TaxTMI 
TaxTMI 
2019 (7) TMI 1986
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....he Corporate Debtor namely Murli Industries Limited to initiate Corporate Insolvency Resolution Process (CIRP) was admitted by this Tribunal vide order dated 5.4.2017 and Mr Vijaykumar V. Iyer was appointed as the Interim Resolution Professional. 2. It is informed that a winding-up petition being Company Petition No. 9 of 2011 in the matter of M/s Sunmax General Trading LL, Dubai (UAE) v/s Murli Industries Limited, Nagpur is pending before the Hon'ble High Court of Bombay, Nagpur Bench and vide order dated 21.3.2017, Provisional Liquidator has already been appointed. 3. In the first Committee of Creditors (CoC) meeting dated 4.5.2017, Mr Vijaykumar V. Iyer was confirmed as the Resolution Professional. The 180 days of CIRP was to expire on 2.10.2017. An extension of 90 days was allowed vide order dated 18.9.2017 extending the last day of CIRP to 31.12.2017. 4. The Official Liquidator submitted to the Hon'ble High Court that the liquidation proceedings be dispensed with till the completion of the CIRP of the Corporate Debtor. Also, the Resolution Professional filed an application being CA No. 10 of 2017 before the Hon'ble High Court to seek to leave under Section 446 of the ....
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.... India & Sakal - Nagpur editions extending the time limit for creditors to submit their claims by 13.12.2018. The received 145 new claims from various creditors for a total claim amount of Rs. 24.86 crore. After verification and clarifications, the RP admitted claims of Rs. 10.38 crore. The Resolution Professional has further stated that given the change in the amount of admitted claims, a meeting was convened on 15.1.2019 to inter-alia apprise the CoC, directors of the suspended board of Corporate Debtor and Dalmia. 11. MA No. 689/2017 has been filed by the Resolution Professional under Section 30(6), IBC read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 seeking approval of the resolution plan submitted by Dalmia, which was approved by 100% vote share of the Committee of Creditors in the 11th CoC meeting held on 20.12.2017. 12. The Resolution Professional has stated that the Corporate Debtor has three business undertakings (i) cement, (ii) paper and (iii) solvent extraction. It is stated that as per the audited financial statement as on 31.3.2016, the operations of the Corporate D....
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....ution plan of Dalmia complies with the provisions of Code: Sr. No. Relevant provisions / Regulations How dealt with in the Plan 1. Provision for payment of insolvency resolution process costs in priority to any other Creditor (Section 30(2)(a) of the Insolvency and Bankruptcy Code, 2016 (Code) read with Regulation 38(1)(a) of the CIRP Regulations) The plan provides that Insolvency Resolution Process Costs shall be paid upfront in priority to any other repayment. 2. Provision for payment of amounts not less than liquidation value due to the operational creditors in priority to Financial creditors of the Corporate Debtor (Section 30(2)(b) of the Code read with Regulation 38(1)(b) of the CIRP Regulations) Liquidation value due to Operational Creditor = Nil; However, the below-given amount is being paid to Operational Creditors of the Corporate Debtor. Stakeholder Amount admitted Payment Workmen and Employees INR 42.9 crore INR 12.86 crore (liquidation value payable in 30 days of approval by Adjudicating Authority and balance by the plan in 30 days of Effective Date)* Statutory Creditors INR....
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.... being in force at the time of placing the resolution plan for approval of resolution plan by the CoC were observed by the Resolution Professional. 8. Resolution Applicant is not ineligible to submit the Resolution Plan. (Section 29A of the Code) The Resolution applicant confirms they vide affidavit dated 14.12.2017 that as on the date of this plan and the basis of the records of the Resolution Applicant, the Resolution applicant is eligible under section 29A of the Code to submit the plan. *Effective Date: means the date being (i) the date falling 5 business days after completion of the last of the conditions to implementation of the plan specified in Schedule 2 (Conditions to implementation of the plan); or (ii) such other date as may be agreed between the Resolution Applicant and the Insolvency professional, on which the plan shall be operative; Long Stop Date: means the date of expiry of 6 months or such other later date as mutually agreed by the Resolution Applicant and the monitoring committee but not exceeding the date of expiry of 12 months from the date of the NCLT order approving the plan. Sr. No. Stakeholder Amount Admitted Payme....
