2020 (3) TMI 1461 - Tri - Companies Law

Seeking sanction of resolution plan as approved in the meeting of Committee of Creditors (CoC) - HELD THAT - In compliance of the proviso to Section 31(1) of the Code that the resolution plan has provisions for its effective implementation. The resolution plan states that the supervision of the resolution plan as finally approved by the Adjudicating Authority is proposed to be done by the Resolution Professional for the entire period of its implementation. It is also stated that in case any violation of any terms of the resolution plan by the Resolution Applicant or the Corporate Debtor is observed the relevant provisions of the Code dealing with such violations shall be invoked. The Plan proposes an implementation Schedule of sixteen quarters or 48 months from the date of approval of the resolution plan. It is stated that the implementation of the plan will be made by making payments towards the outstanding CIRP costs financial creditors operational creditors government dues and payment of other dues and towards unsecured loans/deposits and by fulfilling all other terms laid out in this resolution plan. In Part D of the Resolution Plan (Page No. 74 of application) it is mentioned that the resolution applicant has furnished a performance guarantee by way of upfront payment of Rs. 1.5 Crores. As per the requirement of performance security a Term Deposit Advice Certificate for a sum of 1.5 crores with Kotak Mahindra Bank is found attached with the application as Annexure A-16. The RP should ensure that the performance security is received as per the decision of the CoC. The resolution plan submitted by Shri Narinder Garg Smt. Manju Garg and Shri Shiv Garg as approved by the CoC under Section 30 (4) of the Code is hereby approved subject to comments in para No. 30 regarding performance security. The resolution plan so approved shall be binding on the corporate debtor and its employees members creditors including the Central Government any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force such as authorities to whom statutory dues are owed guarantors and other stakeholders involved in the resolution plan. The moratorium order passed by the Adjudicating Authority under Section 14 of the Code on 13.11.2018 shall cease to have effect - The RP shall forward all records relating to the conduct of the CIRP and the resolution plan to the Board to be recorded on its database. Application disposed off.

Summary

Issues Involved:

1. Determination of the Corporate Debtor's status as a "small enterprise" under the MSME Act, 2006.
2. Approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016.
3. Compliance with the requirements of the Insolvency and Bankruptcy Code, 2016, and related regulations.
4. Voting and approval process by the Committee of Creditors (CoC).
5. Effective implementation and supervision of the Resolution Plan.

Issue-wise Detailed Analysis:

1. Determination of the Corporate Debtor's status as a "small enterprise" under the MSME Act, 2006:
I.A. No. 18/2020 was filed to place on record the Auditor Certificate stating that the Corporate Debtor falls under the definition of "small enterprise" under the MSME Development Act, 2006. The Tribunal accepted and placed this certificate on record, thereby disposing of I.A. No. 18/2020.

2. Approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016:
The Resolution Professional (RP) filed CA No.610/2019 under Section 31 of the Code, seeking sanction of the resolution plan approved by the CoC on 20.07.2019. The Tribunal examined the resolution plan and noted that it was approved by 95.30% of the voting share of the financial creditors. The Tribunal found that the resolution plan met the requirements under Section 30(2) of the Code and had provisions for its effective implementation.

3. Compliance with the requirements of the Insolvency and Bankruptcy Code, 2016, and related regulations:
The RP submitted that all provisions of the Code and Regulations were complied with. The Tribunal verified compliance with Section 30(2) of the Code, which includes payment of insolvency resolution process costs, payment of debts of operational creditors, management of the Corporate Debtor's affairs, implementation and supervision of the resolution plan, and adherence to the law. The Tribunal confirmed that the resolution plan did not contravene any provisions of the law and was feasible and viable.

4. Voting and approval process by the Committee of Creditors (CoC):
The CoC initially constituted with three financial creditors and three operational creditors without voting rights. The CoC approved the resolution plan with 95.30% voting in favor. The Tribunal noted that the resolution plan was approved by the CoC in accordance with the Code and CIRP Regulations. The Tribunal also examined the distribution of voting shares among the financial creditors and confirmed that the plan was approved by the requisite majority.

5. Effective implementation and supervision of the Resolution Plan:
The resolution plan provided for the management and control of the Corporate Debtor by the Resolution Applicant and proposed supervision by the RP for the entire period of implementation. The plan included an implementation schedule of sixteen quarters or 48 months from the date of approval. The Tribunal found that the resolution plan had provisions for its effective implementation and directed the RP to ensure compliance with the performance security requirements.

Conclusion:
The Tribunal approved the resolution plan submitted by the Resolution Applicants, binding it on the Corporate Debtor, its employees, members, creditors, and other stakeholders. The moratorium order ceased to have effect, and the RP was directed to forward all records relating to the CIRP and the resolution plan to the Board.

Order:
CA No.610/2019 was disposed of, and the resolution plan was approved, subject to compliance with performance security requirements.