equity infusion, if any, shall be issued to the Resolution Applicant or its Associates; e. Initial INR 17 Crores (Rupees Seventeen Crore only) is intended to be infused in the form of Equity, quasi-equity or Debt or a combination there off, upfront within 30 days of Effective date. This will be utilised for payment of CIRP cost and payment to Creditors. 3. Heard Mr. M.V. Sudarshan, learned RP, and Mr. Anup Seetharam Rao, learned Counsel for the RP through Video Conference. We have carefully perused the pleadings of Party and extant provisions of the Code and the Rules made thereunder. We have also gone through the detailed Resolution Plan and the details of the proceedings gone through during the CIRP, and the reports of the CoC submitted from time to time. 4. Mr. M.V. Sudarshan, RP, while reiterating various averments made in the Application/Petition, has further submitted that the revised Resolution Plan as approved by the CoC satisfies all requisite conditions as per the provisions of the Code, and the same is approved with requisite majority, and thus urged the Adjudicating Authority to approve the said Resolution Plan. 5. The Resolution Professional has....
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....mi Sugars Limited 2 Date of Initiation of CIRP September 27, 2019 (27-09-2019) (Copy of the Order received on 9-10-2019) 3 Date of Appointment of IRP September 27, 2019 (27-09-2019) (Copy of the Order received on 9-10-2019) 4 Date of Publication of Public Announcement October 10, 2019 (10-10-2019) 5 Date of Constitution of CoC October 28,2019 (28-10-2019) 6 Date of First Meeting of CoC November 2, 2019 (2-11-2019) 7 Date of Appointment of RP November 2, 2019 (2-11-2019) 8 Date of Appointment of Registered Valuers November 16, 2019 (16-11-2019) 9 Date of Issue of Invitation for EOI December 8, 2019 (8-12-2019) 10 Date of Final List of Eligible Prospective Resolution Applicants January 19,2020 (10-1-2020) 11 Date of Invitation of Resolution Plan December 8, 2019 (8-12-2019) 12 Last Date of Submission of Resolution Plan February 9,2020 (09-2-2020) 13 Date of Approval of Resolution Plan by CoC February 28,2020 (28-2-2020) 14 Date of Filing of Resolution Plan with Adjudicating Authority March 2, 2020 (2-3-2020) 15 Date of Expiry of 180 days of CIRP March 25, 2020....
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.... 4 The South Canara District Central Co-Op Bank Ltd. 8.06% Voted for 5 The Tumkur District Central Co-operative Bank Ltd. 3.00% Voted for 6 The Basaveshwara Sahakari Bank Niyamit, Bagalkot 1.53% Voted for 7 The Bilagi Pattan Sahakari Bank Ltd. 0.69% Voted for 8 The Jamakhandi Urban Co-operative Bank Ltd. 1.18% Voted for 9 The KSIIDC Ltd. Bangalore 21.64% Voted for 10 The Rabakavi Urban Co-operative Bank Ltd. Rabakavi 0.38% Voted for 11 Oriental Bank of Commerce, Hubli 4.83% Voted for 12 Shri. Kalidas Co-Op. Credit Society Ltd. 2.94% Voted for 13 Shri Beelur Gurubasava Co-op Credit Society 1.68% Voted for 14 Shri Arumugam Sugars Limited, Coimbatore 10.10% Voted for 15 Karnataka Alpasankhyatara Sangha, Kaladagi 0.13% Voted for 16 SHRINIDHI URBAN CO-OP CREDIT SOCIETY LTD 0.14% Voted for TOTAL 100.00% (e) The Resolution Plan includes a statement under regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interests of all stakeholders in compliance with the Code and regulations m....
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....,10,507 NIL 100% NIL 2 Preference NA NA NA NA (h) The compliance of the Resolution Plan is as under: Section of the Code/Regulation No. 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 the CD? 8.2 Yes Section 29A Whether the Resolution Applicant is eligible to submit resolution plan as per final list of Resolution Professional or Order, if any, of the Adjudicating Authority? 9(A)(i) Yes Section 30(1) Whether the Resolution Applicant has submitted an affidavit stating that it is eligible? 9(A)(i) Yes Section 30(2) Whether the Resolution Plan- (a) provides for the payment of insolvency resolution process costs? 9(ii)&10.1 Yes (b) provides for the payment to the operational creditors? 9(iii)&10.8 Yes (c) provides for the payment to the financial creditors who did not vote in favour of the resolution plan? 9(iii)&10.6 Yes (d) provides for the management of th....
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....xi) Yes (e) the resolution applicant has the capability to implement the resolution plan? 9.C.(xii) Yes 39(2) Whether the RP has filed applications in respect of transactions observed, found or determined by him? No such transactions were found in relevant period of two years. NA Regulation 39(4) Provide details of performance security received, as referred to in sub-regulation (4A) of regulation 36B. Received for an amount approved by COC for Rs. 20 Lakhs. Yes (i) As stated supra, the Resolution Professional has filed Compliance Certificate in Form H dated 29-5-2020 under Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, by inter alia stating that no such transactions under section 66 or avoidance application are filed/pending: Sl. No. Type of Transaction Date of Filing with Adjudicating Authority Date of Order of the Adjudicating Authority Brief of the Order 1 Preferential transactions under section 43 NA NA NA 2 Undervalued transactions under section 45 NA NA NA 3 Extortionate credit transactions under section 50 NA NA NA ....
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.... Resolution Plan is fit to be approved under section 31 (1) of the Code. 8. In the result, by exercising the powers conferred on this Adjudicating Authority, under section 31(1) of the I & B Code, 2016, both the C.P. (IB) No. 43/BB/2019 and I.A. No. 177 of 2020 are disposed of with the following directions: (1) The Resolution Plan dated 26th February, 2020 submitted by M/s. Shri Sai Priya Sugars Limited ('Resolution Applicant') as approved by the Committee of Creditors at their 5th meeting held on 28th February, 2020 with 100% voting is hereby approved by declaring that the Resolution Plan will be binding on the Corporate Debtor (Applicant) and its employees, members, creditors including the Central Government, any State Government or any local authority to whom a debt in respect of payment of dues arising under any law for the time being in force, as authorities to whom statutory dues are owed, guarantors, and other stakeholders involved in the Resolution Plan. (2) The moratorium imposed vide Order dated 27-9-2019 passed in the CP shall cease to have effect from the date of communication of the order. (3) The Resolution Professional is directe....