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....he Resolution Applicant to take over at a fraction of its true value. 21. The Applicant herein has further pointed out that the resolution plan is a sale in disguise as it proposes to revive only the cement unit sell the other business units of paper and solvent extraction. Also, the Plan provides that the workmen would be terminated. Only 1183 employed by the cement unit out of total 2026 employees shall stand appointed afresh on terms and conditions to be decided, and the remaining employees of other two undertakings shall be terminated in contravention of the Industrial Disputes Act, 1947. 22. It is further pointed out that the resolution plan is contrary to the Securities & Exchange Board of India (Delisting of Equity Shares)(Amendment) Regulations, 2018 as the plan neither lays down any specific procedure to complete the delisting of such share nor provides an exit option to the existing public shareholders at a price specified in the resolution plan. It is further stated that the resolution plan in contravention of the SEBI Regulations envisages issue of fresh shares with the specific object of diluting the existing shareholding of the existing shareholders. 23. It h....
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....dertakings of the Corporate Debtor do not appear to be viable and therefore, resolution plan seeks to revive the Corporate Debtor by reviving its Cement undertaking. The RPstates that sale of all or part of the assets of the Corporate Debtor is very much one of the measures for implementation that a resolution plan may provide for. 30. The RPstates that reduction of share capital and provisions of delisting of shares of the Corporate Debtor is in due compliance of applicable law including the SEBI (Delisting of Equity Shares) (Amendment) Regulations 2018, as the resolution plan provides the exit price for the existing shareholders of the Corporate Debtor. 31. The RP had denied that he failed to preserve and protect the assets of the Corporate Debtor as the operations of the units of the Corporate Debtor including the Cement Unit was discontinued much before the insolvency commencement date and business was at a standstill where no employees were available at any of the plant sites. The day RP took charge of the Corporate Debtor, the electricity supply was restored. 32. MA No. 119/2018 has been filed u/s 60(5), IBC by Mr Santosh Vasantrao Walokar on behalf of 1184 workers o....
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....e offering Rs. 609.60 crores, proposing to run all three units of the Corporate Debtor, the resolution of Gajanan has not been approved, and resolution plan of Dalmia has been approved despite the same providing for the closure of two units out of total three units of the Corporate Debtor and offering Rs. 401.62 crores. Gajanan has averred that its plan has been rejected for not meeting the alleged criteria suggested by CoC members and communicated by the Resolution Professional vide email dated 22.11.2017. 40. The Resolution Professional has filed an affidavit-in-reply to MA No. 70/2018 detailing the process followed during the CIRP. INVP 13/2018has have been filed by Dalmia seeking intervention in No. 70/2018. 41. MA No. 54/2018has been filed by Mr Sunil Kumar Maloo, promoter & shareholder of the Corporate Debtor praying for rejection of resolution plan of Dalmia. 42. It is stated that the complete minutes of the meeting dated 20.12.2017 when the resolution plan of Dalmia was approved have not been placed before this Tribunal, and MA No. 689/2017 suffers from misjoinder of parties as the shareholders and erstwhile management whose statutory rights are proposed to be take....
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....ned/ appointed five employees during the CIRP and the CIRP costs inter-alia includes cost towards fees of the RP, insurance, valuation, CoC meetings, publishing advertisements, e-voting platform fees, salaries of employees, security fees, operation & maintenance charges, IT return & auditing fees, costs related to preservation of assets of the Corporate Debtor and other operational costs. The RP has stated that there has been no outsourcing of any duties and responsibilities by him as the RP. 52. The RPstates that CoC, to ascertain the credentials of the resolution applicants, placed condition of deposit of 10% of the amounts along with comfort letter for the balance and the CoC, is entitled to impose further criteria as per S. 25(2)(h), IBC. The RP has further stated that the promoter/shareholder has failed to state even a single defect in the affidavit of Dalmia which shows non-compliance with the provisions of Section 29A of the Ordinance (applicable at the relevant time). 53. The Resolution Professional has stated that there is nothing in the plan concerning the appointment date, effective date etc. which is contrary to IBC and the CoC unanimously approved the plan by exe....
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....tated that the approval of resolution plan of Dalmia is vitiated as it was not by Sections 21, 24 & 30, IBC and the order passed by the Hon'ble Supreme Court in the case of Vijay Kumar Jain v. Standard Chartered Bank [Civil Appeal No. 8430 of 2018] Order dated 31.01.2019, in accordance of which the suspended board of directors is entitled to copy of the resolution plan and other documents and participation in the CoC meeting. Reliance has also been placed on the order passed in Swiss Ribbons Pvt. Ltd. &Ors. V. Union of India &Ors. [Writ Petition (Civil) No. 99 of 2018] Order dated 25.01.2019, to state that a just and equitable proposal should be considered by the CoC. 60. MA No. 364/2018 has been filed u/s 60, IBC by Shri Nitin Murlidhar Agarwal & MA No. 360/2018 has been filed u/s 60, IBC by Shri. Murlidhar Suganchand Agarwal. Both the applications seek direction to the Resolution Professional to either admit or reject their claims as an unsecured financial creditor. It is stated Shri Nitin Murlidhar Agarwal& Shri. Murlidhar Suganchand Agarwal filed their claim with the Resolution Professional on 14.6.2017 and 7.7.2017. 61. The Resolution Professional vide email dated 29.11.....
