2019 (12) TMI 191 - Tri - Companies Law

CIRP - Approval of Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - compliance with the requirement of Section 31 r/ w Section 30(2) of the Code - HELD THAT - On perusal of the Resolution Plan, it is found that Resolution Applicant viz. M/S. Fitcast Founders Engineers Private Limited, is a compan) engaged in the manufacturing and marketing of CI Castings and othel Castings which are having a direct relevance with the business of thc Corporate Debtor and accordingly, the promoters are to be considered from the same line of business having better understanding of thc manufacturing process, market as well as entire technical aspects whick shall definitely result into proper resolution of the Corporate Debtor. Thc RA along with its consortium member viz. Omkara Assets Reconstructior Private Limited is having adequate net worth and accordingly, thc commitment by the RA can be fulfilled without any hesitation. The 'I B Code' defines 'Resolution Plan' as a plan for insolvency resolution of the 'Corporate Debtor' as a going concern. It does not spell out the shape, color and texture of 'Resolution Plan', which is left to imagination of stakeholders. Read with long title of the 'I B Code', functionally, the 'Resolution Plan' must resolve insolvency (rescue a failing, but viable business); should maximize the value of assets of the 'Corporate Debtor', and should promote entrepreneurship availability of credit and balance the interests of all the stakeholders. On perusal of the records, it is found that the Resolution Plan confirms to the criteria as provided under clauses (a) to (f) in section 30(2) of the Code and the COC approved the Resolution Plan by 67.08 per cent majority of voting share. However, during the course of proceedings, the Bank of India submitted their acceptance to the Resolution Plan making the approval of the Resolution Plan by 83.89 per cent. The Resolution Plan also confirms to such other requirements as may be specified by the Board. The decisions of the COC are based on their commercial wisdoms, hence does not attract any interference - On perusal of the Resolution Plan, it is found that it meets the requirement of Section 31 r/ w Section 30(2) of the Code. The approval of the Resolution Plan does not mean automatic waiver or abetment of any legal proceedings which are pending by or against the Company/ Corporate Debtor as those are the subject matter of the concerned Competent authorities having their proper/own jurisdiction to pass any appropriate order as the case may be. The Resolution Applicant on approval of the Plan may approach those Competent Authorities/Courts/Lega1 Forums/Offices - Govt. or Semi Govt. / State or Central Govt. for appropriate relief(s) sought for in Clause No. 14 of the Resolution Plan. The Adjudicating Authority on being satisfied that the Resolution Plan as approved by the Committee of Creditors (COC) meets the requirements as referred to under section 30(2) 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 provisions of the Insolvency and Bankruptcy Code, 2016 and related regulations.
3. Eligibility of the Resolution Applicant under Section 29A of the Code.
4. Voting and approval process by the Committee of Creditors (COC).
5. Distribution of payments to various creditors.
6. Implementation and monitoring of the Resolution Plan.
7. Legal proceedings and reliefs sought by the Resolution Applicant.

Detailed Analysis:

1. Approval of the Resolution Plan:
The application was filed by the Resolution Professional (RP) for the approval of the Resolution Plan submitted by the Resolution Applicant Consortium under Section 30(6) of the Insolvency and Bankruptcy Code, 2016. The plan was approved by the Committee of Creditors (COC) with 67.08% votes in favor.

2. Compliance with the Code and Regulations:
The RP made a public announcement inviting claims from creditors and constituted the COC. The final list of creditors and their voting shares was submitted. The RP confirmed the compliance of the Resolution Plan under Section 30(2) of the Code and Regulation 38A of the CIRP Regulations, providing a compliance checklist.

3. Eligibility of the Resolution Applicant:
The RP received two resolution plans, one of which was rejected. The plan from M/S. Fitcast was discussed, and despite concerns about the eligibility under Section 29A due to willful defaulter status, a legal opinion confirmed the eligibility of M/S. Fitcast.

4. Voting and Approval Process by COC:
The COC held multiple meetings to discuss and negotiate the Resolution Plan. The final revised plan submitted by M/S. Fitcast was approved by the COC with 67.08% votes. The Bank of India later submitted its acceptance, increasing the approval to 83.89%.

5. Distribution of Payments to Various Creditors:
The Resolution Plan outlined payments to be made to various creditors, including CIRP costs, workmen and employees dues, operational creditors, financial creditors, and statutory creditors. The total payment proposed was ?19.20 crores, with specific timelines and securities issued for each payment.

6. Implementation and Monitoring of the Resolution Plan:
A Monitoring Committee was to be formed, including members of the new management and the present RP as Chairman, to oversee the implementation of the Resolution Plan. The RA proposed additional capital and operating expenditures to revive the Corporate Debtor.

7. Legal Proceedings and Reliefs Sought:
The approval of the Resolution Plan did not mean automatic waiver or abetment of pending legal proceedings. The Resolution Applicant could approach competent authorities for appropriate reliefs. The plan was subject to existing laws and required necessary approvals within one year.

Conclusion:
The Adjudicating Authority approved the Resolution Plan submitted by the Consortium between Fitcast Founders & Engineers Pvt. Ltd. & Omkara Assets Reconstruction Pvt. Ltd., finding it compliant with Section 30(2) and Section 31 of the Code. The application IA 352 of 2019 was allowed with specific observations and directions for the implementation of the Resolution Plan. Any other pending applications were disposed of as infructuous.