2020 (4) TMI 447 - Tri - Insolvency and Bankruptcy

Sanction of resolution plan - Section 31 (1) of the Code - HELD THAT - It is observed that the amount payable towards the operational creditors is ₹ 0.35 crore as provided in the resolution plan. Further, the amount to be distributed between operational creditors in the event of liquidation, if distributed in order of priority in Section 53(1) of the Code would be NIL. There are 5 dissenting unsecured financial creditors i.e. EPI Money Pvt. Ltd., United Petro Finance Limited, Oxyzo Financial Services Pvt. Ltd., Bajaj Finance Limited and Equitas Small Finance Bank Ltd. and the amount provided for the dissenting unsecured financial creditors is ₹ 0.25 crore. The liquidation value payable to them under section 53(1) in the event of liquidation would be NIL. Hence, Section 30(2)(b) of the Act stands complied with. The requirements under section 31(1) of the Code are satisfied in the present case. In para No. 4 of Form H he RP has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force. The RP has also certified that the resolution applicant Vaibhav Buildtech Private Limited has submitted affidavit pursuant to Section 30(1) of the Code confirming its eligibility under section 29A of the Code to submit the resolution plan and the contents of the said affidavit are in order - the decision taken by the financial creditors falls within the ambit of its commercial and banking wisdom and is therefore, not being interfered with. In view of the provisions of Section 30(4) of the Code, we approve the resolution plan submitted by Vaibhav Buildtech Private Limited as approved by the CoC. The resolution 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 - moratorium order passed by the Adjudicating Authority under Section 14 of the Code on 15-11-2018 shall cease to have effect - 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. Approval of the resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
3. Constitution and functioning of the Committee of Creditors (CoC).
4. Valuation and liquidation value determination.
5. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code.
6. Implementation and monitoring of the resolution plan.
7. Distribution of funds and settlement of claims.
8. Performance security compliance under Regulation 39(4) and 36B(4A).

Detailed Analysis:

1. Approval of the Resolution Plan:
The application was filed by the Resolution Professional (RP) under Section 31 of the Insolvency and Bankruptcy Code, 2016, seeking sanction of the resolution plan approved by the CoC. The plan was approved by 93% of the CoC members, satisfying the requirement of Section 30(4) of the Code.

2. Compliance with Regulations:
The RP issued a public announcement for claims from creditors as per Regulation 6 and constituted the CoC in accordance with Section 21. Two registered valuers were appointed to determine the fair and liquidation values of the corporate debtor, as per Regulation 35. The RP also complied with Regulation 36(A) by inviting expressions of interest (EOI) and publishing Form G.

3. Constitution and Functioning of CoC:
Initially, the CoC consisted of seven financial creditors, which was later reconstituted to include ten creditors. The CoC approved the eligibility criteria for resolution applicants and the evaluation matrix. The RP received EOIs from four prospective applicants and extended the submission deadlines for resolution plans multiple times to ensure thorough verification.

4. Valuation and Liquidation Value Determination:
The fair and liquidation values were determined by two valuers, averaging ?192.71 lacs and ?135.09 lacs, respectively. These values were presented to the CoC along with the resolution plan.

5. Compliance with Section 30(2):
The resolution plan provided for:
- Full payment of CIRP costs in priority.
- Payment to operational creditors and dissenting unsecured financial creditors in compliance with Section 30(2)(b).
- Management and supervision of the corporate debtor post-approval.
- Compliance with all provisions of the Code and Regulations, as certified by the RP.
- The plan did not contravene any existing laws.

6. Implementation and Monitoring:
An Implementation and Monitoring Committee was proposed, comprising the RP, an Assistant General Manager from SBI, and a technical expert. The plan included a detailed implementation schedule and provisions for effective supervision.

7. Distribution of Funds and Settlement of Claims:
The resolution plan detailed the distribution of funds:
- ?3.50 crore to secured financial creditors.
- ?1.25 crore for employees and workmen.
- ?0.75 crore for CIRP costs.
- ?0.25 crore for unsecured financial creditors.
- ?0.35 crore for operational creditors.

8. Performance Security Compliance:
The RP filed an affidavit confirming the transfer of ?30 lakh (5% of the cash contribution) to the corporate debtor's account, complying with Regulation 36B(4A) and 39(4).

Conclusion:
The resolution plan submitted by Vaibhav Buildtech Private Limited was approved by the CoC with a 93% voting share. The plan met all requirements under Section 30(2) and 31(1) of the Code, including provisions for effective implementation and compliance with relevant regulations. The moratorium order ceased to have effect, and the RP was directed to forward all records to the Board. The application (CA No. 704/2019) was disposed of accordingly.