TaxTMI 
TaxTMI 
2024 (6) TMI 1531
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....EMBER (JUDICIAL) 1. The Present application i.e., I.A/1334/2023 has been filed under Section 30(6) read with section 31(1) of the Insolvency and Bankruptcy Code, 2016 ('the Code') read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP Regulations') on behalf of Mr. Rajiv Chakraborty, Resolution Professional ('Applicant') of M/s Era Infra Engineering Limited ('Corporate Debtor'), seeking approval of the Resolution Plan submitted by SA Infrastructure Consultants Private Limited ('Successful Resolution Applicant') and approved by the Committee of Creditor ('CoC') in its 32nd meeting through e-voting on 25.01.2023 with 87.08% voting in favor. 2. Facts as averred by the Applicant in I.A./1334/ND/2023 a) The Applicant submits that the Corporate Insolvency Resolution Process was initiated against M/s Era Infra Engineering Limited ('Corporate Debtor') by this Adjudicating Authority vide order dated 08.05.2018 in C.P IB- 190/PB/2017, an application filed by Union Bank of India under Section 7 of the Code and Mr. Rajiv Chakr....
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.... by 27.05.2022 and further as per the direction of this Adjudicating Authority vide order dated 02.09.2022, the SRA (and other Resolution Applicants) submitted another revised plan on 20.09.2022. i) The 4 Code compliant Resolution Plans were put to e-voting on 26.09.2022 and the Resolution Plan submitted by SA Infrastructure Consultants Private Limited was approved by the CoC on 25.01.2023 with 87.08% votes in its favor in terms of Section 30(4) of the Code. j) The Applicant further submits that one of the CoC member i.e., Bank of India having 11.05% voting share, voted in favor of the Resolution Plan after closing of the e-voting line by way of e-mail dated 06.02.2023. k) The Applicant submits that the Resolution Professional sent a Letter of Intent dated 27.01.2023 to the SA Infrastructure Consultants Private Limited (SRA), thereby, intimating that the Resolution Plan submitted by it in the CIRP of the Corporate Debtor has been approved by the CoC. The said Letter of Intent was acknowledged by the SRA. l) The Applicant submits that the performance security for total of INR 15,00,00,000 in favor of Union Bank of India (Financial Creditor) dated ....
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....e Assets of the Corporate Debtor and thereby, relying on anticipated refunds from other statutory bodies as mentioned in Annexure -9 of the Resolution Plan. v) The Objector submits that the Resolution Plan failed to mention about the tenure of the Performance Bank Guarantee under clause 8.1 of the Plan. However, under clause 9, the Resolution Applicant mentions the term of the plan as 7 years from the closing date. vi) The Objector submits that the Resolution Applicant by way of clause 12 of the plan has attempted to indemnify itself from any future repercussion. vii) The Objector submits that the Resolution Plan is in breach of Regulation 32 which does not prevail beyond moratorium as the Resolution Applicant has failed to mention under Clause 8.3.l(v) of the plan that the Corporate Debtor shall continue to receive supply of essential goods and services on the basis of Regulation 32 even after moratorium is lifted. viii) The Objector submits that the Resolution Applicant through clause 13.5.1 of the plan is trying to reverse the set-offs done on part of Operational Creditors in respect of transactions done before the commencement of CIRP and the....
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....ted Vs Committee of Creditors of Educomp Solutions Limited & Anr and understands that the law laid down by the said judgement will override the said clause the Material Adverse Effect clause." "The Resolution Applicant confirms that the Plan shall be binding on it in line with the provisions of the Code and the law laid down by the Honourable Supreme Court in the matter of Ebix Singapore Private Limited. Vs Committee of Creditors of Educomp Solutions Limited & Anr. It is observed that the clarifications given by the Successful Resolution Applicant are duly affirmed by an affidavit dated 28.11.2022, wherein, the SRA has agreed that in the event there is any conflict between the proposals contained in the resolution plan and the clarifications, the contents of the clarifications shall prevail. The relevant extract of the affidavit is reproduced hereunder as: "In the event of any contradiction between the proposals contained in the Resolution Plan of the Resolution Applicant and the Clarifications, the contents of the Clarifications shall prevail, and the provisions of the Resolution Plan of the Resolution Applicant will be construed in the light of the Clarificat....
