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TMI Blog2019 (2) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... as to the KYCs of the promoters of the CD as well as information about the mortgagors. I have found that some of the information so sought for was furnished while inability was expressed in regard to furnishing of other information vide email dated 29-09-2018 from RP addressed to the applicant - The information, so furnished by the learned RP, is found to be incomplete. Also, the conduct of the applicant during the course of CIRP is also found far from satisfactory. There are indisputable materials on record to show that the applicant had also kept on asking the learned RP to furnish it with some information viz. liquidation value of the CD, and that too, at a stage, when law forbids the RP from sharing such information with anyone. Such conduct on the part of the applicant again shows that some considerations, other than valid one, might have driven the applicant to keep on hurling queries after queries on the RP in regard to allegation that one of the members of the CoC is a related party to the CD - the RP cannot be adjudged guilty of non-performing of his statutory duty qua constitution of CoC only because of the non-furnishing of the KYCs of the promoters of the CD. Reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 and therefore, with the approval of Committee of Creditors publication for further extension of date of EoI in Financial Express - all editions on 27.07.2018 whereby time for submission of EoI was extended till 07.08.2018. 5. The Resolution Professional received Expression of Interest from the following entities (hereinafter referred to as Entities/Prospective Resolution Applicants ) till 07.08.2018, being the last date of submission of EoI: (a) Greenply Industries Limited; (b) Ensemble Infrastructure India Limited (Lead Member) in consortium with ESS GEE Real Estate Developers Private Limited and ESS GEE Realty Private Limited; (c) SREI Multiple Asset Investment Trust (Vision India Fund). 6. The Resolution Professional provided Information Memorandum, Evaluation Matrix, RFRP other relevant documents to each Resolution Applicant, on receiving undertakings from them that such members shall maintain confidentiality of the information furnished to them and shall not use such information to cause an undue gain or undue loss to itself or to any other person. 7. The Resolution Professional after taking concurrence from the members through email at the behest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the portal because of some technical glitch but confirmed their Assent over Email and Letter to the Resolution Professional. 13. Furthermore, 7.26% members of the CoC voted against the said Resolution Plan. The members who voted against the said Resolution Plan are IDBI Bank, Canara Bank and Bank of Baroda. 14. That as per the Resolution Plan submitted by SREI Multiple Asset Investment Trust (Vision India Fund) the Break-up of the total amount payable by the Resolution Applicant are as follows: EXHIBIT G of Format VA- Resolution Plan S. No Particulars Clause No. of Format VA-Resolution Plan Amount (Rs. In Cr) Total Resolution Fund 175.00 Payments 1. On Cancellation of Equity Shares Clause 1 3.3925 2. For settlement of CIRP Cost Clause 3.1 0.2500 3. For settlement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in force; (f) confirms to such other requirements as may be specified by the Board. Explanation. - For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013(18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent, of voting share of the financial creditors, after considering its feasibility and viability, and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A and may require the resolution professional to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of approval under sub-section (1), - (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors. 16. It may be stated here that after the submission of Resolution Plan before this Authority after being approved by RP a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h information is easily available in the public domain which would have shown that one of the important members of the CoC was a related party to the CD and in that event, such a party, in terms of law, laid down in proviso to section 21(2) of the code could not have any right of representation, participation or voting in a meeting of CoC and in such a scenario, perhaps the fate of various resolutions, adopted in CoC would have been different. 20. To support such a contention that RP has a mandatory duty of doing due diligence to certain the related party status of the members of the CoC, my attention was drawn to the decision of Hon'ble Supreme Court in Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta [Civil Appeal No.9582 of 2018, dated 4-10-2018]. The relevant part thereof is also reproduced below:- Thus, the importance of the Resolution Professional is to ensure that a resolution is complete in all respects, and to conduct a due diligence In order to report to the Committee of Creditors whether or not it is in order. Even though it is not necessary for the Resolution Professional to give reasons while submitting a resolution plan to the Committee of Creditors, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in troubled water. The fact that the applicant kept on asking for liquidation value of the CD even at a stage when law prohibits sharing of such intimation with anyone makes such conclusion inevitable. 