2021 (7) TMI 198 - Tri - Insolvency and Bankruptcy

Seeking approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - In K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS 2019 (2) TMI 1043 - SUPREME COURT the Hon'ble Apex Court held that if the CoC had approved the Resolution Plan with requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2). The Hon'ble Court observed that the role of the NCLT is 'no more and no less'. The Hon'ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 and is limited to scrutiny of the Resolution Plan as approved by the requisite percent of voting share of financial creditors. The Resolution Plan as approved by the CoC under Section 30(4) of the Code meets the requirements of Section 30(2) of the Code and Regulations 37 and 38 of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. The same needs to be approved as provided under Section 31 of the Code - Application allowed.

Summary

Issues Involved:

1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with the mandatory contents of the Resolution Plan under the Code and Regulations.
3. Financial terms and payment terms of the Resolution Plan.
4. Reduction of share capital and issuance of fresh equity shares.
5. Performance security and supervision of the Resolution Plan.
6. Management of the Corporate Debtor post-approval of the Resolution Plan.
7. Reliefs, concessions, and waivers sought by the Resolution Applicant.
8. Judicial review and the role of the Adjudicating Authority.

Detailed Analysis:

1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016:
The application was filed by the Resolution Professional seeking approval of the Resolution Plan submitted by M/s. Yashasvee Textiles Private Limited. The Corporate Insolvency Resolution Process (CIRP) was initiated on 14.10.2019, and the Interim Resolution Professional (IRP) was appointed. The Committee of Creditors (CoC) was constituted, and the Resolution Professional (RP) was appointed. The CoC approved the Resolution Plan with a 100% voting share after multiple revisions and discussions.

2. Compliance with the mandatory contents of the Resolution Plan under the Code and Regulations:
The Resolution Plan was thoroughly checked for compliance with the Code and Regulations 38 and 39. The Plan met the requirements of Section 30(2) of the Code, including payment of CIRP costs, prioritizing operational creditors, managing the Corporate Debtor's affairs, and implementing and supervising the Resolution Plan. The Resolution Applicant provided the necessary declarations and affidavits confirming compliance and eligibility.

3. Financial terms and payment terms of the Resolution Plan:
The total consideration under the Plan was ?1,962 lakh plus ?383 lakh for capital expenditure and working capital. The Resolution Applicant had already made payments and deposits in an Escrow Account towards performance security. The Plan included detailed financial terms and means of finance, ensuring the payment of CIRP costs and prioritizing operational creditors.

4. Reduction of share capital and issuance of fresh equity shares:
The Resolution Plan provided for the extinguishment of all existing shares, with shareholders receiving nil payment. Fresh equity shares would be issued in favor of the Resolution Applicant. This restructuring was part of the financial terms to ensure the successful implementation of the Resolution Plan.

5. Performance security and supervision of the Resolution Plan:
The Resolution Applicant provided an Earnest Money Deposit (EMD) and deposited funds in an Escrow Account as performance security. A Monitoring Committee consisting of representatives from the SRA, CoC, and RP would supervise the implementation of the Resolution Plan from the approval date till the transfer date.

6. Management of the Corporate Debtor post-approval of the Resolution Plan:
The Resolution Professional would continue to manage the Corporate Debtor's business and operations until the transfer date. After implementing the Resolution Plan, the shareholding would be transferred to the SRA, who could reconstitute the Board of Directors in accordance with the law.

7. Reliefs, concessions, and waivers sought by the Resolution Applicant:
The SRA sought certain reliefs, concessions, and waivers, which the Monitoring Committee or new Management could approach the respective authorities for. The authorities were expected to consider these applications favorably, in line with the objectives of the Code and relevant legal pronouncements.

8. Judicial review and the role of the Adjudicating Authority:
The Adjudicating Authority's role was limited to ensuring that the Resolution Plan met the requirements of Section 30(2) of the Code. The Supreme Court rulings in the cases of Essar Steel and K. Sashidhar emphasized that the Authority could not modify the Resolution Plan approved by the CoC in their commercial wisdom. The Tribunal was satisfied that the Plan met all legal requirements and approved it under Section 31 of the Code.

Order:
The application was allowed, and the Resolution Plan submitted by M/s. Yashasvee Textiles Private Limited was approved. The Plan would be binding on all stakeholders, and the moratorium under Section 14 of the Code would cease. The Resolution Professional was tasked with supervising the Plan's implementation and reporting to the Authority. The necessary amendments to the Memorandum of Association and Articles of Association were to be filed with the Registrar of Companies.