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....l guarantors or restrict the rights of lenders on any securities provided by Third Parties as additional collateral for the debt of the Corporate Debtor in any manner whatsoever (other than the Noida asset which has been specifically deal with in the Resolution Plan). This clarity can be made a part of the Definitive Documents to be executed before the implementation of the Plan " ................ Based on the clarification given by the SRA dated 06.10.2022, we observe that the SRA has undertaken to not to deal with any third-party collateral in respect of any financial creditor including dissenting financial creditors of the Corporate Debtor. Hence, no case of extinguishment would arise. Consequently, the objection raised by the objector in this regard does not hold any ground. 9. With regard to the Objection (iv) raised by the Objector that the sources of funds in the approved resolution plan are contingent, the Applicant has submitted that the resolution plan adequately discloses the sources of funds in clause 2 of the part B (Financial Proposal) of the Plan and the same is elaborated hereunder: Instruments Amount (in INR Crores) Remarks Equity Share C....
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....evance and cannot be taken up as a ground of appeal." In view of the Financial Proposal provided under clause 2 of the part B (Financial Proposal) of the Plan and also the decision of the Hon'ble Supreme Court in Amit Metaliks (supra), we are of the view that the objection raised by the Objector in this regard does not hold any ground. 10. With regard to the objection (v) raised by the Objector as to the tenure of Performance Bank Guarantee, the Applicant has stated that as per Explanation I to the Regulation 36B 4A of the CIRP Regulations, "performance security" shall mean security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor. Further, as per Clause 3.4.2 of the request for resolution plan, "The period of performance bank guarantee shall be initially 1 (one) year with an additional 30 days for making claims and thereafter any such period as may be requested by the Resolution Professional (on the instruction of the CoC), is referred to as the "PBG Validity". The Successful Resolution Applicant, in co....
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....lementation of the plan on the basis of acquiring the Corporate Debtor as a 'going-concern'. Hence, the objection raised by the Objector does not stand substantiated. 13. With regard to the Objection (viii) raised by the Objector as to the treatment of the Operational Creditors under Clause 13.5.2 of the Plan, it is observed that the Applicant is an unsecured Financial Creditor and is in no way effected by the payment proposed to be made to the operational creditors as a part of the resolution plan. Therefore, we are of the view that the Applicant has no locus to challenge the aforesaid clause of the resolution plan. 14. Further, after hearing both the parties, it is evident that the objections raised by the objector to the Resolution Plan approved by the CoC do not merit any consideration by this Adjudicating Authority. Hence, I.A./5241/ND/2023 stands dismissed. 15. It is pertinent to mention that in the Clause 13.15.1 of the Plan submitted by the SRA, it is mentioned that the Resolution Applicant reserves its right to pursue any application for avoidance of a PUFE transaction. However, vide clarification dated 27.03.2024 filed by the Resolution Professional, it i....
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....ic shareholders shall stand reduced to 2,00,000 Equity Shares, at a face value of INR 10 only, which will constitute 2% of the total shareholding pattern of Corporate Debtor on a fully diluted basis. iv) Payments to assenting secured financial creditors of the Corporate Debtor are envisaged in a four-component manner in the plan: (1) Upfront Payment of INR 30 Crores, (2) restructuring of debt by way of issuance of NCDs amounting to INR 378 Crores, (3) sharing of proceeds received from arbitral awards (4) Conversion of balance debt to 4% common equity shareholding of the Corporate Debtor v) The average fair value and liquidation value of the Corporate Debtor is Rs. 405.35 Crores and Rs. 199.26 Crores, respectively. vi) That the final resolution plan and its addendum submitted by M/s SA Infrastructure Consultants Private Limited meets the requirements of Section 30(2) of the Code as under: - Section Provisions under Section 30(2) of the Code Compliance under Resolution Plan 30(2)(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debt....
