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2021 (5) TMI 1045 - Tri - Insolvency and BankruptcyApproval of Resolution Plan - HELD THAT - In view of these multiple IAs emanating from the RP's actions while conducting the CIRP, seeking inclusion of their claims or consideration of their Resolution Plan by the CoC, and thus seeking to reject the Resolution Plan submitted in IA 161 of 2020, we have prima facie reason to believe that the process followed by the RP during the CIRP neither takes into account the interest of all the creditors / stake holders, nor seeks to maximise value of the assets of the CD by considering all possible Resolutions Plans, even though these are the twin objects of the CIRP - the manner in which the CIRP has been conducted is not satisfying. Whether under the facts and circumstances of the case, the liability of the Corporate Debtor to the Applicant State Govt. would amount to a Financial Debt? - HELD THAT - The Respondent's argument that no actual money was disbursed for the time value of money and that there was no financial debt has to be rejected and the said transaction has to be considered as 'Financial Debt' under Section 5(8) of the Code. When the audited books of accounts of the Corporate Debtor were available for the concerned years and reflected the financial debt under consideration, and in view of the clear provisions of the Code and the Regulations, the RP was duty bound to determine the financial position of the CD, verify the credits in the name of the Creditor from the books of accounts and put up the same before the CoC, with the complete factual and legal position, rather than reject it behind its back. Whether the financial creditor is eligible to have its claim considered, if not presented or submitted within the period stipulated under Regulation 12(2) of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016? - HELD THAT - In accordance with the provisions of section 60(5)(c) of I B code read with Rule 11 of NCLT Rules 2016 this Adjudicating Authority passes the following orders and directs the Resolution Professional as under (1) IA 85 of 2021 C.P. (IB) No. 51/BB/2018 is disposed of with the directions that the claim filed by the Applicant, the State of Karnataka, Department of Industries Commerce as a Financial Creditor, in Form C, shall be put up by the RP to the CoC for its consideration/acceptance, in the light of our findings and decision in the foregoing paragraphs. Reconstitution of the CoC will also be considered by the RP. (2) IA227 of 2020 C.P. (IB) No. 51/BB/2018 is disposed of with the directions that the Resolution Plan submitted by Swamitva Landmark, Shankeshwar Landmarks LLP and Shankeshwar Landmarks, shall be placed before the CoC along with the Resolution Plan filed by METL and submitted for our approval in IA 161, for the CoC's evaluation and approval, strictly keeping in mind the objects of the Code, and superior commercial viability. The Resolution Plan approved out of the two by the CoC shall be submitted to us for our consideration and approval. (3) IA 248 r/w IA 225 C.P. (IB) No. 51/BB/2018 is disposed as infructuous as IA 225 has already been disposed of. However, the issues raised by the erstwhile Promoters shall be kept in view by the RP so as to attain the objects of the Code. (4) IA 134 of 2020 is disposed with directions to the Commercial Taxes Dept. to place before the RP only ascertained, crystallised demand that may have arisen from a regular assessment for the period under consideration. The RP shall place the same before the CoC/reconstituted CoC, for its consideration. (5) IA 161 of 2020 is deemed to be disposed of and restored to the RP, for being re-considered by the CoC along with the Resolution Plan submitted by Swamitva Landmark, Shankeshwar Landmarks LLP and Shankeshwar Landmarks. (6) The directions at sl. nos. 1), 2) and 4) shall be carried out within a period of 12 weeks from the receipt/uploading of this order. This period is considered appropriate considering the present Covid 19 pandemic situation and the ensuing lockdown in several states. The RP is granted liberty to bring an Application before this Adjudicating Authority for any further exclusion of time, if the same is for exceptional and justifiable reasons, and in the interest of completing the process and achieving the objects of the Code. Application disposed off.
