2018 (5) TMI 1556 - Tri - Insolvency and Bankruptcy

Insolvency Resolution Process - Acceptance of resolution plan approved by the Committee of Creditors submitted by HI Resolution Applicant - treatment of applicant as secured creditor as against their assigned status of unsecured/operational creditor - appeal filed by the Bhushan Employees seeking direction to the RP to decide the objection raised by them - RP under Section 19(2) of the Code. Held that - all the requirements of Section 30(2) are fulfilled and no provision of the law for the time being in force has been contravened - A perusal of Regulation 38 would clearly show that by virtue of mandatory contents of the resolution plan discussed under Sections 30 and 31 of the Code the requirement of Regulation 38 stand fulfilled - Even the requirement of Regulation 39 stand fulfilled as the RP has submitted the resolution plan of HI resolution applicant as approved by the CoC to this Tribunal with the certification that the contents of the resolution plan meet all requirements of the Code and the CIRP Regulations and that the resolution plan has been duly approved by the CoC. There is no scope for argument left that shareholder, or parties to joint venture agreement or anyone holding similar document need to accord sanction in view of the provisions of Regulation 39(6) of the CIRP Regulations. The Resolution Applicant-TSL merely sought to purchase the shares which were in the nature of pre-emptory rights. Even that undertaking had lapsed nine years ago as it ceased to operate in March 2009 and has not been acted upon by Standard Chartered Bank. In any case the order of Bankruptcy issued by Supreme Court of Seychelles has been subsequently revoked in 2016. Therefore, it cannot be concluded firstly that Sterling Infotech Private Limited qualifies as a connected person or related party or associated company - there are serious doubt with regard to the locus standi of Bhushan Employees as the application has been filed only by Mr. Rahul Sengupta who has been the Executive Director of the Corporate Debtor since 2005. The application has not been filed by the Bhushan Employees authorizing anybody. The allegation even otherwise on facts is not sustainable. Accordingly, it is held that the objection is frivolous and the same is hereby rejected. Prosecution and conviction of Tata Steel UK which is a 100% subsidiary of HI Resolution Applicant-TSL and obviously is a connected person under Section 29-A(d) of the Code and explanation (iii) - Held that - The provisions of Section 29-A(d) of the Code would not be applicable to cover a juristic person and could be applied only to a natural person because it contemplates visiting the convict with imprisonment for two years or more. As there is no provision for imposition of fine and a corporate body like a company cannot be visited with imprisonment/custodial sentence - Section 29-A(d) does not provide for imposition of fine and therefore, it would not be applicable to the facts in the present case because a Corporate Entity cannot be subjected to any custodial sentence which is the only provision made by sub-section (d) of Section 29-A of the Code. When a resolution plan is submitted and the rights of employees are protected by such a plan then raising objections by the Employees is a self-defeating proposition. The resolution plan retrieves about 67% of the NPA s and takes care of the existing employees by continuing their employment and also provide for payment of their back wages. The claim made on behalf of L&T on the face of it appears to be wholly unsustainable. There is no document placed on record showing any creation of charge or security warranting a view that the L&T should be regarded as a secured creditor and not as the operational creditor. The charge is created by execution of a document as per the requirements of S. 132 of the Companies Act, 2013. In the absence answering the basic description of S. 55(4)(b) of Transfer of Property Act no benefit could be gained by L&T. It is well settled that any supplier of goods and services would fall within the meaning of expression operational creditor and the claim made by L&T would amount to rewriting the provisions of the statute which is an impossible proposition. Therefore, we do not find any substance in the aforesaid argument and same is hereby rejected. Application disposed off.

Summary

Issues Involved:
1. Acceptance of the resolution plan under Sections 30 & 31 of the Insolvency and Bankruptcy Code, 2016.
2. Status of Larsen & Toubro Limited as a secured creditor.
3. Objections raised by Bhushan Employees regarding the eligibility of the HI Resolution Applicant.
4. Application under Section 19(2) of the Code by the Resolution Professional.
5. Objections by Bhushan Energy Limited regarding the termination of power purchase agreements.

Issue-wise Detailed Analysis:

1. Acceptance of the Resolution Plan:
The Tribunal examined the resolution plan submitted by TATA Steel Limited (TSL) and approved by the Committee of Creditors (CoC). The plan was submitted under Sections 30 & 31 of the Insolvency and Bankruptcy Code, 2016. The Tribunal confirmed that the resolution plan met all requirements under Section 30(2) of the Code, including the payment of insolvency resolution process costs, repayment of operational creditors, management of the corporate debtor's affairs, and compliance with the law. The plan was approved with an affirmative voting share of 99.80% by the CoC. The Tribunal also addressed the reliefs and concessions sought by the resolution applicant, directing that they be considered by the relevant authorities in accordance with the law.

2. Status of Larsen & Toubro Limited as a Secured Creditor:
Larsen & Toubro Limited (L&T) filed an application seeking to be treated as a secured creditor. The Tribunal rejected this claim, stating that L&T, as a supplier of goods and services, falls under the category of operational creditors. The Tribunal emphasized that there was no document showing the creation of a charge or security warranting L&T to be regarded as a secured creditor. The Tribunal dismissed L&T's application with a cost of ?1 lakh to be deposited in the account of the Corporate Debtor.

3. Objections Raised by Bhushan Employees:
Bhushan Employees raised objections regarding the eligibility of the HI Resolution Applicant under Section 29A of the Code. The Tribunal examined the objections, including allegations about the conviction of Tata Steel UK and the involvement of Mr. C. Sivasankaran. The Tribunal found that Tata Steel UK's conviction did not attract disqualification under Section 29A(d) of the Code, as the provision applies to natural persons and not juristic persons. The Tribunal also dismissed the allegations regarding Mr. Sivasankaran, stating that there was no evidence to show that he or his company was a connected person. The Tribunal dismissed the application filed by Bhushan Employees with a cost of ?1 lakh to be paid by Mr. Rahul Sengupta personally.

4. Application under Section 19(2) of the Code by the Resolution Professional:
The Resolution Professional (RP) filed an application under Section 19(2) of the Code, seeking cooperation from the Ex-Management. The Tribunal directed the Ex-Management to cooperate in all respects during the implementation of the resolution plan. The Tribunal granted liberty to the Monitoring Agency to apply for further directions against the Ex-Management if necessary.

5. Objections by Bhushan Energy Limited:
Bhushan Energy Limited (BEL) objected to the resolution plan, claiming that it unlawfully terminated power purchase agreements (PPAs) with the Corporate Debtor. The Tribunal rejected BEL's objections, stating that the resolution plan, approved by the CoC, takes effect notwithstanding the requirement of consent from members or partners of the Corporate Debtor. The Tribunal held that the termination of PPAs was within the commercial wisdom of the CoC and did not violate any legal provisions.

Conclusion:
The Tribunal approved the resolution plan submitted by TSL and dismissed the applications filed by L&T and Bhushan Employees. The objections raised by BEL were also rejected. The Tribunal directed the Ex-Management to cooperate during the implementation of the resolution plan and granted liberty to the Monitoring Agency to seek further directions if needed. All other applications were disposed of.