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TMI Blog2018 (4) TMI 1779X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Resolution Plan. An 'objective satisfaction' revolves around the object of enactment of the Code as enshrined in the Preamble of the I B Code i.e. to revive the financially stressed corporate body. And the 'subjective satisfaction' depends upon logical analysis of the Financial Data supplied so as to match with the business model of the Corporate Debtor. A methodical scrutiny of Financial Statement is expected before concurring with approval of the COC. There are no two views, and must not be, that this I B Code provides greater accountability both on the Insolvency Professional, as also on COC, mainly comprise of lender Banks. Their approval of a Resolution Plan ought to be judged with due diligence. To sum up, in our humble interpretation the recording of an analytical 'satisfaction' is a condition precedent before granting of approval. The Resolution Plan as approved by the Committee of Creditors is by and large hereby sanctioned by this Order subject to certain minor qualifications. - MA 35 of 2018 in CP No.1132/I&BC/MB/MAH/2017 - - - Dated:- 19-4-2018 - Hon'ble Shri M.K. Shrawat Member (Judicial)Hon'ble Bhaskara Pantula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year ended on 31st March, 2016 had not been adopted by the Shareholders of the Corporate Debtor due to the reason that a Stay was granted by the Hon'ble High Court for holding AGM on 30.09.2016. The Memorandum had also consisted an information that, quote the corporate debtor had issued CDRs at US$11.084 each representing 35,000,000 equity shares on 26.07.2012 as per the Offering Circular. The amount raised in GDRs was US$ 77,589,800/- (₹ 42.97 crores approximately). The said GDRs were listed on the Luxemburg Stock Exchange. Necessary documents with regard to receipt ofthe GDR amount and inward remittance were not made available for review, 2.3. Third COC meeting was held on 14.11.2017 wherein the I.M. was discussed and certain irregularities have also been highlighted in the discussion. It was noticed that the Corporate Debtor had recorded fictitious Sales and Purchases, further wrongfully written off certain accounts. There were several instances of irregularities which were also informed in the report and also through a separate Application. An Order on this Application is yet to be passed i.e. pending for disposal. In this meeting it was also decided to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittee of Creditors. The most important part is the commitment on the part of the Resolution Applicant. It is informed that the Resolution Applicant is committed to pay a sum of ₹ 6224 Lakhs to the Creditors as against the Liquidation value of ₹ 2283 Lakhs. Further, the commitment is to invest Lakhs, (i) towards Plant Refurbishment ₹ 200 Lakhs, (ii) Working Capital ₹ 1000 Lakhs, (iii) Insolvency Resolution Process cost ₹ 60 Lakhs. Thus the aggregate comes to ₹ 7484 Lakhs. The assurance is that a sum of ₹ 6224 Lakhs which is committed towards payment to Creditors shall be cleared in 15 quarters after approval of the Resolution Plan. The summary of the total commitment is as follows:- 2.12. Resolution Professional has examined the year-wise cash outgo of the Resolution Applicant and the figures stated to be as under :- 2.13. An important aspect is to ascertain the arrangement of the finances by the Resolution Applicant. As per the following chart, the proposed means of finances duly committed by the Resolution Applicant is reproduced below:- 2.14. The Application submitted by the Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors on 19.12.2017. After discussion the Committee of Creditors had taken the following decision:- 2.16. In the light of the said requirement as stipulated by Committee of Creditors, a final Resolution Plan was submitted by the RAs jointly. The said two Resolution Plans were put to e-voting. In terms of Regulation No. 25(2) the COC voted for the final Resolution Plan submitted on 20-12-2017. The result of the voting was that 77.68% assenting votes, 18.91% dissenting vote and 3.41% remained absent. In terms of the notification dated 31.12.2017 issued by IBBI, a dissenting financial creditor means a Financial Creditor who voted against the Resolution Plan or abstained from voting. In this case, since the voting on Resolution Plan under consideration was concluded on 22.12.2017 i.e., before