TaxTMI 
TaxTMI 
2022 (12) TMI 1575
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....uthority vide order dated 15.01.2020, in an application filed by the financial creditor IDBI Bank Limited under Section 7 of the Code triggering the moratorium and Mr. Rajeev Bal Sawangikar was appointed as Interim Resolution Professional ('IRP'). The IRP made a public announcement in Form-A and collated claims and thereafter constituted a Committee of Creditors ('CoC') comprising of 22 financial creditors. Thereafter in 2nd CoC meeting held on 13.03.2020, CoC had resolved to replace IRP and appointed the Applicant herein as the Resolution Professional of the Corporate Debtor and the said replacement was confirmed by this Adjudicating Authority vide order dated 05.05.2020. 3. The Applicant submits that the members of the CoC in its 3rd meeting held on 09.04.2020 had approved the eligibility criteria for the prospective resolution applicants to submit their Expression of Interest ("EoI") for the Corporate Debtor. Thereafter pursuant to the approval of the members of the CoC during the 4th CoC meeting held on 22.05.2020, the Applicant made publication of 'Form G' on 28.05.2020, in Economic Times (All Editions) and Divya Bhaskar (Gujarat Edition) for inviting EoIs. On delib....
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....he Hazel Mercantile Limited in its resolution plan had given two options regarding value of ongoing arbitration proceedings of the Corporate Debtor, which is reproduced below: "Option 1- The Corporate Debtor has initiated arbitration proceedings for the recovery of amounts owed to it under various contracts which have been terminated. The claims in these cases, amount to Rs. 1,247.48 Crores (approximately) (Rupees One Thousand Two Hundred and Forty-Seven Crore and Forty-Eight Paise Only). HML has proposed to assign 76% of the net amounts received from these pending disputes to the COC for the benefit of the Financial Creditors (subject to deduction of actual expenditure / costs incurred in realizing these receivables, and net of all applicable taxes). Option 2: As an alternative to Option 1 above, the CoC may opt to receive a one-time lumpsum payment amount of INR 400 Crores which shall be considered full and final consideration towards relinquishment of all rights of the Unrelated Financial Creditors upon amounts which may be received from the ongoing arbitration proceedings of the Corporate Debtor. This amount of Rs. 400 Crores (Four Hundred Core Only) shall be ....
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....bution as per the plan to the stakeholders under the Resolution Plan is as under, as described in Form-H: (Amount in Rs. lakh) Sr. No. Category of Shareholder * Sub-Category of Stakeholder Amount Claimed Amount Admitted Amount provided under the Plan# Amount provided to the Amount Claimed (%) (1) (2) (3) (4) (5) (6) (7) 1 Secured Financial Creditors (a) Creditors not having a right to vote under subsection (2) of Section 21 0 0 - 0.00 (b) Other than (a) above: (i) who did not vote in favour of the resolution Plan (ii) who voted in favour of the resolution plan 36,805 11,54,908 36,805 11,49,006 3952 2,00,048 10.73% 17.32% Total [(a)+(b)] 11,91,713 11,85,811 20,4000 17.12% 2 Unsecured Financial Creditors (a)Creditors not having a right to vote under subsection (2) of section 21 31,31,714 11,111 0 0 (b)Other than (a) above: (i) who did not vote in favour of the resolution plan. (ii) w....
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....ection (1) of section 53 in the event of a liquidation of the corporate debtor. Explanation 1. - For removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors." 12. The Resolution Professional through an affidavit referred to the following observations made by Hon'ble Supreme Court of India in the matter of Committee of Creditors of Essar Steel India Limited Through Authorised Signatory versus Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 of 2019): "80. When it comes to the validity of the substitution of Section 30(2) (b) by Section 6 of the Amending Act of 2019, it is clear that the substituted Section 30(2)(b) gives operational creditors something more than was given earlier as it is the higher of the figures mentioned in sub-clauses (i) and (ii) of sub-clause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of sub-clause (b) which refers to dissentient financial creditors. Mrs. Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provision in favour of operational....
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....Section 30 (2) (b) of the Code and is fair and equitable; and that it is well within the commercial wisdom of CoC to decide on the distribution of the resolution plan amount as provided in Section 30 (4) of the Code. 13. It is noted that Form-H has been filed by Resolution Professional wherein all information as regard to conduct of CIRP, as well as process adopted for Resolution Plan, has been given. It is stated in clause 12.3 of the resolution plan that as on 30.06.2021 the CIRP costs amounts to Rs. 6530.66 lakhs and the Resolution Applicant shall pay this amount in full along with the additional CIRP costs incurred between 30.06.2021 and the closing date. The closing date is defined as the date on which the Resolution Applicant causes the upfront payment amount under clause 20.1(Timeline of Implementation) to be deposited with the designated lender. 14. The sources of funds for making payments to various stakeholders by the Resolution Applicant as provided at clause 11.6 of the Resolution plan is as below: Sources of funds Amount (in Crs.) Application of Funds Amount (In Crs.) Promoters Contribution 600 CIRP Costs 65.30 Payme....
