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TMI Blog2018 (8) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... CA(IB) No. 402/KB/2018, CA (IB) No. 398/KB/2018 And CA (IB) No. 509/KB/2018 all connected to CP (IB) No. 371/KB/2017 - - - Dated:- 22-6-2018 - Shri Jinan K. R. Member (J) And Shri M. B. Gosasvi, Member (J) For The Resolution Professional : Mr. Sumit Binani, Pr. C. S. For The Resolution Profissional : Mrs. Manju Bhuteria, Advocate, Rahul Auddy, Adv., Sumant Batra, Adv And Mr. Rajarshri Dutta, Advocate For The DMO Gvot. of Jharkhand : Mrs. Sonal Singh, Adv. And Surendra Kumar, Advocate For The Sundargarh Mines and Transport Workers Union : Amrita Pandey And Vivek Mohanty, Adv. For The Resolution Professional : Jishnu Chawdhury, Adv. Ms. Sristi Barman Roy, Mr. Sidhartha Shrama, Adv And Ms. Namrata Basu, Advocate For The CoC : Mr. Joy Saha, Sr. Advocate, Ms. Suhani Dwivedi, Advocate And Mr. Deepanjan Dutta Roy, Advocate For SREI Equipments : Mr. D. N. Sharma, Advocate And Mr. Shaunak Mitra, Advocate ORDER Per Shri Jinan K. R., Member (J). By this common order, we propose to dispose of all the four applications filed under sub-section 5 of section 60 of the Insolvency and Bankruptcy Code, 2016. CA(IB)No.402/KB/2018 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld on 5th March 2018. The Resolution Applicant being failed to satisfy the CoC while negotiating with the EARC, the CoC decided to reject the pan submitted by EARC ranking as H1 bidder in the 9th meeting of CoC held on 31st March 2018 and proceeded with the negotiation with the H2 bidder who is GMSPL. 6. The Resolution Professional further submits that despite negotiation with the H2 bidder namely GMSPL, the offer of H2 bidder was also found unacceptable to the CoC and thereby in its 10th meeting of CoC held on 3rd April 2018, the CoC decided to annul the existing process and initiate a fresh process for invitation for resolution plan from only those entities who have earlier provided their expression of interest for submission of resolution plan. In view of the above said decision, a communication has been issued to the prospective resolution applicant. In response to the calling for fresh invitation for submission of resolution plan, the resolution professional was in receipt of three resolution plans from respective applicants namely GMSPL, EARC and Srei Infrastructure Finance Limited (SIFL). Those resolution plans were considered by the CoC in its 11th meeting held on 13th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it violates Section 5(26), 30(2)(c) of the Code. The Resolution Plan does not provide for Insolvency Resolution of Corporate Debtor as a going concern in accordance with part II of the Code, nor does it provide for management of affairs of Corporate Debtor after approval of the Resolution plan. It provides for demerger of the corporate debtor and transfer of assets, cash, approvals, licences, plant, machinery, properties, tax benefits, credits, employees and customers and business of corporate debtor into a separate SPV leaving Corporate Debtor as defunct and a shell company with mining leases. So also, the Resolution Plan does not conform with the provision of Section 30(3) of the Code and Regulation 39(1). He violated Section 24(3) of the Code by not issuing notice to Mining Authorities. He violated Section 18, Section 21(1), Sub-Section (2)(g) of Section 25 and Section 29 of the Code read with Regulation 36 of the CIRP Regulations by not disclosing the Mining Authority in the list of Creditors on Website or Information Memorandum. 11. The Resolution Professional has failed in its duty of disclosing of the required information in the Information Memorandum in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Edelwiess would have a right to walk away from their plan if such waiver is not approved which will lead to forced liquidation of the corporate debtor as there would be no time left to restart the process. In the 9th meeting dated 31st March, 2018, an email from Edelweiss dated 28th March, 2018 was discussed wherein it was clearly stated that waiver by the adjudicating authority is a condition precedent and the it would not continue with the resolution plan if the same is not waived. However, another email dated 31st March, 2018 was received from Edelweiss stating that they were willing to reconsider/withdraw their earlier mail of 28th March and make revised offer to COC. It was confirmed by the authorised representative of Edelweiss through audio call but no written confirmation was provided. However, this was unacceptable to the other members present and they wanted to commence negotiation with Ghanshyam Mishra Sons Pvt Ltd which was to be decided by e-voting on 3rd April, 2018. But an email dated 2nd April, 2018 was received from Edelweiss by the COC confirming that the waiver of uncrystallized