TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 707
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....s. Uttam Value Steel Limited (CP/1830(MB)/2017) (hereinafter referred as "Value Steel") against which Corporate Insolvency and Resolution Process (CIRP) is independently initiated and thereafter for these two companies functioning being inter linked to each other, NCLT - Mumbai Bench ordered to take up joint hearing on the Resolution Plans filed in the respective company petitions considering the fact that these two companies functioning is inter linked to each other. 2. In view of the same, the Resolution Plans filed against the respective companies by the Resolution Applicant namely Consortium of Carval Investors LLP, New York and Nithiya Capital Resources Advisors LLP, Middlesex, United Kingdom, (hereinafter called "Carval") being approved by the respective CoC's with requisite majority i.e. with 88.9% votes in the meetings of the CoC held on 21.04.2019, the Resolution Professional namely Mr. Rajiv Chakraborty (hereinafter called as "the RP") filed the Resolution Plans approved by the respective CoCs before this Bench for approval u/s 31 of the Code. 3. It is also pertinent to mention here that, while these Resolution Plans pending for approval of this Adjudicating Authori....
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....s commenced on 11.07.2018, thereafter the CIRP period was extended for another 90 days i.e. 07.01.2019 expiring on 07.04.2019 and another extension was given up to 07.05.2019. In the meanwhile, on the resolution applications received, the CoC shortlisted Carval Resolution Plan. Before it was put to approval of the CoC, the RP issued a Certificate stating that Carval plan is in compliance with Sec. 30(2) of the Insolvency and Bankruptcy Code, 2016, over which, the CoC approved Carval plan with 88.9% votes in the meeting held on 21.04.2019, in furtherance of it, the RP, on 07.05.2019, filed this application u/s 30(6) r/w Sec. 31 of the Code seeking approval by detailing the provisions for making payment to the stakeholders set out in the resolution plan and other terms of the plan, which are as follows: The summary of payments to be made by the Successful Resolution Applicant under the Resolution Plan is as under: 9. This Consortium of these Resolution Applicants is global investment fund and seasoned credit investors in distressed securities both in India and Abroad. The Resolution Applicant issued a Certificate dated 21.04.2019 certifying the compliance of the Successful Resoluti....
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....ase to be involved in the management and affairs of the Corporate Debtor and during the period between the Effective Date and the Closing Date, monitoring committee shall be constituted which shall comprise of two representatives of financial creditors, two representatives of Successful Resolution Applicant and one external expert nominated by the Successful Resolution Applicant and one external expert nominated by the Successful Resolution Applicant and the financial creditors. The monitoring committee shall supervise the implementation of the Resolution Plan, which shall be dissolved after the Closing Date. The Successful Resolution Applicant intends to retain all employees and supplement with certain key managerial personnel. 15. The implementation of the Resolution Plan is subject to certain conditions as set out in Part D - Item 1 of the Resolution Plan. One of the material conditions of the Resolution Plan is that the Resolution Plan submitted by the Successful Resolution Applicant for Value Steel to be approved by its committee of creditors and the control of Value Steel be transferred to the Successful Resolution Applicant. It is submitted that the said condition on inter-....
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.... permitted unless any explicit provision exempts payment of Stamp Duty under Insolvency and Bankruptcy Code, 2016. (vii) The Competition Commission of India shall permit the Resolution Applicants to make payment of CIRP costs and Liquidation Value due to the Operational Creditors within the prescribed period under the IBC and CIRP Regulations. (viii) SEBI & Stock Exchanges shall be bound by the resolution plan to the extent that is not inconsistent with their Regulations and to the extent IBC prevails over SEBI Regulations. (ix) With regard to terms of the utility and facility sharing agreements between the Corporate Debtor and Value Steel, and the approval letter dated 07.10.2014 released by the Central Railways, Railways shall not exercise any specific termination rights available to it or take any adverse actions under the utility and facility sharing agreements based on the prior inactions or actions of the company before initiation of CIRP process, in the event the resolution plan is terminated before initiation of CIRP, the consequential action against the Corporate Debtor shall be waived. (x) Likewise, with regard to the operation of the priva....
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.... and Bankruptcy Code, 2016, it is left open to the Resolution Applicant to proceed in accordance with law. (xvii) With regard to recasting of Financial Statements for the period mentioned in the resolution plan, it is permitted to the extent that is not inconsistent with the law in force. (xviii) The Corporate Debtor has right to use the trade mark "UTTAM" and any other trade mark or trade name which is used by the Corporate Debtor prior to the date of approval of the Resolution Plan. In the event any liabilities in relation to the use of these trademarks pending before initiation of CIRP, they are hereby extinguished. (xix) In relation to the titles of the land parcels, the Corporate Debtor is open to pursue its remedies as before. (xx) With regard to carry forward of losses, the amendment brought to Sec. 79 of the Income Tax, Act, 1961 is applicable to the Corporate Debtor. (xxi) The Corporate Debtor shall continue to be eligible for the benefits under the Government of Maharashtra's Resolution No. PSI 2018/CR-117/IND-8 on Modalities for sanction and disbursement of Industrial Promotion Subsidy under GST regime to Mega/Ultra Mega Projec....