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.... v PSL Limited [APPEAL LODGING NO. 68 OF 2018], ORDER DATED 26.07.2018to state that pendency of a winding up petition before the Hon'ble High Court cannot be a ground to reject any claim/ application made under IBC. 68. As far as MA 689/2017 for approval of Resolution Plan u/s 30(6), IBC read with Regulation 39(4) of CIRP Regulations for approval of the resolution plan submitted by Dalmia, is concerned, it is understood that the plan has been approved by 100% vote share of the Committee of Creditors in the 11th CoC meeting held on 20.12.2017. With due regard to the decision of the Hon'ble Supreme Court in K Sashidhar & Indian Overseas Bank &Ors.[Civil Appeal No. 10673/2018], Date of order: 05.02.2019, the role of COC now is 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 66% voting of the COC or not. Therefore, the commercial wisdom is not allowed to be interfered with. The relevant portion ....
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.... is less comparing the proposals made in the Resolution Plan. 70. The segregation of the total payments prescribed in the resolution plan is given below: i. Payment of Rs.9,00,00,000/- as CIRP costs in full and in priority to other creditors, ii. payment of Rs.347,74,00,000/- to Financial Creditors iii. payment of 13% of workmen dues subject to a maximum of Rs.12,86,00,000/-. iv. Payment of Rs.25,00,00,000/- as „statutory dues settlement amount‟. v. Payment of 5.29% of the dues of Operational Creditors (which is not less than the liquidation value), subject to a maximum of 6,59,00,000/-. vi. Payment of Rs.42,00,000/- to the shareholders for the acquisition of all existing securities. [Regulation 35 of IBBI (CIRP) Regulations, 2016 prescribes that two registered valuers shall be appointed to give the RP an estimate of the fair value and the liquidation value. However, this Regulation came into force on 06.02.2018 vide IBBI (CIRP) (Amendment) regulations, 2018, while the Application for the approval of Resolution plan was filed by the RP way back in December 2017. Hence, the provisions of this regulation do not a....
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....has approved the Resolution Plan with 100% vote share with its commercial wisdom. 75. Since the successful resolution applicant wants to continue with only the cement undertaking and wishes to sell the assets of paper, solvent extraction units, both the units have a land bank of more than 64 Acres of land which will be sold by the Resolution Applicant. The liquidation value of the cement unit is approximately is Rs.165 Crores, and realisable value is around Rs.460 Crores whereas the Resolution Applicant proposed only Rs.401 Crores towards the settlement of various creditors and CIRP cost of the Corporate Debtor. However, CoC has approved the Resolution Plan with 100% vote share with its commercial wisdom. 76. Upon perusal of the Financial Statement submitted by the Resolution Professional/Applicant, the Bench observed that Resolution Applicant is "Dalmia Cement (Bharat) Limited". However, the source of funds and the Financial Statement of this Company is not submitted so far. Instead, the financial statement of the parent company, namely Dalmia Cement Ltd, of Dalmia Group, is submitted. 77. When the Bench questioned the source of funds of the Resolution Applicant, the Reso....
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....Resolution Applicant is directed to do the same within one year as prescribed under section 31(4) of the I&B Code. 83. The Plan provides for management of affairs of the Corporate Debtor and implementation & supervision of the plan. The RP has given a statement as required under Section 30(2) of the I&B Code and Regulation 38 of CIRP Regulations, that the plan deals with interests of all stakeholders. 84. The resolution plan provides that the affairs of the Corporate Debtor shall be managed by Deloitte Touche Tohmatsu India LLP which shall be called Insolvency Professional. However, it is suggested to use some other term for Deloitte Touche Tohmatsu India LLP to avoid the confusion that Corporate Debtor is still under the 270 days of CIRP. 85. The resolution applicant has also proposed that the management and control of the Corporate Debtor will be through Deloitte Touche Tohmatsu India LLP which is not acceptable since this entity cannot exercise the powers of the board of the corporate debtor. 86. Clause 6 titled 'Pre-effective Date Conditions and obligations', absolving the Resolution Applicant of any obligation if the conditions outlined in Schedule 2 (Conditions to....