mining liabilities by NCLT would not be a condition precedent. It was however not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted with his entire team present at the meeting. It is also stated that the liquidation value has been calculated by independent registered valuers which have been ratified by the CoC. He also filed a supplementary affidavit denying the allegation levelled against him in conducting the meeting held on 25.04.2018 by audio call and prays for dismissing the application with exemplary cost. CA(IB)No. 470/KB/2018 16. Edelweiss Asset Reconstruction Company Limited (EARC) also filed one another application namely CA(IB) No.470/KB/2018 challenging the decision of the Resolution Professional in not admitting claim of the applicant. So also, the applicant raised objections in approving the Resolution Plan of H1 bidder alleging that the Resolution Professional did not perform his duties in terms of Regulation 1(3) and Regulation 1(4) of the CIRP Regulations. It is contended by the applicant that his claim on the strength of corporate guarantee provided by the Orissa Manganese and Minerals Limited (OMML) not being admitted by the Resolution Professional, its claim on the strength of pledge of shares invoked by the applicants violated the Regulation 13 and Regulation 14 of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 25(2) of Mines and Mineral (Development and Regulation) Amendment Act, 1972 (MMDR); (2) The Resolution Professional did not admit its claim submitted as per Form B Annexure IV dated 16.03.2018, thereby violate Regulation 14 of CIRP Regulations; (3) Not given an opportunity to participate in the CIRP process though the applicant has been considered as an Operational Creditor and applicant s claim constitute more than 10% of the entire claim and thereby violate Section 24 of the Code; (4) The Resolution Professional not included the claim of the applicant in the Information Memorandum, thereby violate Regulation 36 of the CIRP Regulation; (5) The Resolution Professional deliberately violated the direction of the Hon ble Supreme Court in regard to the realisation of dues due to the applicant. Not given due regards the order dated 02.08.2017 by the Hon ble Supreme Court of India Writ Petition (Civil) No.114 of 2014 (Common Cause v. Union of India). 20. Upon the above said grounds, it is alleged by the applicant that the Resolution Professional failed in conducting the CIRP process in accordance with the provisions of the Code and Regulation and thereby the Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and manganese ore and agglomerating iron fines into pellets through facilities in Orissa and Jharkhand. However, due to regulatory uncertainties leading to mining disruption, raw material uncertainties and fall in lumps price and business losses aggravated by increase in finance costs failed to pay off the debt and thereby the application filed by one of the financial creditors/State Bank of India was admitted by the Bench and CIRP was initiated against the Orissa Manganese Minerals Ltd. 25. As submitted by the Ld. RP in his application CA(IB) No.402/KB/2018, he has complied all the requirement to be meted out under the provisions of the Code and Regulation and succeeds in approving one among the three plans by the CoC. The approved plan by CoC by majority vote share is the plan of GMSPL. GMSPL consists of different entities which include SPV1, SPV2, Bhagawati Power Steel Limited, Narheram Power Steel Private Ltd. and Narherm Vishram. As per the data available from the resolution plan it is under stood that the applicant is well experienced in the operation of mines. It says that mines under the jurisdiction of the group are one of the oldest and best proven reserves in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns by any one of the bidders and thereby the initial bidding process was annulled by the CoC by rejecting all the plans by a vote share of 97.62% of the members of the CoC. 28. The CoC then decided to restart fresh process for invitation for Resolution Plan from only those entities who have earlier submitted Expression of Interest (EoI) and issued advertisement dated 27/09/2017 for invitation of Resolution Plan. CoC also decided only to negotiate with H-1 bidder and the last date of submission of Resolution Plan in the fresh bidding process is fixed on 10/04/2018. Therefore, the CoC by majority decision annulled the first bidding process and initiated the 2nd bidding process by 10th April, 2018, in which the CIRP period is expiring on 29/04/2018. 