25. It has also been pointed out that the information relating KYCs of the promoters was sought for at a stage when the CIRP had almost entered into final phase which is certainly not in the tune of arrangements of things as envisages in the Code where time is the essence since the Code prescribes very specific period for completion of each and every stage of CIRP. In the face of such revelation, contention of the applicant that since one of the members of the CoC was the related party to the CD and since such a member of the CoC was allowed to have representation, participation or voting in a meeting of CoC, the entire CIRP becomes a nullity is nothing more than a bundles of claims without any substance whatsoever. 26. Learned counsel appearing for the applicant had also drawn my attention to the provisions of Section 29A(c) of the Code of 2016 to contend that at the time of submission of resolution plan by the SMAIT, it was hit by the prohibition in aforesaid provisions of ..... 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(ii) for seven years or more under any law for the time being in force: Provided that this clause shall not apply to a person after the expiry of a period of two years from the date of his release from imprisonment: Provided further that this clause shall not apply in relation to a connected person referred to in clause(iii) of Explanation I]; (e) is disqualified to act as a director under the Companies Act, 2013 (18 of 2013): [Provided that this clause shall not apply in relation to a connected person referred to in clause (iii) of Explanation I;] (f) is prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets; (g) has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code: [Provided that this clause shall not apply if a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Exchange Board of India; (f) 27. In support of such contention, it has been submitted that one of the Resolution Applicant through one of its Fund, namely, India Growth Opportunity Fund had invested in the Oddisha Slurry Pipeline Limited (in short OSPIL ) and have around 69% shareholding and management control over the OSPIL, The OSPIL had defaulted in making payment to IDBI Bank Ltd. and the debt due from the OSPIL was declared NPA and the same was, therefore, referred to NCLT but such application was not admitted as yet as informed by the applicant. Such a fact was brought to the notice of the CoC in its 5th meeting by the applicant. Since the applicant has come under the prohibition enunciated in Section 29A (c) of the Code, on this count also, the Resolution Plan submitted by the SMA1T (RA) is required to be rejected. 28. The learned Sr. Counsel, Ms. M. Hazarika, however, submits that the aforesaid contention has no basis at all. It is an admitted position that the RA is an alternative investment fund registered with the Securities Exchange Board of India. Sub-clause (e) to second Explanation to clause (j) of Section 29A clearly declares that an Alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the KYCs of the promoters of the CD as well as information about the mortgagors. I have found that some of the information so sought for was furnished while inability was expressed in regard to furnishing of other information vide email dated 29-09-2018 from RP addressed to the applicant. For ready reference, same is reproduced below: 'Dear Yogesh, With reference to the trial mail, we pursued /or KYCs of the promoters namely Vinay Goenka, Usha Goenka, Usha Goenka, Sunita Goneka and Caurav Goenka with KMPs of the Corporate Debtor. However they have shown their inability to arrange for the KYCs of the promoters as requested by your good office. Moreover the KMPs have stated that the given assets are not owned by the corporate debtor but are third party assets of Vinay Goenka, Usha Goenka, Sunita Goenka and Caurav Goenka and the Guarantee Deeds have been executed solely in favour of SRIE Infrastructure Finance limited and to no other Financial Creditor. Moreover the Guarantee is limited to the value of respective holding of Agricultural Land. They have further requested that one should refer Point No.1 in each respective deed of guarantee which reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted EoI within the date so fixed, for which the date for submission of EoI was extended till 07.08.2018. Pursuant thereto, three Prospective Resolution Applicants had submitted their EoI. In due course, RP has provided Information Memorandum, Evaluation Matrix, RFFP and other relevant documents to those Prospective Resolution Applicants (PRAs in short) and also obtained from them Confidentiality Undertaking/Non-Disclosure Agreement and the last date for submission of Resolution Plan was fixed on 01.10.2018. 