the notification date, hence the Insolvency Professional had made a request that 3.41% abstaining voters may be treated equivalent to assenting Creditors . The Resolution Plan finally so approved thus provided ₹ 7,484 lakhs containing the following three main components :- (i) an amount of ₹ 6224 lakhs payable to the creditors, (ii) insolvency resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was resolved that the Resolution Professional is required to hand over the charge of affairs of Corporate Debtor i.e. Raj Oil Mills along with Books of Accounts, Asset of the Company, Documents, Agreement, etc. 2.23. Further, it has also been resolved that all the rights in terms of lease, tenancy etc. shall continue to be the property and rights of the incoming Company (RA) without any hindrance. The Debtor Company is having an office at Bellasis Road, Mumbai Central which is stated to be a tenanted property and the Landlord of the property is a Firm called M/S. Raj Builders. The said Landlord had sent a request to Resolution Professional seeking vacant possession of the said premises stated to be occupied by the Respondent Corporate Debtor. Before the Company could hand over the vacant possession the CIRP was commenced with effect from 10.07.2017. As a consequence, 180 days Moratorium had also commenced which had ended on 06.01.2018. Admittedly, during the period of Moratorium no change in the Assets of the Company - whether tangible or intangible - was permissible under the Insolvency Code, hence maintained the status quo. M/S. Raj Builders, owner / land-lord, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anaging Director, a Representative of the Secured Creditors, and an Independent Auditor so that the Terms of the Resolution Plan be implemented correctly. 5. The Resolution Professional has made following Prayers:- (a) Consider and a//ow the instant MA No. 35/2018; (b) Consider and approve the resolution plan approved by the Committee of Creditors (COC) u/s 31(1) Of the IBC, 2016; (c) Consider dosing the corporate insolvency resolution process of the corporate debtor on approval of the resolution plan under IBC, 2016; (d) Consider dedarjng u/s 31(3)(a) of IBC, 2016, that the moratorium u/s 14(1) of IBC, 2016, shall cease to have effect from the date the Hon ble NCLT passes an order approving the resolution plan; (e) Consider passing such directions as the Hon We NCLT may deem fit and proper with respect various issues listed in the Table under para 49 here in above, (f) Consider directing various authorities to undertake speedy investigations and conclude the matters on various issues relating to irregularities and non-compliances as contained in the RP's 'Qualifications and Observations' enclosed at Exhib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of email, the representation made by SICOM was not placed before the Hon'ble Tribunal. As a result, the outcome of the Insolvency Resolution Process is prejudicial to the interest of SICOM. Through this Application SICOM is making a representation for its entitlement to receive a sum of ₹ 1.07 Crore as provided in the approved Resolution Plan. The denial of payment of the legitimate due of SICOM specially when the approved Resolution Plan had made a provision for the said payment of SICOM, the decision of the RP is contrary to the scheme of the I B Code, pleaded by the Ld. Representative of the Applicant. 6.2. Considering the totality of the circumstances and the nature of transaction with the Corporate Debtor it is appropriate that the outstanding Debt of SICOM be also considered during the process of implementation of the offered Resolution Plan. A compilation placed before us contains a list of Unsecured Financial Creditors and their respective claims shortlisted on 10th July, 2017. For ready reference the said list is reproduced below:- 6.3. It is important to clarify that the Debts owed to a Secured Creditor shall get preferen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Secured Loans. 7. 