2021 (4) TMI 1128 - Tri - IBC

Approval of Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Resolution Applicant takes over the Corporate Debtor with all its assets and liabilities as specified in the Resolution Plan subject to orders passed herein. As already indicated the Resolution Plan has been approved by the CoC in its meeting held on 20.11.2020 with 100% votes. In K. Sashidhar v. 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. Even in that enquiry, the grounds on which the Adjudicating Authority can reject the Resolution Plan is in reference to matters specified in Section 30(2) when the Resolution Plan does not conform to the stated requirements. 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 procedural requirements of the Corporate Insolvency Resolution Process (CIRP).
3. Evaluation of the Resolution Plan's financial terms and means of funding.
4. Reduction of Share Capital.
5. Management and supervision of the Corporate Debtor post-approval.
6. Compliance with mandatory contents of the Resolution Plan under the Code and CIRP Regulations.
7. Legal precedents and their application to the Resolution Plan.

Issue-wise 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. The Tribunal reviewed the application and found that the Resolution Plan submitted by Mr. Ashok Atre meets the requirements specified under Section 30(2) of the Code and Regulations 37 and 38 of the CIRP Regulations.

2. Compliance with the procedural requirements of the Corporate Insolvency Resolution Process (CIRP):
The CIRP of the Corporate Debtor was initiated upon admission of a Petition under Section 9 by order dated 08.03.2019. The Interim Resolution Professional (IRP) constituted the Committee of Creditors (CoC) with the State Bank of India as its sole member. Various procedural steps, including meetings and extensions, were conducted as per the Code. The CoC approved the final Resolution Plan with 100% voting share in its 16th meeting held on 20.11.2020.

3. Evaluation of the Resolution Plan's financial terms and means of funding:
The Resolution Plan envisages an infusion of Rs. 2273.52 lakh over 36 months. The financial terms include payments to unpaid CIRP costs, employees, operational creditors, statutory dues, and financial creditors. The means of funds include current bank balances, amounts deposited by M/s Chettinad Cement, sale of scrap, fresh equity infusion, and recovery from litigations. The plan also proposes the sale of the Thane office and the use of a Group Gratuity Fund.

4. Reduction of Share Capital:
The Resolution Plan proposes to reduce the issued Equity and Preference Share capital of the Corporate Debtor to zero due to the insufficiency of assets to cover the full claim of the Financial Creditor. The SRA will infuse fresh share capital into the Corporate Debtor.

5. Management and supervision of the Corporate Debtor post-approval:
The management of the Corporate Debtor will be undertaken by its erstwhile Board of Directors, with Mr. Ashok Atre as Chairman and Managing Director. A Monitoring Committee will be constituted for the supervision of the Resolution Plan, including representatives from the SRA, the Applicant, and one nominee from SBI.

6. Compliance with mandatory contents of the Resolution Plan under the Code and CIRP Regulations:
The Resolution Plan complies with Section 30(2) and Regulation 38 of the CIRP Regulations. It provides for the payment of CIRP costs in full, prioritizes payments to Operational Creditors over Financial Creditors, and includes declarations by the Resolution Applicant regarding compliance with the law and the interests of all stakeholders.

7. Legal precedents and their application to the Resolution Plan:
The Tribunal referred to the Supreme Court rulings in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. and K. Sashidhar v. Indian Overseas Bank & Others. These rulings emphasize that the Adjudicating Authority's role is limited to ensuring compliance with Section 30(2) and that it cannot modify the Resolution Plan approved by the CoC.

Order:
The Tribunal approved the Resolution Plan submitted by Mr. Ashok Atre, making it effective immediately. The Plan is binding on all stakeholders, including the Corporate Debtor, its employees, members, creditors, and government authorities. The Memorandum of Association and Articles of Association will be amended accordingly. The moratorium under Section 14 of the Code ceases to have effect from the date of the order. The Applicant is tasked with supervising the implementation of the Resolution Plan and submitting periodic status reports.