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....ied that only crystallised liabilities of the Corporate Debtor shall stand extinguished on the approval of this resolution plan. The contingent liabilities shall exist, and no waiver can be provided for them. 94. The Resolution Applicant has sought extinguishment of all claims along with abatement of any related legal proceeding including criminal proceedings; however, this Adjudicating Authority cannot grant any such reliefs. Such proceedings shall proceed by the law. Any undertaking relating to applicability of law will not be part of the Resolution Plan. 95. We had also noted that when the Corporate Debtor was valued at the behest of a lending institution of the Corporate Debtor in the year 2013 for sanctioning loan, the distress sale value was Rs.1943,37,00,000/-. However, the current liquidation value is only Rs.231.1Cr. Which is a meagre 12% of the distress sale value, and the difference amount is Rs.1712,27,00,000/-. However, CoC has approved the Resolution Plan with 100% vote share with its commercial wisdom. 96. The Resolution Plan shall be approved subject to the Resolution Applicant filing the undertaking it is not ineligible u/s 29A of the I&B Code as on date. ....
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.... 98. The Resolution Professional has provided his certificate under Regulation 39(4) of the CIRP Regulations. 99. The objections raised in MA No. 306 of 2019 by Mr Lalchand Maloo, MA No. 119/2018 by Mr Santosh Vasantrao Walokar, MA No. 54/2018 by Mr Sunil Kumar Maloo and MA No. 70/2018 by Gajanan are dealt in preceding paragraphs. Given the order passed by the Hon'ble Supreme Court in the matter of K. Sashidhar v. Indian Overseas Bank & Ors. [Civil Appeal No. 10673 of 2018], the objections relating to commercial wisdom of the resolution plan approved by Financial Creditors with a vote share of 100% cannot be entertained by this Adjudicating Authority. 100. MA No. 546/2019 filed under Sections 12A read with 60(5)(c), IBC by Mr Lalchand Maloo, promoter & member of suspended board of directors cannot be considered as an application u/s 12A since the same has to be filed by the Resolution Professional only after the approval of CoC with 90% vote share. MA No. 546/2019 is not filed by Section 12A, IBC and Regulation 30A of the CIRP Regulations and is therefore rejected. 101. MA No. 364/2018 has been filed by Shri Nitin Murlidhar Agarwal and MA No. 360/2018is filed by Shri. Mur....
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.... Resolution Plan proposed that the Resolution Applicant has submitted the plan for the Corporate Debtor as a going concern. Further, the plan also provides for the sale of assets of the paper undertaking and solvent extraction undertaking and would continue with the operations of only cement unit. Therefore, the plan submitted by the Resolution Applicant appears to be contradictory to the statement of the going concern as more than 843 employees will be terminated. Suggestions to the Government :- 109. It is observed that in any CIRP, three major entities are involved viz. Corporate Debtor, Financial Creditors/CoC and Resolution Applicant. The Government of India has clarified it vide it's Circular dated 25.10.2017, that approval of shareholders of the Corporate Debtor is not required when the Corporate Debtor is undergoing CIRP. However, there is no specific provision about not obtaining approval of shareholders of either Financial Creditors and the Resolution Applicant. I have also experienced that in some cases the haircut proposed by the Resolution Applicant and approved by the Financial Creditors/CoC are extraordinary viz around 90% of outstanding loan amounts, runni....
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.... market, i.e. through Stock Exchange platform even at many multiples of its face value/issue price. Therefore, huge haircut/loss in loan recovery is the ultimate loss to the Shareholders and not to the Professional Board of Directors/Employees. If this suggestion is not found merit for any reason the alternative could be at least notice may be sent to the shareholders for their approval/comments within fifteen days from the date of dispatch of the notice that could be done only by e-voting or postal ballot. Otherwise, the shareholders are deemed to have approved the Resolution Plan and that shareholders do not have any negative comments on the proposed write off/haircut and the Banks can proceed with the Resolution Plan as per their commercial wisdom. To consider as to the approval of resolution plan by the shareholders, the methodology can be a simple majority of votes cast in favour of the proposal/resolution is greater than votes cast against the proposal/resolution. Transparency & Corporate Governance is the hallmark in today's corporate world. Therefore, shareholders must at least be informed or made aware of important decisions. 114. Approval of the shareholders of the Res....