'RESOLUTION PLAN' 'FINDINGS' :- Finally, after having a detailed foregoing discussion on Insolvency Process adopted so far, now the feasibility of the Resolution Plan is required to be examined. The revised Resolution Plan was submitted on 21st December 2017. Only the main feature relevant for satisfaction of the outstanding Debt are reproduced as also discussed hereunder :- APPLICANTS RESOURCES OF FUNDS TO PAY FOR RESOLUTION PLAN 1. Mr. S.A.Tabrez Shaikh , Mr. S.A. Humayun S.A. Shaikh and Parvez S.A. Shaik through one of its group company Rubberwala Hospitality Pvt Ltd has entered into a term sheet dated 3 rd October, 2017with Mr. Nisar I Patel for sale of land admeasuring 1532 sq. mt. at Vileparle, Andheri for a consideration of ₹ 35 crs. which will be distributed as ₹ 1.42 crs to Rubberwala Hospitality Pvt Ltd and ₹ 11.19 crs. to each shareholder i.e. Tabrez, Humayun and Parvez. The consideration is scheduled to be received as under: Balance Consideration- 2. Mukhi Industries Limited has negotiated with BOI for Term Loan of ₹ 15cr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Details are as per the following information forming part of this Resolution Plan KEY OBJECTIVES BEHIND THE RESOLUTION PLAN The Resolution Plan envisaged by New Promoter ('INP') for Insolvency resolution of Raj Oil Mills Limited ('ROM') and to ensure continuity of business along with most effective use of assets and equipment of ROM is as detailed below: i) Resolution Plan provides for payment of Insolvency Resolution Process Cost in priority to the repayment of other debts. ii) Payment to Workers Employees: NP will make payment ofoutstandingdues of workers and employees as per the claims received by the Resolution Professional till date of approval of Resolution Plan iii) Financial Re-Structuring- -Restructuring of Debts by way of settlement with Financial Creditors and Operational Creditor and payment of restructured dues over a period Of 3 years. iv) Capital Restructuring - Reduction in existing issued and subscribed capital of corporate debtor and issue of new Equity shares on preferential allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by NCLT and balance ₹ 2.45cr. shall be paid by 25th March, 2018. INSOLVENCY RESOLUTION PROCESS COST We have considered the Insolvency resolution process cost Of ₹ 0.6 cr. The same will be paid under this resolution plan on approval by NCLT PAYMENT TO WORKERS We have perused the copy of Information Memorandum as per the point 15 on page no. 110 Resolution Professional has stated that they have received claim from some Of the Ex- employees which are under review. As the amount has not been ascertained and the claims are not quantified it is not practical to make the provision for payment of the same. We have made assessment on the basis of the information in the IM that the claim of workers will not be more than 2.42 crs. To ensure that claims of the workers are settled we are willing to settle such cases at the rate of 35% of the claims admitted before approval of Resolution Plan by Adjudicating Authority subject to maximum of ₹ 0.85crores. Workers Claim Amount Settlement Percentage Maximum Amount payable under our Resolution Pan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s initial payment by 25th March, 2018 on approval Of Resolution Plan. The balance ₹ 15 Crores will be paid in fifteen quarterly instalments of ₹ 1cr. each 3. City Bank will be paid ₹ 6 lakhs as initial payment and balance of ₹ 30 lakhs in Five quarterly instalments of ₹ 6 lakhs each. 4. Bank Of Baroda will be paid Rs.O.06 Crores as part Of initial payment PUBLIC FIXED DEPOSIT Public Fixed Deposit is from socially weaker section and senior citizens. We intend that the small fixed deposit holders should not suffer; therefore we are proposing to settle the principal amount due to fixed deposit holders @ of 100% of the amount. The amount will be paid to the fixed deposit holders who have submitted the claims which are in the books of the company will be verified and accepted not exceeding ₹ 5.36 Crores. The amount so settled shall be paid in eight quarterly instalments starting from 30th June, 2019. Public Fixed Deposits Amount Claimed Settled @Percentage Amount Settled Quarterly Instalment (beginning 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for settlement amount of @I% of crystalized demand maximum to ₹ 2.58 crores. The amount due on the settlement as stated above will be paid in 4 equal quarterly instalments starting from Sep, 2019. VAT: The Company has not received any Claim Form from Value Added Tax department towards VAT liabilities. In view of the same no provision is required to be made for payment of dues on account of VAT liabilities. RP has enumerated on page no. 72 of the 1M The details of legal matters with regards to VAT. ROM has filed appeals with Value Added Tax Appellate Tribunal, before Commissioner of VAT. The subject matters are