29. In the 2nd bidding process, the CoC ranked the applicant as H-3 and GMSPL has been declared as the H-1 bidder by way of majority decision of the CoC and it is this ranking under challenge in the case in hand. The selection of GMSPL as H-1 bidder was done as per the evaluation parameter and the evaluation framework already laid down by the CoC. It is significant to note here that the applicant herein not disputed the evaluation ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditors NPV of Offer amount/Enterprise Value 60.95% 62.87% 34.83% NPV of Offer amount / Liquidation Value 105.99% 109.34% 60.58% 30. Looking at the above comparative chart and scoring summary it is revealed that the offer of the GMSPL is better than the offer of other two resolution applicants. It shows that GMSPL as H1, SREI Infrastructure Finance Ltd. is the H2 and EARC the applicant herein is the H3 bidder. It is self explanatory. The applicant who gave an offer of ₹ 350/- Crore in the 1st Plan while filing revised plan reduced the offer to ₹ 282 Crore. The said conduct of the applicant by reducing its earlier offer leads to an inference that the applicant submitted the fresh plan not with an intention to compete with the other resolution applicants plan. So, we do not find any justifiable reason to hold that the ranking of the applicant herein not as H-1 bidder is in violation of the approved evaluation matrix or that the ranking was in violation of the Code and Regulations. The said contention is found devoid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other person authorised by the committee to attend the meeting. Reg.21(1) The notice shall inform the participants of the venue, the time and date of the meeting and of the option available to them to participate through video conferencing or other audio and visual means, and shall also provide all the necessary information to enable participation through video conferencing or other audio and visual means. Reg.23(1). The notice convening the meeting of the committee shall provide the participants an option to attend the meeting through video conferencing or other audio and visual means in accordance with this Regulation. 34. Ld. Sr. Counsel appearing for the applicant, referring to the above provisions of the Code and Regulation, submits that since the Resolution Professional did not attend in the meeting in person, the meeting held on 25/04/2018 is to be held in violation of Section 24 of the Code and, therefore, the entire business of the CoC meeting held on 25/04/2018 has no legal validity. According to him, Regulation 23(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 permits participants of meeting to whom Resolution Profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dio call. Truly he has to ensure and safeguard the integrity of the meeting by ensuring sufficient security and identification procedures as per Reg.23(3)(a). But here in this case, there is no challenge against the integrity of the meeting and that unauthorised persons attended the meeting. The challenge is only against the absence of the RP. 37. At this juncture, the Ld. Sr. Counsel appearing for the CoC citing a judgment (2009) 6 Supreme Court Cases 735 - Dr. Ram Deen Maurya v. State of Uttar Pradesh submits that regulation referred to by the Ld. Sr. Counsel for the applicant is directory in nature and not mandatory and hence for the reason of RP s absence alone the meeting held at his direction cannot be invalidated. Despite substantial compliance of the Regulations, no prejudice is caused to the participants to the CoC and in short only voting is to be undertaken on 25/04/2018 on the Resolution Plan. There is no illegality in not Chairing the Resolution Professional in person and according to him the meeting of the CoC cannot be annulled only because Resolution Professional did not chair the meeting. It is good to read Para 52 of the above cited judgment. It read as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany: INR 2540 Crores of debt assigned by FC to RA (SPV). Total value to be paid by RA (SPV) to FC for assignment of debts in (a) and (b) Step 2 will be INR 250 Crores (pro rata to debt assigned). Step 3: Issuance of Preference Shares. The Pellet Company would issue 0.01% Compulsory Redeemable Preference Shares of face value of INR 60 Crores redeemable at the end of 5th year from the date of NCLT approval, through conversion of Debt of INR 60 Crores. There would be a put option on all 3 RA companies (NVR, NPSPL and GMSPL) for the aforesaid preference shares at the end of 5th year. Step 4: Conversion of debt to equity by RA would happen in respective companies and reduction of capital in Mining Company and the Pellet Company, if required; Step 5: RA to sell 25% stake in Mining Company to FC at nominal consideration (such consideration will be tax-efficient); All the above mentioned steps from 1 to 5 shall happen simultaneously. 