Issues Involved:
1. Whether the liability of the Corporate Debtor to the Applicant State Government amounts to a Financial Debt. 2. Whether the financial creditor is eligible to have its claim considered if not presented within the stipulated period. 3. Whether the process followed by the Resolution Professional during the CIRP was as per the provisions of the Code and Regulations. 4. Whether a new Resolution Plan can be considered after the CoC's approval and submission to the Adjudicating Authority. 5. Whether the Commercial Taxes Department's claim should be admitted and how it affects the Resolution Plan. Issue-wise Detailed Analysis: I. Whether the liability of the Corporate Debtor to the Applicant State Government amounts to a Financial Debt: 1. Applicant's Claim: The State of Karnataka, Department of Industries & Commerce, claimed an interest-free VAT loan of Rs. 226.87 crores provided to the Corporate Debtor under a special incentive scheme, which was to be repaid after ten years. 2. Respondent's Objection: The RP argued that the VAT loan was a benefit/concession, not a financial debt, as it lacked the "time value of money." 3. Tribunal's Finding: The Tribunal found that the loan agreement indicated a time value for money, as it included provisions for interest if not repaid within the stipulated time. The Corporate Debtor's assets were mortgaged to the State Government, and the loan was categorized as a "Secured Loan" in the Corporate Debtor's audited balance sheets. Therefore, the Tribunal held that the VAT loan qualifies as a "Financial Debt" under Section 5(8) of the Code. II. Whether the financial creditor is eligible to have its claim considered if not presented within the stipulated period: 1. Applicant's Delay: The State of Karnataka filed its claim late due to a lack of information and the onset of the COVID-19 pandemic. 2. Respondent's Argument: The RP argued that the claim was not submitted within the timelines and hence could not be considered. 3. Tribunal's Finding: The Tribunal held that the timelines for submission of claims are directory, not mandatory. The RP should have considered the claim based on the Corporate Debtor's books of accounts. The Tribunal directed the RP to put up the claim for the CoC's consideration and reconstitute the CoC if necessary. III. Whether the process followed by the Resolution Professional during the CIRP was as per the provisions of the Code and Regulations: 1. Applicant's Allegation: Swamitva Landmarks alleged that the RP did not provide audited financial statements and other necessary information, hindering the preparation of a viable resolution plan. 2. Respondent's Defense: The RP argued that the information was provided on an "as is where is" basis, and the applicants had access to the Virtual Data Room. 3. Tribunal's Finding: The Tribunal found that the RP did not comply with Regulation 36(2)(b), (c), (d), and (f) of the IBBI Regulations, which mandate providing audited financial statements and details of creditors. The Tribunal held that the RP's failure to follow the correct procedure prevented the applicant from submitting a timely plan and directed the RP to place the Swamitva Landmarks' plan before the CoC for consideration. IV. Whether a new Resolution Plan can be considered after the CoC's approval and submission to the Adjudicating Authority: 1. Respondent's Argument: The RP argued that once the CoC has approved a resolution plan and submitted it to the Adjudicating Authority, no new plan can be considered. 2. Tribunal's Finding: The Tribunal referred to the Supreme Court's decision in the Essar Steel case, which allows the Adjudicating Authority to send a resolution plan back to the CoC if the parameters of the Code are not met. The Tribunal held that the RP's failure to follow the correct procedure justified reconsideration of the Swamitva Landmarks' plan, even after the CoC's approval of another plan. V. Whether the Commercial Taxes Department's claim should be admitted and how it affects the Resolution Plan: 1. Applicant's Claim: The Assistant Commissioner of Commercial Taxes claimed Rs. 54,46,13,819/- based on a best judgment assessment. 2. Respondent's Objection: The RP argued that the best judgment assessment orders were deemed withdrawn as the Corporate Debtor filed returns and paid self-assessed GST liability. 3. Tribunal's Finding: The Tribunal noted that the regular assessment was still pending, and the RP should have included a clause in the IM to factor in any potential liability. The Tribunal directed the Commercial Taxes Department to provide a crystallized demand and the RP to place it before the CoC for consideration. Directions: 1. IA 85 of 2021: The claim by the State of Karnataka as a Financial Creditor shall be put up by the RP to the CoC for consideration, and reconstitution of the CoC will be considered. 2. IA 227 of 2020: The Resolution Plan submitted by Swamitva Landmark shall be placed before the CoC along with the plan submitted by METL for evaluation and approval. 3. IA 248 r/w IA 225 of 2020: Disposed of as infructuous, but issues raised by the erstwhile Promoters shall be considered by the RP. 4. IA 134 of 2020: The Commercial Taxes Dept. shall provide a crystallized demand, and the RP shall place it before the CoC for consideration. 5. IA 161 of 2020: Deemed disposed of and restored to the RP for reconsideration by the CoC along with the Swamitva Landmark plan. 6. Timeline: The RP shall carry out the directions within 12 weeks from the receipt of the order, with liberty to seek further exclusion of time if necessary. All IAs in C.P. (IB) No. 51/BB/2018 are disposed of as above. No order as to cost. Post the case for report of the RP on 30th June 2021.
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