not settled and the liabilities cannot be determined. New Promoters (NP) proposes to settle crystalized demand as per the order of Value Added Tax Appellate Tribunal or Commissioner of VAT Appeals. The so determined demand will be settled for a settlement amount of @1% of crystalized demand maximum to Rs.O.89 crores. The amount due on the settlement as stated above will be paid in 4 equal quarterly instalments starting from Sep, 2019. The details are as under : Sundry Liabilities Amount Claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oupons in the ratio of no. of fractional shares. Consolidation of 20 coupons will be offered one share. Under this process the present subscribed and paid up capital of 7,49,43,438 shares of ₹ 10 each amounting to ₹ 74,94,34,380/- will reduced to 37,47,171 shares of 10 each amounting to ₹ 3,74,71,710/-. After reduction of capital NP will subscribe to 1,12,41,513 shares of rupees 10 each amounting to ₹ 11,24,15,130/-. The revised capital after subscription by NP would be 1,49,88,684 shares of ₹ 10 each amounting to ₹ 14,98,86,840/-. Revised Capital structure of the company will be as under: Particulars Number of Shares amount Authorised Capital 16,00,00,000 1,60,00,00,000 1600 lakhs equity shares Of FV Of ₹ 10 each Subscribed and Paid up Capital 1,49,88,684 14,98,86,840 749.43 lakhs equity shares of Face Value Of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... workers and Employees shall continue in the employment. The performance of each employee will be judged on the basis of his performance, capabilities, experience and accordingly he will be assigned functions and duties. CFO will prepare financial budgeting and forecasting under the advice of Mr. Sufyan Managing Director. Mr. Sufyan will draw plan for rehabilitation of existing plant and Machinery to support and enhance the production. The Resolution Plan approved by Adjudicating Authority shall be implemented in 4 years from the date of approval of the order. The following chart submitted has demonstrated the total Project Cost and Means of Finance to be arranged and accruals from the Debt Restructuring Plan. The figures of this Chart are self-explanatory as follows:- The company will have the option to pre pay the dues of the banks, Financial Institution, Creditors without any additional levies. In the event Of failure on the part of the company to adhere to make payments to financial creditors for an amount and in the manner and in accordance with the terms as envisaged in the scheme financial creditors should be entitled to reins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is worth reproduction :- LIQUIDATION VALUE WATER FALL Amount (Rs in Cr) Sr. waterfall Particulars Amount claimed as per IM Amount available as Liquidation Value 1 Insolvency Resolution Process Cost 0.6 0.6 2 workmen's dues for preceding 24 months from the date of approval of Resolution Plan 2.42 0.6 3 Debts owed to Secured Creditors 178.78 21.36 4 Employees other than workers covered in item 2 for 12 months preceding date of approval of resolution an. 2.42 0 5 Unsecured Creditors Financial Creditors 64.45 0 6 Unsecured Creditors (Sundry Creditors) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation that, being sanctioned without judicial analysis, thus may not be sustainable in the eyes of law. There are no two views, and must not be, that this I B Code provides greater accountability both on the Insolvency Professional, as also on COC, mainly comprise of lender Banks. Their approval of a Resolution Plan ought to be judged with due diligence. To sum up, in our humble interpretation the recording of an analytical 'satisfaction' is a condition precedent before granting of approval. 10. To sum up the above discussion, the Resolution Plan as approved by the Committee of Creditors is by and large hereby sanctioned by this Order subject to certain minor qualifications, noted below:- a) As already held above, the claim of Debt of the dissenting Financial Creditor viz. SICOM cannot be rejected out-rightly and to be considered as directed supra. b) The Resolution Applicants/ New Promoters shall abide and be responsible to the extent of Undertaking given in the Resolution Plan in a time bound manner. c) The Resolution Applicant/ NP is expected to discharge the Liability in the manner it is prescribed U/s 53 of The Code, although it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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