2018 (11) TMI 1857 - Tri - Insolvency and Bankruptcy

Approval of the final resolution plan - Section 30(6) read with Section 31(1) of the Insolvency Bankruptcy Code, 2016 read with Regulation 39(4) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 - HELD THAT - The secured creditors are placed above other creditors in terms of receiving payments. The Resolution Plan provides for sale of security of only Axis Bank while securities of all other creditors are intact so therefore if the sale proceeds of security of Axis Bank, the sole charge holder, is being utilized to make payment, Axis Bank is to be given priority as it is just and legal. Therefore, different treatment given to secured financial creditor Axis Bank regarding priority payment in respect to other creditors is just and reasonable. This Bench is of the considered view that the prayer of Axis Bank, a secured creditor who is losing its security, to receive its share of dues in priority to other creditors is justified. The Resolution Plan approved by the Resolution Professional and the Committee of Creditors with 80.92% voting has been found in conformity Section 30(2) of the IBC along with the regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 has been approved as per Section 31(1) of the IBC with modifications as stated - Application disposed off.

Summary

Issues Involved:
1. Approval of the Resolution Plan under Section 30(6) and Section 31(1) of the Insolvency & Bankruptcy Code, 2016.
2. Compliance with Section 30(2) of the IBC and CIRP Regulations.
3. Payment to Financial Creditors and Operational Creditors.
4. Priority of payment to dissenting secured Financial Creditor (Axis Bank).
5. Deletion of non-compliant clauses in the Resolution Plan.

Detailed Analysis:

Approval of the Resolution Plan:
The application was filed under Section 30(6) read with Section 31(1) of the Insolvency & Bankruptcy Code, 2016, seeking approval of the final resolution plan by the Adjudicating Authority. The Resolution Plan of Formation Textiles LLC was approved by the CoC with an 80.92% voting share.

Compliance with Section 30(2) of the IBC and CIRP Regulations:
The Resolution Plan was examined for compliance with Section 30(2) of the IBC and the CIRP Regulations. It was found to meet the criteria laid down in Section 30(2) and Regulations 38 and 39 of the IBBI. Specific provisions included payment of CIRP costs, repayment to Operational Creditors, management of the Corporate Debtor, and implementation and supervision of the plan.

Payment to Financial Creditors and Operational Creditors:
The plan provided for an upfront payment of ?175 crores to Financial Creditors within 30 days of the Effective Date, with the balance amount of ?305 crores to be paid over six years. Operational Creditors, despite having NIL liquidation value, were to receive payments of ?1.59 crores and ?0.634 crores within 30 days of the Effective Date.

Priority of Payment to Dissenting Secured Financial Creditor (Axis Bank):
Axis Bank, a dissenting secured Financial Creditor, sought priority payment of ?46.70 crores. The Tribunal held that Axis Bank, as a secured creditor with an exclusive charge over the Baramati land, should receive priority payment from the sale proceeds of the land. This was justified as Axis Bank would lose its security while other creditors' securities remained intact.

Deletion of Non-Compliant Clauses:
The Tribunal directed the deletion of specific clauses from the Resolution Plan for being non-compliant with the law:
- Clause 7.7 regarding the waiver of dues during CIRP.
- Chapter VIII seeking reliefs and concessions.
- References to payment of liquidation value to dissenting financial creditors, including clause 9.

Additional Directions:
- Rationalization of employee strength as per the Industrial Disputes Act.
- Compliance with SEBI Regulations for stock exchange approvals.
- Compliance with FEMA and RBI Regulations for External Commercial Borrowing.
- Priority in payment to Operational Creditors over Financial Creditors as per amended Regulation 38 of the CIRP Regulations.
- Modification of payment clauses to give priority to Axis Bank from the sale proceeds of Baramati Land.
- Statutory dues to be governed as per respective Acts.
- CIRP costs to be paid on actuals as approved by the CoC.

Conclusion:
The Resolution Plan was approved with modifications, making it binding on the Corporate Debtor and all stakeholders. The applications MA 692/2018 and MA 811/2018 were disposed of, and the Registry was directed to communicate the order immediately to the Resolution Professional and the Resolution Applicant.