TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 1986
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....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 Companies Act, 1956 where under vide a common orde....
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....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 Debtor came to stand still during FY 2015-2016. The Corporate Debto....
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....n 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 247 crore INR 25 crore (payable in giving equal annual instalments from the Effective Date) Other Operational Creditors INR 89.36 crore INR 6.59 crore (payable in giving equal annual instalments from the Effective Date) 5.29% ....
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.... 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 Payment 1. IRP Costs INR 9 crore (estimated till the 270th day of CIRP being December 30, 2017.) It is ongoing due to the peculiar situation in the present matter. INR 9 crore 2. Financial Creditors INR 2,783 crore (Page 54) ♦ Secured Creditors = INR 2642.61 crore ♦Unsecured Creditors = INR 140.49 crore. Aggregate: INR 3....
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....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 has also been pointed out that without obtaining approval from the Directorate of Geology and Mining, Government of Maharashtra, relief is sought for a direction to the Directorate of Geology and Mining, Government of Maharashtra, to issue a letter granting In-Principle Approval for the reinstatement of all mining leases of the Corporate Debtor that have lapsed, expired, been canc....
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....ions 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 of the Corporate Debtor working in paper and solvent extraction industrial units praying that the Company Petition No. 66/2017 be dismissed and resolution plan of Dalmia be rejected. 33. The first objection of the workers is regarding the maintainability of this petition because a winding-up petition against the Corporate Debtor is already pending before the Hon'ble High Court of Bombay, Nagpur Be....
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....mmunicated 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 taken away unilaterally are not made parties to the application. 43. It is stated that the resolution plan of Dalmia envisages waiver of the right of subrogation of the promoter & shareholder, writing off its entire debt payable by the Corporate Debtor and foreclosure of all its legal rights while obligations and liabilities continue to remain on the promoter & shareholder. 44. It is stated that the Resolution Professional has not provided detail....
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....ponsibilities 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 exercising their financial wisdom. It is stated that the condition of 10% of the value of the proposed amounts and comfort letter etc. were requisitioned to cushion the Corporate Debtor and the Creditors from any lapse from Dalmia. 54. The RP states that the appointment of an agency such as Deloitte Touche Tohmatsu India LLP from the date of approval till the effective date under the plan is not contrary to any of the provisions of IBC or any other law. The appointmen....
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.... 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 29.11.2017 and 5.4.2018 informed about the inability to verify the claims as the same were sub-judice before the Hon'ble Bombay High Court, Nagpur Bench as Company Petition No. 23/2016 wherein the Corporate Debtor had disputed the liability to pay the claim and in view of the Resolution Professional, serious questions of fact and law are in dispute. 62. The cause of this application is stated as action/ inaction of the Resolution Professional in putting the claim in abeyance in the abse....
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....editors 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 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 or evaluate the commercial decision of the CoC muchless to enquire into the justness of the rejection of the resolution....
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.... 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 apply in this case, and Fair Market Value of the Corporate Debtor is not disclosed]. 71. It is noticed that despite the liquidation value payable to Operational Creditors being nil, the plan provides for payment of statutory dues and the liability towards the statutory dues is not extinguished. 72. The Resolution Applicant wishes to run this business by reviving the cement undertaking as a going concern and selling the paper and solvent extraction units of the business. The Justification given for selling the latter two units is that the Paper and....
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....f 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 Resolution Applicant submitted the consolidated and Standalone Financial details of its parent company i.e. Dalmia Bharat Ltd. On scrutiny, we have observed that Standalone Profit for the year ending 31.03.2018 is Rs.72Cr whereas the resolution plan proposes to settle the past dues for an amount of Rs. 401.62Cr. 78. On perusal of the resolution plan submitted by the Resolution Applicant Dalmia Cement (Bharat) Ltd, the bench has observed that the Resolution Plan does not discuss the "Source of Funds" of the Resolution Applicant and the same was submitted by the RP f....
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....nal. 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 implementation of the plan) are not met to the satisfaction of the Resolution Applicant, cannot be accepted for being in contravention of IBC. 87. The resolution plan is conditional to the fulfilment of various conditions, approvals from various authorities etc. and the same is provided in schedule 2 of the Resolution Plan. The said reliefs and concessions are not granted. 88. The delisting of shares of the Corporate Debtor shall be by the SEBI Regulations. The approval of Resolution Plan shall not mean that the Corporate Debtor will stand delisted; therefore, all clauses rela....
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....e 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. This is for the reason that S. 29A first introduced by the Insolvency and Bankruptcy Code (Amendment) Ordinance 2017 on 23.11.2017 underwent amendment by the Insolvency and Bankruptcy Code (Amendment) Act, 2017 [having retrospective effect from 23.11.2017] and further amended by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 [having retrospective effect from 6.6.2018]. The Hon'ble Supreme Court in the matter of ArcelorMittal India Private Limited v. Satish Kumar Gupta & Ors. [Civil Appeal Nos. 9402-9405 of 2018] has noted the following: "28. It will be noticed that the opening lin....
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....e 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. Murlidhar Suganchand Agarwal. Concerning these applications, the RP has stated that this loan was taken from M/s Mittal Finance and Investment run by the Agarwals and the same had been settled. Also, there is no written agreement concerning this claim, and a dearth of supporting documents has been evidenced to substantiate the claim. Hence, these applications are rejected. 102. The Application filed by The Office of the Commissioner, Central GST & Central Excise, Nagpur -I Commissionerate, Nagpur is rejected as the claim was not in the prescribed form as per CIRP Regulations within the 270 days. 103. MA 1885/2019 wa....
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....on 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, running into thousands of crores of rupees. Therefore, the following suggestions are made to safeguard the ultimate rights of the shareholders which are supreme, to ensure corporate democracy, transparency, to follow best practices of corporate governance, the participation of owners of the company in such important process. 110. Approval of the shareholders of the Financial Creditors - The Financial Creditors who are Banks (Public Sector/Private Sector are all mostly listed Companies) having a large number of shareholders that sometimes runs into more than a lakh. I also recognise the fact that lending, recovery, resolution of the l....
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....oposed 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 Resolution Applicant - The suggestion as to the approval of the shareholders in the case of the Resolution Applicant is made since in any merger, demerger, schemes of arrangement under section 230-232 of Companies Act, 2013, irrespective of the amount involved, approval of the shareholders of the transferee Company is a must. By extending the same analogy, approval of shareholders of Resolution Applicant, which is akin to transferee company may be made compulsory. If this suggestion is not found merit for any reason, the alternative could be that as proposed above at least, notice may be sent to shareholders of Resolution Applicant for their approv....