2017 (12) TMI 562 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process (CIRP) - Held that - It is not in dispute that IBC is the only alternative available to resolve insolvency and Bankruptcy for debts of any Financial Creditor/Operational Creditor, under sections 7, 8, 9 & 10 of the Code. The Contentions of 3 dissenting Bankers as they would resort to other legal proceedings under other laws to recover the dues from the Corporate Debtor is nothing but non-application of mind and they have miserably failed to avail the opportunity provided under the newly enacted, effective code. They have not come up with any other legally viable alternative remedy except making bald statements. Especially as per the RBI guidelines the dissenting Bankers are expected to fall in line with Lead Bank in accepting the scheme. In view of above discussion of case, we are satisfied that the Resolution Professional has followed all the extant provisions of IBC, 2016 with extant rules, regulations made thereunder. And the Resolution plan in question also contains all mandatory clauses as discussed supra. And there are no grounds exists for rejection of resolution plan. Therefore, we are satisfied that the Resolution plan contains all mandatory provisions and the Resolution Professional followed all the extant provisions of IBC, 2016, rules made thereunder and IBBI Rules, regulations apart from following Principles of Natural Justice. The Resolution plan in question is also prepared based on information memorandum. The Resolution Plan also provides all the required measures as mandated under Regulations 37 & 38 of IBBI (IRP for Corporate Persons) Regulations 2016. In the aforesaid facts, provisions of IBC and law, taking a practical approach considering the place in which the Unit is situated, to meet the ends of justice by exercising powers conferred upon this Adjudicating Authority, under section 31(1) of IBC, 2016, We hereby allowed the Company petition bearing CP(IB)No.11/10/HDB/2017 with the following directions (1) We hereby approved the Resolution plan/Revised OTS scheme as submitted by the Resolution Professional-vide affidavit dated 03.11.2017; (2) We hereby declared that the moratorium imposed on 10.02.2017 in this case ceased to have effect from the date of receipt of copy of this order; (3) We hereby direct that the Resolution Plan/Revised OTS Scheme of the Corporate Debtor shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. (4) We also hereby direct the Corporate Debtor, as promised by the Managing Director, to reinstate all the 450 employees, who were on the rolls of the Company (both skilled 325 and unskilled 125 workers) before stopping the operations of the Company, however, subject to their eligibility/fitness; (5) We direct the corporate debtor to pay the amount of ₹ 0.13 crores to other Operational Creditors at the time of making initial payment of 5% of OTS Scheme and the balance amount towards electricity dues should be paid in equal instalments along with the payments to be made to the financial creditors as per payment schedule in the revised OTS scheme. Since total dues to operational creditors is ₹ 14.36 crores, out of which ₹ 0.13 crores is for other operational creditors and ₹ 14.23 crores is towards electricity dues to TSSPDCL. (6) We hereby directed the Resolution Professional to forward all records relating to the conduct of Corporate Insolvency Resolution Process and the Resolution plan to the Insolvency and Bankruptcy Board of India to be recorded on its database. (7) The parties are at liberty to make miscellaneous Company Application(s) in order to seek clarification(s), if any, required in implementation of the Resolution plan.

Summary

Issues Involved:
1. Admissibility of the Company Petition under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Appointment and actions of the Interim Resolution Professional (IRP).
3. Conduct and decisions of the Committee of Creditors (CoC).
4. Extension of the Corporate Insolvency Resolution Process (CIRP).
5. Approval of the Resolution Plan/One-Time Settlement (OTS) proposal.
6. Compliance with the Insolvency and Bankruptcy Code (IBC) and related regulations.
7. Role and decisions of dissenting financial creditors.
8. Adjudicating Authority's discretion and final judgment.

Detailed Analysis:

1. Admissibility of the Company Petition:
The Company Petition was filed by the Corporate Debtor under Section 10 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP). The Tribunal admitted the petition and appointed Shri C.B. Mouli as the Interim Resolution Professional (IRP).

2. Appointment and Actions of the IRP:
The IRP was directed to constitute a Committee of Creditors (CoC) and make a public announcement of the initiation of CIRP. The IRP complied by making announcements in newspapers and on relevant websites. Two Registered Valuers were appointed to assess the value of the Corporate Debtor's assets.

3. Conduct and Decisions of the CoC:
The CoC conducted nine meetings to discuss the resolution plans and financial strategies. Key decisions included confirming the IRP as the Resolution Professional (RP), authorizing Indian Bank to proceed with asset valuation, and considering various resolution plans proposed by the Corporate Debtor. The CoC meetings were attended by a majority of the creditors, and detailed discussions were held on the feasibility and terms of the resolution plans.

4. Extension of the CIRP:
Due to the inability to complete the CIRP within the stipulated 180 days, an application for a 90-day extension was filed and granted, extending the process to 270 days.

5. Approval of the Resolution Plan/OTS Proposal:
The Corporate Debtor submitted multiple resolution plans, with the final proposal being an OTS scheme of ?600 crores. This proposal was approved by creditors holding 66.67% of the voting power, including Indian Bank, JM Financial Asset Reconstruction Co. Ltd., Allahabad Bank, Andhra Bank, and Oriental Bank of Commerce. However, dissenting creditors (Indian Overseas Bank, Central Bank of India, and Bank of Maharashtra) holding 33.33% voting power rejected the plan.

6. Compliance with IBC and Related Regulations:
The Resolution Professional ensured compliance with the provisions of the IBC and related regulations. The resolution plan included mandatory contents such as the payment of insolvency resolution process costs, management of the Corporate Debtor's affairs, and implementation and supervision of the plan.

7. Role and Decisions of Dissenting Financial Creditors:
Dissenting creditors raised concerns about the valuation of the Corporate Debtor's assets, the source of funds for the OTS, and the exclusion of corporate and personal guarantees. They argued that the proposed OTS amount was lower than the liquidation value and did not comply with their internal policies.

8. Adjudicating Authority's Discretion and Final Judgment:
The Adjudicating Authority, considering the majority approval and the socio-economic benefits of reviving the Corporate Debtor, approved the resolution plan despite the dissenting creditors' objections. The Tribunal emphasized the importance of resolving insolvency over liquidation, noting that the dissenting creditors did not provide a viable alternative. The resolution plan was deemed compliant with the IBC, and the moratorium was lifted. The Corporate Debtor was directed to reinstate its employees and pay operational creditors as per the approved plan.

Conclusion:
The Tribunal approved the resolution plan submitted by the Resolution Professional, binding all stakeholders and emphasizing the revival of the Corporate Debtor over liquidation. The decision highlighted the need for financial creditors to comply with RBI guidelines and the IBC's objectives. The Tribunal also directed the scrutiny of dissenting banks' handling of bad loans by the RBI.