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....be taken by the Monitoring Agency#, to file and communicate the Plan with various authorities, including governmental authorities, tax authorities/department, other government departments, and also before the various Courts, Tribunals and regulatory authorities where proceedings with respect to the Corporate Debtor are pending, for disposal of all such proceedings and for release of all such assets / encumbrances in accordance with the provisions of the Resolution Plan. Within 90 days of Effective Date 6. Capital Reduction The Corporate Debtor shall undertake a capital reduction, whereby all the equity shares ("Equity Shares") and preference shares of the Corporate Debtor held by any Person on a fully diluted basis shall stand cancelled and extinguished, without any pay-out (other than as envisaged in this Plan) to the Financial Creditors, Operational Creditors, employees and workmen, statutory creditors, Other Creditors, other third parties, The Equity Shares of the Corporate Debtor held by public shareholders shall stand reduced to 2,00,000 Equity Shares, at a face value of INR 10 only, which will constitute 2% of the total shareholding pattern of Corporate Debtor on a f....
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....BI CIRP Regulations 2016 are as under: - Regulation Provisions under Regulation 38 of IBBI CIRP Regulations 2016. Compliance under Resolution Plan 38(1)(a) The amount payable under a resolution plan - (a)to the operational creditors shall be paid in priority over financial creditors; and (b) to the financial creditors, who have a right to vote under sub- section (2) of section 21 and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the plan. YES Part B, Clause 8.4 Page No. 31-32 38(1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.] YES Part B, Clause 1-5, 7.3 and 21 Part D, Clause 2.6 Page No. 20-26, 28, 42-49, 54 38(1B) A resolution plan shall include a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past.] NO Part D, Clause 2.8 Page No. ....
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....or more than 17 years in the industry. The Resolution Applicant shall utilize the understanding of its infrastructure space to bid for new tenders/projects in the EPC sector by utilizing the existing pre qualifications of the Corporate Debtor. Further, the Resolution Applicant has experienced manpower and the necessary network to help ramp up the scale of the operations of the Corporate Debtor. 17. In view of Section 31 of the Code, this Adjudicating Authority before approving the Resolution Plan is required to examine whether the Resolution Plan which is approved by the CoC under Section 30 (4) of the Code meets the requirements as referred to under Section 30 (2) of the Code. Section 30 (2) is quoted below: - "(2) The resolution professional shall examine each Resolution Plan received by him to confirm that each Resolution Plan - (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- ....
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....submitted by the Successful Resolution Applicant along with the mandatory compliances filed by the Applicant herein, we are of the view that the mandatory requirements as laid down under Section 30(2) of the Code are complied with. 19. In respect of compliance regarding Regulation 39(4) of the CIRP Regulations, the Applicant has filed a compliance certificate in Form-H annexed as Annexure A- 20 at Page 250-255 of the application, certifying that the Resolution Plan submitted by the Successful Resolution Applicant meets the requirements as laid down in various sections of the Code and the CIRP Regulations and there are sufficient provisions in the Plan for its effective implementation as required under the Code. Further, an affidavit has been obtained from the Successful Resolution Applicant stating that he is eligible under the provisions of Section 29A of the Code, 2016. 20. As to the relief and concessions sought in the Resolution Plan more specifically set out in Section-11 (Other Provisions of Resolution/Reliefs) of the Resolution Plan, it is pertinent to refer to the decision of the Hon'ble Supreme Court in the matter of Embassy Property Development Private Limited v....
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.... an appeal against the decision of the Committee of Creditors and this Adjudicating Authority is duty bound to follow the judgment of the Hon'ble Supreme Court in the matter of K. Sashidhar v. Indian Overseas Bank (2019) 12 CC 150, wherein the scope and interference of the Adjudicating Authority in the process of the approval of the Resolution Plan is elaborated as follows: - "35. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the aff....
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....catory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by the Committee of Creditors. If, within its limited jurisdiction, the adjudicating authority finds any shortcoming in the resolution plan vis-a-vis the specified parameters, it would only send the resolution plan back to the Committee of Creditors, for re-submission after satisfying the parameters delineated by the Code and exposited by this Court.' (emphasis supplied) The above view of the Hon'ble Supreme Court in Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Limited (Supra) is reaffirmed by the Hon'ble Supreme Court in its recent decision dated 21.11.2023 in the case of Ramkrishna Forgings Limited Vs Ravindra Loonkar, Resolution Professional of ACIL Limited & Anr., 2022 SCC OnLine SC 2142. 24. Thus, from the judgments cited supra, it is amply clear that only limited judicial review is available to the Adjudicating Authority under Section 30(2) read with Section 31 of the Code, 2016 and this ....