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.... shall be deemed to have resigned and vacated their office and the board of directors of the Corporate Debtor shall be reconstituted by the Successful Resolution Applicant. 24. It is submitted that since the Resolution Plan was approved prior to the amendment dated August 16, 2019 in Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016 (the "Code") related to "financial creditors who do not vote in favor of the resolution plan" (and such amendment being applicable to the Resolution Plan by virtue of Explanation 2(i) to Section 30(2)(b) of the Code), it is hereby confirmed that the payment being made to the financial creditors who have not voted in favor of the Resolution Plan is more than the amount payable to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the Corporate Debtor. Accordingly, it is also submitted that in compliance with the Code and regulations made there under, while implementing the Resolution Plan, such financial creditors shall be paid in priority to the financial creditors who have voted in favor of the Resolution Plan. 25. After the Effective Date (as defined in the Resolution Plan, means the date on w....
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.... exemptions to the extent permitted under various enactment in the light of the Insolvency and Bankruptcy Code, 2016. Jatia Group Objections: 30. One Mr. Vinodh Jatia of Jatia Group submits that the total admitted debt of Jatia Group in UVSL is Rs. 423Crore and the Jatia Group exposure is 82% of the total operational debt. As against this claim, , Jatia Group is now under this plan only getting Rs. 82,00,000, i.e. 0.19% of the total admitted debt of Rs. 423Crore payable to this group. Now the principal objection of Jatia Group is as follows: I. Violation of IBC as amended, Corporate Insolvency Resolution Process: 31. This group submits that Carval filed the Resolution Plans in the respective Corporate Debtor companies with a rider that it is the sole prerogative of the Resolution Applicant to withdraw its plan without any liability if both the plans of the Carval are not approved by the CoC. 32. Since it has been reiterated that whenever plan is conditional, such plan should not be approved because a conditional offer by an offeror to the offeree will not amount to an open offer acceptable in the form that has been made. To substantiate this ratio, Jatia Group relied upon Kev....
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....Commission of India (CCI) u/s 5 of the Competition Act prior to the approval of the Resolution Plans by the CoC, since the Resolution Applicant has failed to place approval of the CCI before the CoC prior to the approval of the Resolution Plan for combination by the CoC, these plans, in principle, shall be rejected by the CoC for want of CCI approval by the time plans were placed before the CoC. 36. As to factual aspect is concerned, the Resolution Applicant applied for approval of CCI on 20.04.2019 pursuant to requirement set out in proviso to Section 31(4) of the Code, but fact of the matter is, these plans were approved by the CoC on 21.04.2019 despite the Resolution Applicant failed to place CCI approval as on the date CoC approved the Resolution Plans of the Carval. However, Carval obtained CCI approval on 04.06.2019 i.e. after the resolution plans were approved by the CoC. 37. As against this factual aspect, Jatia Group counsel submits that when a proviso is carved out to a section making CCI approval as condition precedent prior to the approval of the resolution plans for combination by the CoC, the CoC shall not approve the plans with the infirmity of the non filing of th....
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....n of justice, the ratio afore decided cannot be super imposed over the facts not identical to the facts of those respective cases cited by the Counsel. 44. The fundamental difference in IBC is speed is the essence of the Code. Every milestone under IBC is underlined with a deadline. At the same time, I don't vouchsafe that compliances and conditions set out in IBC could be flouted under the cover of meeting with timelines. In the present case, the CoC already took two extensions for approval of plans by the CoC; therefore in a situation like this, CoC cannot remain waiting until approval is obtained from CCI. If for any reason approval is not given by the CCI, it will not pass through the window provided u/s 31 of the Code. One more fact to take into cognizance is, this is a condition set out under section 31, not under section 30 of the Code. Therefore, in the cases of combination, the Adjudicating Authority is mandated to examine as to whether approval is obtained from CCI or not, if not approved, it will not be approved by the Adjudicating Authority. Moreover, in the proviso, it is not said that if approval of CCI is not obtained before CoC approved the plans; the plan appr....
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....ional creditor is not entitled to get if distribution is made as per section 53 of the Code. Fair and equitable treatment of the Operational Creditor does not mean that they shall be provided a share beyond their entitlement as set out u/s 53 r/w Section 30(2) (b) of the Code. 52. It has been reiterated in various judgements of Honourable Supreme Court (K. Sasidhar vs. Indian Overseas Bank; Swiss Ribbons Private Limited vs. Union of India; CoC of Essar Steel India Limited vs. Satish Kumar Gupta that the commercial decision with regard to approval of the plan is within the domain of the CoC, the Adjudicating Authority is not expected to transgress into the commercial wisdom of the CoC in approving the plans. The rule is set out to examine as to whether the plan placed u/s 31 is in accordance with Sec. 30(2) of the Code. 53. It is not the case of this Operational Creditor that provision is not made as set out in Sec. 30(2) of the Code, it is also not the case of this group that plans are in contravention of any law that is in force. 54. If at all equitable treatment is set as a test to approve the Resolution Plan ignoring the provisions of the Code, it always differs from case to ....
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....as taken an undue advantage of its voting rights to undercut the payout to the Operational Creditors. 61. On looking at the narration of facts given by the Operational Creditor, Noble counsel submits that Personal Bank Guarantee given by the Resolution Applicant is not as per the format set out in the RFRP; therefore such PBG should not have been accepted. It appears the Resolution Application filed revised PBG so as to meet the requirements as mentioned in the format. It is not the case of the Noble counsel that PBG given by the Resolution Applicant is not proportionate to the value of the plan. At the end of the day, one has to see as to whether PBG equivalent to the requirement has been given or not, while approving plans, it is quite common, the Resolution Applicant offers something, when something offered is not in compliance of the requirement, CoC would ask for compliance, if the applicant fulfills the compliance, CoC would further proceed with the plan. In this case also, same thing happened. PBG is normally taken to bind the Resolution Applicant to fulfill the plan; it will not make any difference to quantum of payment and timings mentioned in the plans. Therefore, I have....