36. However, the RP had received only one resolution plan from SMAIT within the stipulated period meaning thereby that in the event of failure of RA herein too to submit the resolution plan under consideration, there would have been no other option but to allow the CD to go into liquidation. The Hon'ble Supreme Court/Hon'ble NCLAT have held that revival of a sick corporate debtor is a rule, whereas liquidation is an exception. In the face of such observations from the Hon'ble Supreme Court/Hon'ble NCLAT and also in view of the facts, which I have recorded hereinbefore, I am of the opinion that allegation that the constitution of CoC being bad for violati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the corporate debtor and first charge on the fixed assets/current assets of the company, being the Corporate Debtor. 6.1.9 Category B Creditors represent those secured creditors who have minuscule exposure as compared to the Class A Secured Creditor, and who are not having first charge on the fixed assets/current assets of the company. 6.1.10 In the event of liquidation, the Secured Creditor having exclusive charge on the brand value of the corporate debtor and first charge on the fixed asset/current asset block of the corporate debtor if exercises the SARFAESI rights available to them, therein that event, no other creditors either financial or operational, would get any amount through the waterfall arrangement, as provided in Section 53 of the Code. 6.1.11 On this logic, the treatment proposed to be accorded to the different class of secured creditors cannot be seen as arbitrary, illegal or contrary to the provisions of the I B Code, 2016 and/or the CIRP Regulations. 6.1.12 In SreeMetahks Ltd. v. SREI Equipment Finance Ltd. (07.11.2017-NCH-Kolkata): MANU/NC/1686/2017 the Hon'ble National Company Law Tribunal, Kolkata Bench while dwelling upon similar fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial creditors to hold the resolution plan to hostage, and that too, for no apparent valid reason 41. Resultantly, none of the allegations above stands to reason and accordingly all allegations are rejected. 42. But a perusal of Section 31 of the Code of 2016 also show that a heavy duty is cast on this Authority to satisfy itself before giving a seal of approval to the Resolution Plan, already approved by CoC under Section 30 (4) of the Code of 2016 that the Resolution Plan, so approved, meets the requirement of law as specified in Section 30 (2).Pursuant to the jurisdiction conferred upon this Adjudicating Authority by Section 31 of the IBC 2016, as set out above, I have examined the Final Resolution Plan and I find that the mandatory requirements have been dealt with in the Final Resolution Plan as follows: (a) Clause 8 and Clauses 2 3 of Format-VA of the Resolution Plan comprehensively provides for dealing with the interest of all the stakeholders of the corporate debtor including financial creditors and operational creditors of the corporate debtor. (b) The terms and implementation schedule of the Final Resolution Plan are provided under Clause 4 of Format-VA of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Resolution Plan by this Authority until the closure date, a Supervisory Committee shall be constituted which will supervise the implementation of the Final Resolution Plan and manage and control the operations of the Corporate debtor. (k) Clause No. xxxi of Glossary of terms in Format-VA of the Resolution Plan provides for the composition of the Supervisory Committee 43. The Resolution Professional has submitted the required Compliance Certificate in Form H of the Schedule certifying that the Final Resolution Plan is in conformity with the provisions of IBC 2016 and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 including Section 30(2) of the IBC 2016 and Regulations 37(1), 38(1), 38(1A), 38(2), 38(3) and 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 and does not contravene any of the provisions of the law for the time being in force. 44. In Para No.7 of the compliance certificate in Form H, the amounts provided for the stakeholders under the Resolution Plan is as under: (Amount in Rs. lakhs) Sl. No. Category of Stakeholder* Amount C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,85.93 830,89.48 17500.68 18.04% #Amount provided over time under the Resolution Plan and includes estimated value of non-cash components. It is not NPV. *Omitted vide Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Fourth Amendment Regulations, 2018 dated 05.10.2018 45. The fair value and liquidation value of the assets as on the insolvency commencement date i.e. 01.05.2018 as given in para 2 of Form H is INR 203.95 crores and INR 154.43 crores respectively. However, as noted above, the total amount provided for the stakeholders under the resolution plan is INR 175 crores which is significantly higher than the liquidation value. 46. Para 9 of Form H states that in terms of the Report from S.K. Agrawal Co, Chartered Accountants (appointed for conducting due diligence of the financial of the corporate debtor), there were no transactions u/s 43, 45, 50 66 of the Insolvency Bankruptcy Code, 2016. 47. The Resolution Applicant SREI Multiple Asset Investment Trust (Vision India Fund) has submitted an affidavit pursuant to section 30(1) of the Code ..... X X X X Extracts X X X X X X X X Extracts X X X X
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