41. The Committee of Creditors decided the above said proposal is to be deliberated further in the adjourned meeting to be held on 25th April 2018 and it seems that the proposal of restructuring the unit of the Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment of monitoring committee, provision for management of corporate debtor post CIRP completion date and implementation and supervision of Resolution Plan. It is clearly state that the Corporate Debtor s business is to be as a going concern and that the Corporate Debtor and SPV shall continue as an on going concern basis and operations of the Company will be continued in the normal course of business upon implementation of the proposed plan. The period of validity clause provisions in case of failure of Resolution Plan all are dealt with in detail in the Resolution Plan. 45. In view of the above said discussion we can come to a legitimate conclusion that none of the objections raised by the applicant is sustainable under law. This point is answered against the applicant in CA 398/KB/2018. Point No. 2 46. EARC (Edelweiss Asset Reconstruction Company Limited) also filed one another application namely CA(IB) No.4707KB/2018 challenging the decision of the Resolution Professional in not admitting the claim of the applicant submitted to RP. Here, in this case, corporate debtor had executed guarantee securing loan received by APNRL which have been given by India Infra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot reveal the claim of the applicant. According to the Ld. Counsel, for the applicant being a financial creditor, its claim would have found a place in the Information Memorandum. 50. To the said contentions, Ld. Resolution Professional submits that the claim preferred by the applicant has been communicated before the CoC as well as to the process adviser and that all the information was uploaded in the virtual data room to which the applicant had access to since the applicant also was a resolution applicant. To strengthen the said submission, the Resolution Professional brought to our notice Annexure-B and a copy of e-mail sent to the resolution applicants. A look at the Annexure-B and the Annexures annexed to the Annexure-B e-mail, it reveals that the claim of all financial creditors inclusive of Edelweiss Asset Reconstruction Company Limited (EARC) (Applicant), is shown. It shows that the amount of claim of the applicant not admitted for the reason corporate guarantee in question is uninvoked as on date. That being so, the objection that the data regarding the claim of the applicant was not provided in the Information Memorandum is found devoid of any merits. We find there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2018 is perfectly legal and his claim would have been considered by the resolution professional. The submission on the side of the Ld. Counsel for the applicant is found not at all sustainable under law. The application filed by the resolution professional under Section 31(1) for approval of the plan is pending for consideration and it is at that juncture this application came up for consideration. Unless and until the adjudicating authority pass a decision either approving or rejecting the resolution plan and if a Resolution Plan is rejected upon passing an order of liquidation the moratorium declared under Section 14 shall continue. The effect of moratorium declared in the case in hand being in force even on 30.04.2018 it cannot be held that the moratorium does not extend to APNRL or that same would be prejudicial to the applicant. Therefore, the above said contention also is found devoid of any merits. 55. It is submitted on the side of the Resolution Professional that the applicant herein is an unsuccessful bidder who was one among the resolution applicants only interested in dragging the process so as to not to approve any resolution plan of the applicants raising untenab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in hand is found reasonable. 58. District Mining Officer, Department of Mining and Geology, Jharkhand filed the CA 509/KB/2018 under Section 60 Sub-Section 5 of Insolvency and Bankruptcy Code. Challenging the non-admission of its claim to the tune of ₹ 93,51,91,724/- and ₹ 760.51 crores as per Form B submitted before the Resolution Professional. Ld. Resolution Professional as well as the Ld. Counsel appearing on the side of the Resolution Professional has stated that there was no failure on the side of the Resolution Professional in calling for the claim of the applicants. Coming to the first grounds raised on the side of the applicant, it has come out in evidence that the allegation levelled by the applicant as against the Resolution Professional is vague and not supporting with any proof. 