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TMI Blog2019 (6) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... final consideration payable by the resolution applicant M/s. Kundan Care Products Ltd. is up front payment of ₹ 45.12 crores towards insolvency resolution process costs and secured financial creditors and ₹ 50,00,000/- for the operational creditors within a period and for the purpose discussed above. The members of the CoC were given an opportunity of being heard and have stated that all the three financial creditors have approved the plan and no objections are to be filed. We have already pointed out above that the consideration of ₹ 45.12 crores plus ₹ 50,00,000/- is more than that of the fair value of ₹ 25.90 crores and liquidation value of ₹ 15.38 crores (para 2 of Form H) . Above that CA was filed by the ex-Director of the suspended Board of Directors Shri Rajit Mehra and his plea for impleadment was not accepted but in the interest of justice, the objections raised by the learned counsel have been considered above. We may add here that an application (CA No.442/2018) under Sections 43, 44, 66 and 67 read with Section 69 of the Code has been filed by the resolution professional in respect of preferential transactions and fraudulent tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor). The petition was admitted on 25.01.2018, moratorium was declared and the Interim Resolution Professional was appointed by order dated 30.01.2018. The resolution plan has been approved by the Committee of Creditors (CoC). CA No.339/2018 for sanction of the plan has been filed by the resolution professional. 2. The CA No.477/2018 is filed by Shri Rajit Mehra, ex-Director of the corporate debtor under Section 60(5) and other applicable provisions of the Code for impleadment as respondent/objector in CA No.339/2018 filed by the Resolution Professional for approval of resolution plan (supra) and for placing on record the objections of the ex-Director to the resolution plan purportedly approved in the meeting of CoC held on 30.06.2018. 3. Learned counsel for the applicant has pleaded that he is entitled to attend the meeting of CoC and is a shareholder of the corporate debtor and therefore, his application for impleadment as respondent/objector be accepted. 4. We have carefully considered the submissions of the learned counsel for the applicant at the preliminary stage and have also perused the record. We find that as per Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Section 15 of the Code in Form A in two newspapers i.e. Rozana Spokesman, a Punjabi newspaper dated 02.02.2018 and Times of India, Chandigarh and Dehradun Editions on 03.02.2018 and Hindustan, a Hindi newspaper, Dehradun Edition on 03.02.2018 thereby inviting claims from the creditors of the corporate debtor as envisaged in the Code. 3. It is submitted that in pursuance of the public announcement, claims were received from the financial as well as operational creditors, which were verified and after collation, the IRP constituted the CoC as per the provisions of Section 21 of the Code. It is stated that initially, the CoC was constituted with two financial creditors i.e. Punjab National Bank having a voting share of 62.4% and Oriental Bank of Commerce having a voting share of 37.6% and later on, Kotak Mahindra Bank also filed their claim as one of the financial creditors which was approved by the RP, in view of unamended Regulation 12 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 on 29.06.2018 with 0.86% voting share and constitution of the Committee of Creditors and their voting share was amended accordingly and intimation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that three entities out of the four aforesaid entities submitted their resolution plan within the stipulated time and the three entities are M/s. Kundan Care Products Ltd., M/s. Ajanta Energy Pvt. Ltd. and M/s. Agam Pulp and Papers Pvt. Ltd. 8. It is stated that the evaluation matrix was revised as per provisions of Regulation 36 (A) of the Regulations with the approval of CoC in their fifth meeting held on 04.05.2018 and the revised evaluation matrix was duly shared with the prospective resolution applicants as per Regulation 36 (A) of the Regulations. 9. It is submitted that all the resolution plans were opened in front of the CoC in the sixth meeting held on 14.05.2018 and it was resolved to defer the approval of resolution plan for further evaluation. 10. It is stated that in seventh meeting of CoC held on 05.06.2018 an agenda was put forward for adoption of Swiss Challenge Method for maximisation of the value of CIRP process and in the eighth meeting of CoC held on 12.06.2018, CoC resolved to decline the Swiss Challenge Method but in the ninth meeting of CoC held on 25.06.2018, they reconsidered their earlier decision and all memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel representing the ex-Directors of the suspended Board of Directors submitted that notice may also be issued to them for being heard on the resolution plan. The copy of the application was supplied to the learned counsel for ex-Directors of the suspended Board of Directors. However, it was directed on 29.08.2018 that there are no grounds to issue notice to the ex-Directors of the suspended Board of Directors and in case they want to represent themselves, an application for intervention may be filed which shall be disposed of on its own merits. Notice of the application was, however, directed to be issued to the resolution applicant and the RP was also required to file certificate