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....ference is in compliance with the decision of the Hon'ble Supreme Court in State Tax Officer Vs. Rainbow Papers Limited on the issue of statutory dues payable by the corporate debtor. 17. The Applicant Resolution Professional has filed its submission and submits that Resolution Professional had admitted a claim of Rs. 12,29,78,585/- of Maharashtra VAT Department for the period 2012-13 and a claim of Rs. 2,08,16,038/- of GST for period 2017-18 aggregating to Rs. 14.37 crores. Further with regard to MVAT by referring to Section 37 of MVAT Act, 2002, it has been submitted that claim of the department under the MVAT would be subordinate to any Central Legislation creating first charge i.e. financial creditors. 18. For ready reference, Section 37 of MVAT is reproduced below: "Section 37: Liability under this Act to be the first charge:- (1)] Notwithstanding anything contained in any contract to the contrary, but subject to any provision regarding creation of first charge in any Central Act for the time being in force, any amount of tax, penalty, interest, sum forfeited, fine or any other sum, payable by a dealer or any other person under this Act, shall be the fi....
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....r Section 30(2) of the Code read with CIRP Regulations: (i) It should provide for the payment of insolvency resolution process costs in priority to the repayment of other debts of the corporate debtor. [Section 30(2)(a)] (ii) The repayment of the debts of operational creditors and dissenting financial creditors should not be less than the amount to be paid to such respective creditors in the event of liquidation of the corporate debtor under section 53 of the Code. Moreover, the payment to the operational creditor is to be made in priority over the financial creditor; and the payment to dissenting financial creditor is to be made in priority to the consenting financial creditors. [Section 30(2)(b) read with CIRP Regulation 38(1)(a) & 38(1)(b)]; (iii) Provides for the management of the affairs of the corporate debtor after approval of the resolution plan. [Section 30(2)(c) read with CIRP Regulation 38(2)(b)]; (iv) The implementation and supervision of the resolution plan. [Section 30(2)(d) read with CIRP Regulation 38(2)(c)]; (v) It does not contravene any of the provisions of the law for the time being in force....
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.... the approval date. However, from Form-H, it is seen that the operational creditors are proposed to be paid Rs. 308 lakhs. Further with respect to dissenting financial creditor, under clause 14.7 of the resolution plan, the Resolution Applicant has undertaken that any dissenting financial creditor would be paid the liquidation value due to them in priority to the other financial creditors. However, it is noted that on considering only Section 30(2) (b) of the Code, the CoC in its commercial wisdom have proposed the distribution to dissenting financial creditors at an amount of Rs. 39.52 crore payable to them in accordance with Section 53 (1) of the Code in the event of a liquidation of the Corporate Debtor. To this a query was raised by the bench as to what would have been the amount payable to those dissenting creditors, had they given their consent. On this, an affidavit has been filed stating that in that case amount payable to those dissenting creditors would have been Rs. 63.32 crores. We are of the view that the provision of Section 30(2)(b) is in fact a beneficial provision in favour of dissenting financial creditors. Explanation-1 to Section 30 (2) provides that th....
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....n force. Thereby, Section 30(2)(e) of IBC, 2016 has been complied with. (vi) The resolution plan also conforms to other IBBI Regulations as given hereunder: (a) The resolution plan contains a statement regarding dealing with interests of all stakeholders, including financial creditors and operational creditors, of the Corporate Debtor. Thereby, Regulation 38(1A) of CIRP Regulations, 2016 has been complied with. (b) The resolution plan contains a statement that the Resolution Applicant or any of its related parties has not failed to implement or contributed to failure of implementation of any other Resolution Plan approved by the Adjudicating Authority. Thus, statement giving details of such non-implementation is not applicable under Regulation 38(1B) of CIRP Regulations, 2016. (c) The term of the resolution plan is for a period of five years which shall commence on the date of the approval of the said plan by the Adjudicating Authority. It provides for the implementation schedule for payment to the creditors as envisaged in the resolution plan within a period of 5 years. Thereby, Regulation 38(2)(a) of CIRP Regulations, 2016 has been com....