59. Ld. Counsel appearing for the applicant submits that the applicant has come to know the resolution process initiated against the Corporate Debtor through media reports. This submission seems to be not true but false. Ld. Resolution Professional in his reply affidavit given the details of communication addressed to the applicant. Annexure-R.1 dated 17.03.2018 is a letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2 of Section 25 of the MMDR Act provides realisation of the dues due to the State Governments and as per Section 25(2) of the MMDR Act it can be recovered in the same manner as if it were an arrears of land revenue and every such sum becomes due to the Government after the commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 1972 together with interest due thereon shall be the first charge of the assets of the hold as the case may be . 63. Referring to Section 25 of the MMDR Amendment Act, 1972 Ld. Counsel for the applicant attempted to highlight that the applicant is a Secured Creditor and not an Operational Creditor. Insolvency and Bankruptcy Code is a Special Code. Section 238 of the Code override other laws. It read as the provisions of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law . That being so, in classifying the applicant as a Secured Creditor or Operational Creditor, we have to look into the definition of Operational Creditor as given under Section 5(20). In accordance with the Section 5(20) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant is that the Resolution Professional not included the claim of the applicant in the Information Memorandum, thereby violate Regulation 36 of the CIRP Regulation. The very same contention was raised by EARC in its application CA(IB) No.398/KB/2018. It is submitted by the Ld. Resolution professional that applicant claim has been included by the RP in the received column of the updated list of creditors and that all the resolution applicant is aware of the mining liability. It is understood that the crystallized mining liabilities of State of Odisha as well as State of Jharkhand to the tune of 98.69 and 85.41 crore seen considered by the resolution applicants. So it has come out in evidence that mining liability of corporate debtor was brought to the notice of resolution applicants and CoC have had discussion in respect of its claim even if the mining authority not submitted any valuable claim supporting with supporting documents. A reference to the copy of 10th CoC meeting minutes dated 3rd April 2018 reveals that resolution applicant was aware of the above said crystallized liabilities of the corporate debtor. That being so the said objection is also found unsustainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89.23% of voting share of financial creditors of the corporate debtor. The resolution plan meets all the requirement of Section 30(2) of the Code read with Regulations 37 and 38 of the IBBI (Insolvency Resolution Process for corporate Persons), Regulations, 2016. A certificate under Section 39(4) of CIRP Regulation also seen submitted along with the application. Upon the above said findings we have come to a conclusion that the objections against approval of the resolution plan raised by EARC and District Mining Officer of Jharkhand is unsustainable under law and devoid of any merit. 70. The Ld. Sr. Counsel for the CoC submits that RP has carried out the entire process in appropriate manner and had no role in evaluation and scoring of the resolution plans received and CoC in the meeting held on 21st April 2018 recorded its appreciation in completing the CIRP successfully. Two of its observations read as follows:- (3) The selection of H1 bidder was based on the outcome of an approved transparent process and Resolution Professional could not in no manner influence any decisions of the CoC and PWC in connection with the same. (4) The CoC members upheld the conduct of the Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val of this Bench, no doubt is a confidential document. Admittedly, the petitioner has undertaken confidentiality agreement. 74. The sources of information regarding the Resolution Plan of GMSPL not at all disclosed by the petitioner. On the other hand, supplementary affidavit has been filed on 10.04.2018 contending that the applicant has inadvertently produced the copy of the Resolution Plan of GMSPL instead of producing copy of its own plan. According to the Ld. Counsel appearing for the Resolution Professional it is a serious violation of confidentiality undertaking and action is to be taken against the applicant herein. Ld. Senior Counsel appearing on behalf of the applicant submits that there is no fraud played behind obtaining a copy of the Resolution Plan under consideration before the CoC and since it is a genuine copy no action for cause production of a copy of the resolution plan of GMSPL is warranted as against the applicant. We take note that the allegation amount to suspicious conduct of the applicant in CA(IB)398/KB/2018 and it is so grave for which the applicant is answerable. However, the RP being expressed his intention to take steps by approaching before the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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