to the effect that the contents of the resolution plan fulfil all the requirements of the Code and the Regulations and that the Resolution Plan stands duly approved by the CoC. The RP was also directed to file compliance certificate in Form H. 14. Vide diary No.3415 dated 10.09.2018, the copy of certificate/undertaking that the contents of the resolution plan fulfil all the requirements of the Code and Regulations and that the resolution plan stands duly approved by the CoC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he valuer is highly doubtful and suspicious; there is conflict of interest in respect of valuer M/s. R.K. Associates who also acted as debris removal agency; bids were invited only in English newspaper Economic Times; RP has concealed material and significant fact that by virtue of order passed by the court of Assistant Collector (1st Class), Joshi Math in the matter titled State Govt. v. Rishi Ganga Power Corporation Ltd. a chunk of land on which the power plant of the corporate debtor is situated has been ordered to be vested with the State Government; no care has been taken for the dues of operational creditors and statutory dues. 18. During the course of the hearing, the learned Senior Counsel for the resolution applicant stated on instructions that the resolution applicant undertakes to abide by any of the directions/judgements/orders/interim orders or otherwise subject to right to challenge these orders in respect of the assets/properties of the corporate debtor unconditionally and the undertaking was taken on record. It was also submitted that a Writ Petition was pending in the Hon'ble High Court of Uttrakhand. It was submitted by the learned Senior Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stained) 1 Punjab National Bank 61.86 Voted in favour of the Resolution plan submitted by the Successful Resolution Applicant, Kundan Care Products Limited 2 Oriental Bank of Commerce 37.28 Voted in favour of the Resolution plan submitted by the Successful Resolution Applicant, Kundan Care Products Limited 3 Kotak Mahindra Bank 0.86 Voted in favour of the Resolution plan submitted by the Successful Resolution Applicant, Kundan Care Products Limited 23. The details of stakeholders under the resolution plan given in para 7 of Form H (Annexure A-3 of diary No.3415 dated 10.09.2018) is as follows:- (Amount in Rs. Crs) Sl. No. Category of Stakeholder* Amount Claimed Amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Other Debts and Dues NIL NIL NIL NIL Total 164.35 164.35 44.42 - 24. The compliance of the resolution plan has been given in para No.9 of Form H (supra) as follows:- Section of the Code Regulation No. Requirement with respect to Resolution Plan Clause of Resolution Plan Compliance (Yes/No) 25(2)(h) Whether the Resolution Applicant meets the criteria approved by the CoC having regard to the complexity and scale of operations of business of the CD? Mentioned on Page 2 of the Resolution Plan Yes Section 29A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 43, 45, 50 or 66,before the one hundred and fifteenth day of the insolvency commencement date, under intimation to the Board? Please refer Minutes of 10 th COC Meeting held on 30.06.2018, Page 472 of the paper book and undertaking is on page 338. Yes Regulation 38 (1) Whether the Resolution Plan identifies specific sources of funds that will be used to pay the - ( a ) insolvency resolution process costs? ( b ) liquidation value due to operational creditors? ( c ) liquidation value due to dissenting financial creditors? Undertaking dated 06.06. 2018 Yes Regulation 38(1A) Whether the resolution plan includes a statement as to how it has dealt with the interests of all stakeholders? Mentioned in the Resolution Plan on Page 242 of paper book. Yes Regulation 38(2) Whether the Resolution Plan provides: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. The satisfaction of the conditions is discussed below. It is submitted by the RP that the resolution plan has been approved by a vote of 100% of voting share of the financial creditors and that the specific comment as to the feasibility and viability of the resolution plan is not specifically mentioned while passing the resolution plan, as the said amendment to the Code 2016 came via Ordinance dated 06.06.2018 and is applicable to cases commencing on or after 06.06.2018 (para No.13 of Form H Annexure-3 of diary No.3415 dated 10.09.2018). Without going into the question whether the provisions were applicable, we find that in para No.18 of the application, CA No.339/2018, it is stated that M/s. Kundan Care Products Ltd. was adjudged as successful resolution applicant of the corporate debtor and this decision of the CoC was not merely on the basis of the financial bid given by the successful resolution applicant but also on the basis that the applicant was getting maximum marks as per the evaluation matrix and to the mind of the CoC is the most suitable applicant to ensure the maximisation of the value of the assets of the corporate debtor. The scoring table of resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te since sufficient time was given to H2 and H3 bidders to revise their financial bid and also to H1 bidder to make a revised/final/binding bid. It has been stated that no further opportunity was given to H2 and H3 bidders since it was held by the CoC that the revised bid would be final and thus, finality of the bid process was sought to be achieved. The objection that the resolution plan was approved with malafide and malicious intention to favour the resolution