2019 (6) TMI 1639 - Tri - Insolvency and Bankruptcy

Seeking approval of Resolution Plan - HELD THAT - All the reliefs asked for in Section 6 of the resolution plan by the RA, are granted. The resolution plan submitted by the RA seems to be in place and fit to be admitted. Henceforth the moratorium order shall cease to have effect. The resolution professional shall further act upon as prescribed on approval of the resolution plan to forward the records to the concerned authorities and to intimate the closure of the insolvency proceedings. Application allowed.

Issues Involved:
1. Admission of CIRP application.
2. Progress and approval of the resolution plan.
3. Reasons for the corporate debtor's insolvency.
4. Details of the resolution plan.
5. Financial proposal by the resolution applicant.
6. Implementation steps for the resolution plan.
7. Management and supervision of the corporate debtor post-resolution.
8. Compliance with mandatory requirements under the Code and CIRP Regulations.
9. Specific reliefs requested by the resolution applicant.

Issue-wise Detailed Analysis:

1. Admission of CIRP Application:
This Tribunal admitted the application filed under Section 9 of the Insolvency and Bankruptcy Code (the "Code") by Power2sme Pvt. Ltd. against the corporate debtor (CD), Uttam Strips Ltd., and ordered the commencement of the corporate insolvency resolution process (CIRP) of the CD.

2. Progress and Approval of the Resolution Plan:
The resolution professional (RP), Mr. Sanjay Gupta, submitted progress reports periodically. The Committee of Creditors (CoC) meetings were held as prescribed under the Code. The current RP was appointed in the 1st CoC meeting on 15.05.2018, and the appointment was confirmed by the Tribunal. The RP prepared the Information Memorandum and published the Expression of Interest. In the 12th CoC meeting on 26.12.2018, the resolution plan submitted by Jyoti Strips Ltd. (RA) was approved by the CoC with 100% votes in favor.

3. Reasons for the Corporate Debtor's Insolvency:
The CD, involved in manufacturing steel and steel products, faced insolvency due to strategic expansion from 2008-2012, increasing installed capacity from 75,000 MTPA to 2,50,000 MTPA, and venturing into home furnishing products for export. The CD was unable to recover receivables, leading to defaults with lenders.

4. Details of the Resolution Plan:
The RA, an ISO 9001:2015 company incorporated in 2007, engaged in trading, cutting, and slitting flat steel products, proposed restructuring operations. The plan includes leveraging expertise in raw material sourcing, operations, and maintenance, ramping up sales volume, reviewing future sales agreements, and achieving a saleable steel capacity of 90,000 TPA of CRC.A. The RA proposes to infuse approximately ?5 crores for revamping existing facilities and improving safety, environmental, and other operating norms.

5. Financial Proposal by the Resolution Applicant:
The financial proposal includes:
i. Payment of CIRP costs up to ?3.75 crores plus taxes.
ii. Liquidation value payable to workmen for 24 months preceding CIRP commencement or 20% of admitted claims (?1.28 crores), whichever is higher.
iii. Up to 1% of admitted claims (?0.27 crores) to operational creditors.
iv. Payment to financial creditors of ?108 crores pro rata to their respective portions, including repayment of outstanding interest and principal.
v. Infusion of ?5 crores by the RA for starting and improving CD operations.

6. Implementation Steps for the Resolution Plan:
The RA proposes steps including:
i. Invocation of pledged shares by financial creditors within 15 days from the Effective Date.
ii. Capital reduction by the CD, canceling equity shares held by persons other than financial creditors.
iii. Infusion of funds by the RA for CIRP costs and claims.
iv. Payment towards CIRP costs, employee and workmen dues, and operational creditors within 20 days from the Effective Date.
v. Acquisition of pledged equity shares by the RA and payment of ?108 crores towards financial creditors on the Closing Date.
vi. Infusion of equity by the RA within 2 months of the Closing Date to improve CD operations.

7. Management and Supervision of the Corporate Debtor Post-Resolution:
The RA proposes:
i. Post Effective Date and prior to the Closing Date, a monitoring agency comprising the RP, a CoC representative, and an RA representative to supervise plan implementation.
ii. On and after the Closing Date, the RA will hold 100% of the CD's equity share capital, acquire control, and reconstitute the Board of Directors.

8. Compliance with Mandatory Requirements Under the Code and CIRP Regulations:
The resolution plan complies with mandatory requirements, including:
i. Submission of an affidavit by the RA stating eligibility under Section 29A.
ii. Payment of CIRP costs in priority to other debts.
iii. Payment of operational creditors' claims not less than the amount payable in liquidation.
iv. Inclusion of a statement addressing stakeholders' interests.
v. Provisions for management, implementation, and supervision of the CD.
vi. Approval by the CoC with 100% votes.

9. Specific Reliefs Requested by the Resolution Applicant:
The Tribunal discussed and rejected specific reliefs requested by the RA, including:
i. Exemption from minimum alternate tax under Section 115JB of the Income Tax Act, 1961.
ii. Exemption from stamp duty and fees by the Department of Registration and Stamps and the Ministry of Corporate Affairs.
iii. Waiver of penalties for non-registration and inadequate/non-stamping of documents.
iv. Exemption from income tax for any income/gain/profits arising from the resolution plan.

Conclusion:
All reliefs requested in Section 6 of the resolution plan, apart from those discussed, are granted. The resolution plan is admitted, and the moratorium order ceases to have effect. The resolution professional shall act as prescribed to forward records to concerned authorities and intimate the closure of insolvency proceedings.

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