2019 (9) TMI 1422 - Tri - Insolvency and Bankruptcy

Approval of Resolution Plan - HELD THAT - The outbidding process was openly conducted by the CoC at the meetings of creditors, in the presence of members of the CoC and all the four resolution applicants including SREI who reached upto the final round. We also understood that multiple rounds of outbidding took place and each participating resolution applicant was given same opportunity to outbid the other resolution applicant. The above said factors brought out from the copies of minutes is self explanatory. Possibility of leaking any data for enabling the bidders to increase its bids never, ever arose in the said process adopted by the CoC. None of the resolution applicants is to be influenced by an insider or outsider. The outbidding process was conducted transparently and diligently. It is significant to note here that other than SREI, none other raised the said contention. The contention of the applicant is frivolous and raised only for the purpose of abusing the process by the unsuccessful bidder. Though an allegation was raised that it was instigated by the promoter director, we were not supplied any data, but we could not rule out that possibility too in the peculiar circumstances of the case in hand. There are no merit in the submission of the Ld. Counsel for the SREI that Mr. Anoop Krishna being a director of Shayam Metalics and Energy Limited SSN is a disqualified resolution applicant. It is significant to note here that Shayam Metalics and Energy Limited is not a successful resolution applicant. Truly the successful resolution applicant is a consortium of SSN and Shayam SEL and Power Ltd. In the absence of any materials brought out to prove that he is connected in any manner with SSN or its consortium members we are unable to hold that Mr. Anoop Krishna is connected with a company allegedly a group company of SSN and thereby entire process is vitiated by undue influence of an employee. Thus, the distribution methodology considering the value of security interest held by the FC's adopted by the CoC for distributing the resolution bid amount which has been approved by a vote of 74.41% is not contrary to any of the provisions of the Code or regulations and any of the principle of law settled by NCLAT and Hon'ble Supreme Court. This is a case wherein the Financial Creditors have taken a hair-cut of 94% by receiving about 6% of admitted claim and the Operational Creditors as a class were treated similarly. Therefore, none of the objections of the Operational Creditors are found sustainable. Whether the application filed by the RP for the approval of the resolution plan of consortium of SSN and Shyam SEL and Power Ltd. approved by the CoC by vote of 74.41% deserves to be approved? - HELD THAT - As per Regulation 39A of the CIRP Regulations, liquidation value due to the operational creditors should be paid in priority to the Financial Creditors. Provision is seen made in the plan to pay aforesaid amount within 30 days from the Effective Date and in any event 1 (one) day prior to the payment to the Financial Creditors - Insolvency resolution cost is agreed to be paid in full in priority over payments to be made of any other debt as per the Code. It is also made clear that resolution applicant and its group companies have sufficient funds and do not envisage any challenge in terms of source for the payment. Payment to workmen's admitted due also is agreed to be paid by the resolution applicant and it is made clear that in any event any further due is admitted under the category, all the workmen and employees shall be paid pro rata based on the admitted claims by the RP. The Resolution Plan, shall come into force from the date of pronouncement of this order - moratorium order passed under Section 14 shall cease to have effect.

Summary

Issues Involved:
1. Approval of the Resolution Plan.
2. Objections by Operational Creditors.
3. Objections by Financial Creditors.
4. Objections by Promoter Director.
5. Objections by Unsuccessful Bidders.
6. Inclusion of Security Expenses.
7. Eligibility of the Resolution Applicant under Section 29A.

Detailed Analysis:

1. Approval of the Resolution Plan:
The Resolution Professional filed an application for the approval of the Resolution Plan for M/s. Ramsarup Industries Limited, which was approved by the Committee of Creditors (CoC) with a voting share of 74.41%. The Corporate Applicant initiated the Corporate Insolvency Resolution Process (CIRP) due to its inability to pay debts. The CIRP period was extended to complete the process, and the CoC approved the Resolution Plan on 16-03-2019.

2. Objections by Operational Creditors:
Operational Creditors filed multiple applications objecting to the approval of the Resolution Plan, claiming discrimination in the distribution of the resolution bid amount. They argued that their claims should be prioritized over those of Financial Creditors. The tribunal concluded that the amount due to Operational Creditors must be given priority over Financial Creditors as per Regulation 38(1) of the CIRP Regulations. The tribunal found no merit in the objections, as the distribution was in accordance with Section 30(2) of the Code, and differential treatment is permissible if creditors are not similarly situated.

3. Objections by Financial Creditors:
Financial Creditors objected to the methodology of distribution based on security interest rather than voting share. The tribunal found that the methodology was approved by the CoC with a 74.41% vote and was not in violation of Section 30 of the Code. The objections were dismissed as the methodology considered the value of the security interest of secured creditors, which is permissible under the amended Section 30(b).

4. Objections by Promoter Director:
The Promoter Director challenged the approval of the Resolution Plan on multiple grounds, including the resolution bid amount being below the liquidation value, discriminatory distribution, and the eligibility of the Resolution Applicant. The tribunal found no merit in these objections, stating that the resolution bid amount being less than the liquidation value is not a ground for rejection. The tribunal also found that the distribution methodology was not discriminatory and that the Resolution Applicant was eligible under Section 29A of the Code.

5. Objections by Unsuccessful Bidders:
Unsuccessful bidders, including Orissa Metaliks Private Limited (OMPL) and SREI Multiple Asset Investment Trust, challenged the eligibility of the successful Resolution Applicant under Section 29A. The tribunal dismissed these objections, finding no evidence to support the claims of ineligibility. The tribunal imposed costs on the unsuccessful bidders for filing frivolous applications.

6. Inclusion of Security Expenses:
West Bengal Industrial Development Corporation Limited (WBIDCL) filed an application seeking inclusion of security expenses in the upfront payment. The tribunal directed the inclusion of the security expenses incurred by WBIDCL, which were admitted by the Resolution Professional, in the upfront amount payable by the Resolution Applicant.

7. Eligibility of the Resolution Applicant under Section 29A:
The tribunal examined the eligibility of the Resolution Applicant under Section 29A and found that the Resolution Applicant was eligible. The objections raised by the Promoter Director and unsuccessful bidders were found to be without merit, and the Resolution Applicant's compliance with Section 29A was confirmed.

Orders:
1. The Resolution Plan of Ramsarup Industries Ltd., approved by the CoC with 74.41% voting share, is hereby approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016.
2. The Resolution Plan shall include the portion of security expenses incurred by WBIDCL, admitted by the Resolution Professional, in the upfront amount payable by the Resolution Applicant.
3. The Resolution Plan shall come into force from the date of pronouncement of this order.
4. The moratorium order passed under Section 14 shall cease to have effect.
5. The Resolution Professional shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the Insolvency and Bankruptcy Board of India.
6. Various applications filed by Operational Creditors and Financial Creditors are dismissed without costs.
7. Applications filed by the Promoter Director and unsuccessful bidders are dismissed with costs, to be paid to the account of the Corporate Debtor.
8. The costs imposed on the Promoter Director and unsuccessful bidders shall be added to the amount payable to Operational Creditors other than workmen.
9. The CP (IB) No. 349/KB/2017 is disposed of, with pending applications listed separately for hearing and disposal.
10. The Registry is directed to communicate the order to all concerned parties through email and free copy, and issue a certified copy of the order upon compliance with requisite formalities.

The judgment ensures that the Resolution Plan is implemented in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016, and addresses the objections raised by various stakeholders comprehensively.