applicant M/s. Kundan Care Products Ltd. cannot be accepted. The contention regarding resolution applicants not being invited in the meeting of CoC is not shown to have prejudiced the proceedings before the CoC leading to the determination of the resolution applicant whose plan is most suited for approval. Moreover, no objections have been raised by H2 and H3 bidders. The plea that the bids for the resolution plan were not adequately and sufficiently publicised since the bid was made in only English newspaper Economic Times is not shown to have prejudiced the process of approval of the resolution plan by the CoC and there is no claim from any third party that they desired to participate in the resolution plan process but c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was stated in the resolution plan (page 241 of the application) that the payment of ₹ 50,00,000/- to the operational creditors is in addition to the consideration of ₹ 37.25 crores to buy out the unit/100% shareholding of the corporate debtor to the secured financial creditors. The bid amount is subsequently increase to ₹ 45.12 crores. Further, as noted in the order dated 24.10.2018, the learned Senior Counsel submitted that an amount of ₹ 50,00,000/- in addition to the revised bid amount of ₹ 45.12 crores shall be kept apart and deposited in a separate account in consultation with the monitoring agency within a period of seven days from the date of receipt of certified copy of the order that may be passed in this case. The amount of ₹ 50,00,000/- is stated during the course of the hearing to be for the purpose of payment to operational creditors as explained at page 9 of the resolution plan and in case any amount remains after this utilisation, the amount will be paid on pro rata basis to the operational creditor whose claim was verified and admitted. It may be added that during the course of hearing on 24.10.2018, the RP has stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018, a team of professionals headed by Project Manager (details at Annexure-I) will be assembled and a Technical Consultant appointed to coordinate and provide detailed drawing and designs for completion of work and thereafter construction agencies will be appointed and accommodation at Tapovan acquired for the team and site office for monitoring of construction activities started. It is stated that the period from June, 2018 is a period of heavy rains and therefore, full scale activities shall be taken up from November, 2018 to complete the project within one year by May, 2019. The activity-wise details are stated to be enclosed as Annexure-II of the resolution plan. It is stated that during the construction period, the project shall be managed by the team of professionals and the management and control of the business of the corporate debtor will be with a management committee headed by a Director and the operations team will be supervised by the management committee and technical consultant. It is stated that a tie up has been made with Dr. Hutarew and Partners (India) Ltd. a very experienced and high profile project implementation company who will manage, guide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and payment to financial creditors and any other creditors is stated to be 100% out of reserves. The estimated amount to be spent for making the project operational is given at page 6 of the Resolution Plan (page 240 of the application) at ₹ 53.00 crores. As regards the technical aspect, we have already discussed above that the proposal is to make the project operational in a period of 12 months and to appoint a team of professionals headed by Project Manager and appoint technical consultant during the period from June, 2018 to October, 2018 and to complete the project within one year by May, 2019. The organisational chart of team of professionals proposed to be appointed has been enclosed as Annexure-I of the resolution plan. The management and control of the business of the corporate debtor is stated to be supervised by a management committee headed by a Director and the operations team will be supervised by management committee and technical consultant. It is further stated that there is a tie up with Dr. Hutarew and Partner (India) Ltd. a very experienced and high profile implementation company for managing, guiding and supervising the project implementation and detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and fraudulent trading and those matters are still pending. 34. In view of the above discussion, the resolution plan submitted by M/s. Kundan Care Products Ltd. as approved by the CoC under Section 30 (4) of the Code is approved and the same shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan, with the following further directions to the Resolution Applicant:- (i) that the Resolution Applicant shall be bound by the directions, judgements, orders, interim orders or otherwise, subject to the right to challenge these orders in respect of the assets/properties of the corporate debtor. (ii) that the Resolution Applicant shall deposit an additional amount of ₹ 50,00,000 (Rupees fifty lacs only) over and above the bid amount of ₹ 45.12 crores within seven days of the receipt of copy of this order in a separate account in consultation with the monitoring agency for payment to operational creditors as explained at page 9 of the resolution plan and in case the amount is still unutilized, the same would be disbursed to operational credito ..... X X X X Extracts X X X X X X X X Extracts X X X X
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