2017 (11) TMI 1771 - Tri - Insolvency and Bankruptcy

Resolution plan approval - order for revival of the company - funding arrangements with the prospective investor - Held that - To keep the company a going concern SML has formed SVP and entered into MoU and has made funding arrangements with the prospective investor. It is also written in the plan that the mining contractors who will be paid as contracting charges will be assisting the company in getting various approvals from the various authorities. The above plan submitted by one of the promoters of the corporate debtor shows that SML has made arrangement for funds and also entered into MoU with the mining contractors who have also agreed in assisting the company in getting various approvals from the concerned authorities so that the company can remain a going concern. The plan approved by the COC provides for payment of insolvency resolution process cost in priority to other debts repayment of operational creditors compliance with applicable law and met such other conditions as laid down by the Insolvency and Bankruptcy Board of India and it has been approved by COC having more than 75 per cent of vote shares. Since COC has approved the resolution plan with more than 75 per cent of voting share and the approved plan by the COC conforms the conditions laid down under sub-section (2) of section 30 of Code therefore resolution plan deserves to be approved. The resolution plan which is approved by the COC with a voting share of 78.53 per cent is being approved under provisions of section 31 of the Code which will be binding on the corporate debtor its employees members creditors coordinators and other stakeholders involved in the resolution plan. The following orders are also passed in this context. (i) The above order for revival of the company in accordance with approved resolution plan shall come into force with immediate effect. (ii) The moratorium order passed under section 14 shall cease to have effect. (iii) The resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Insolvency and Bankruptcy Board of India to be recorded on its database. Sincere effort on the side of Resolution Professional Shri Kuldeep Verma who rendered his service as Insolvency Professional and submitted resolution plan in time which would necessarily give life to a dying company.

Summary

Issues Involved:
1. Eligibility of the corporate debtor to submit a resolution plan.
2. Approval of the resolution plan by the Committee of Creditors (CoC).
3. Classification of secured creditors into Class A and Class B.
4. Allegations of the SML plan being a design to transfer operations.
5. Compliance with the Insolvency and Bankruptcy Code (IBC) and relevant regulations.

Issue-wise Analysis:

1. Eligibility of the Corporate Debtor to Submit a Resolution Plan:
The primary contention was whether a corporate debtor could act as a resolution applicant under the Insolvency and Bankruptcy Code (IBC). The objector, SREI Equipment Finance Ltd., argued that a corporate debtor, whose management is vested in the interim resolution professional and whose board of directors is suspended, cannot submit a resolution plan. They cited the Supreme Court judgment in Innoventive Industries Ltd. v. ICICI Bank, stating that erstwhile directors cannot maintain an appeal on behalf of the company once an insolvency professional is appointed. However, the Tribunal clarified that Section 30 of the IBC does not restrict who can be a resolution applicant, including promoters or corporate debtors, provided the plan meets the conditions under Section 30(2) and is approved by the CoC with a minimum 75% voting share.

2. Approval of the Resolution Plan by the Committee of Creditors (CoC):
The resolution plan submitted by Mr. Mahesh Kumar Agarwal was initially rejected by the CoC due to non-clarity on the mining contractor arrangement and other related issues. However, after addressing these concerns through an addendum and clarifications, the revised plan was reconsidered and approved by the CoC with 78.53% voting share. The Tribunal noted that the revised plan addressed the earlier objections and was thus valid for reconsideration and approval.

3. Classification of Secured Creditors into Class A and Class B:
SREI objected to the classification of secured creditors into Class A and Class B, arguing it was discriminatory and violated the IBC. Class A creditors were those with a first pari passu charge on the fixed/current assets of the company, while Class B creditors did not have such a charge. The Tribunal held that this classification was not discriminatory as it was based on the specific nature of the security interests held by the creditors. The plan proposed different treatment for these classes, with Class A creditors receiving a 75% settlement and Class B creditors a 50% settlement, which was deemed reasonable given the nature of their securities.

4. Allegations of the SML Plan Being a Design to Transfer Operations:
SREI alleged that the SML plan was a design to transfer operations to the investor proposed in the plan, with the resolution professional and CoC kept in the dark about certain transactions. The Tribunal found that the plan included arrangements with mining contractors and a strategic investor to ensure the company's revival and continuity as a going concern. The plan provided for necessary approvals and funding arrangements, thus addressing the concerns raised.

5. Compliance with the Insolvency and Bankruptcy Code (IBC) and Relevant Regulations:
The Tribunal examined whether the resolution plan complied with Section 30(2) of the IBC, which includes provisions for payment of insolvency resolution process costs, repayment of operational creditors, management of the corporate debtor's affairs, implementation and supervision of the plan, and compliance with applicable laws. The resolution plan met these requirements and was approved by the CoC with more than the required 75% voting share. Therefore, the Tribunal approved the resolution plan under Section 31 of the IBC, making it binding on all stakeholders.

Conclusion:
The Tribunal approved the resolution plan submitted by Mr. Mahesh Kumar Agarwal, which was endorsed by the CoC with a 78.53% voting share. The objections raised by SREI were addressed, and the plan was found to comply with the necessary legal provisions. The moratorium order ceased, and the resolution professional was directed to forward all relevant records to the Insolvency and Bankruptcy Board of India.