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TMI Blog2019 (8) TMI 1528X X X X Extracts X X X X X X X X Extracts X X X X ..... ubjective satisfaction may lead to situation 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, 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 - the approval of a Resolution Plan can be accepted U/s 31 (1) IBC by Adjudicating Authority after considering feasibility and viability recorded by COC ( refer Sec. 30(4) IBC ) with a 75%/66% voting share consenting for the said plan - The Resolution Plan is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the Moratorium imposed under section 14 shall cease to have any effect henceforth. - MA 1509/2019 & MA 2104/2019 & MA 662/2019 in CP No.1368/I&BC/MB/MAH/2017 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectricity supply to the premises of the Corporate Debtor was disconnected much before the CIRP in respect of the Corporate Debtor commenced. Hence, no activity was carried out in the premises of the Corporate Debtor with such Plant Machinery, and therefore, this outstanding rent cannot be included in the CIRP Cost. The RP has also submitted that this application has been filed belatedly after the application for approval of Resolution plan has already been filed before this Tribunal. This application at such belated stage cannot be entertained and is merely an attempt to stall the CIRP of the Corporate Debtor. Hence, in the light of RP s submissions and considering the fact that the Operational Creditor has not filed its claim before the RP, as also under the totality of the facts and circumstances, MA 1509 of 2019 is rejected. B. Miscellaneous Application No. 2104/2019 6. This application also require an adjudication prior to the decision on the Resolution Plan, submitted for due consideration of this Bench. This application is filed on 11.06.2019 by Swwapnil Bhingardevay (Applicant), the Promoter of the Corporate Debtor seeking permission to submit a Resolution plan. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with Resolution Plan an Order is hereunder passed as prescribed U/s 31(1) of The Code. 9. The Financial Creditor Karad Urban Co-operative Bank Ltd. had filed a Petition by invoking the Provisions of Section 7 of The Code against the Corporate Debtor Khandoba Prasanna Sakhar Karkhana Limited [KPSKL] read with Rule 4 of The Insolvency Bankruptcy (Application to Adjudicating Authority) Rules 2016 on 07.09.2017 in respect of Financial Debt of ₹ 17,86,84,138/- and for a default of ₹ 28,46,86,768/- . 10. After considering the merits of the case, the said Petition was admitted vide an Order dated 01.01.2018 (CP No.1368/I BP/NCLT/MB/2017). Initially Mr. Kiran Kunte was appointed as IRP. The said IRP published the commencement of CIRP in newspapers on 11.11.2018. 11. The Financial Creditor is holding 98% voting share in the CoC of the Corporate Debtor. Remaining 2% voting share is held by Jankalyan Nagari SahPata Sanstha. A Resolution was passed by the Committee of Creditors for substitution of the IRP, as a consequence, this Bench appointed the Applicant as the Resolution Professional on 06.03.2018. The Applicant published the invitation for Expression of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Resolution Applicants) has been approved unanimously. Hence, this Application is filed by the RP under section 31(1) of the I B Code, 2016 for the approval of the said Resolution plan. The Resolution plan has been discussed in this order in detail. 16. Coming on to the Resolution Plan, the relevant portions are reproduced below: RESOLUTION PLAN :- 1. Dues of Financial Creditors on the Corporate Debtor Dues to Financial Creditors of the company as at 1st January 2018 No Name of Financial Creditor Claim (Rs. Cr.) Security 1 Karad urban Co-op Bank Limited 30.27 First pari-passu charge on the entire fixed and movable assets. Registered Mortgage of land, building, P M and Personal Guarantees 2 Janakalyan Nagari Sah. Patasanstha 0.62 Second Pari-passu charge TOTAL CLAIMS 30.89 2. Dues of operational and other creditors of the Corporate Debtor Dues to operational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Dandnaik Mr. Dandnaik, having age of 46, currently hold position of Chairperson of Yashwant Multistate Bank. He serves as the Director of Osmanabad DCC Bank and also he held position of President of Osmanabad District Urban and Credit Society federation. He comes from the finance background and has terrific knowledge in financials. Mr. Nade and Mr. Dandnaik collectively took over Sai Agro Plant. The said plant was improved and had 50,000 per liter per day capacity. Mr. Nade and Mr. Dandnaik have increased capacity of plant to 65,000 per liter per day. Mr. Nade and Mr. Dandnaik have successfully turn around plant in recent times. 4. RESOLUTION PLAN a. Takeover of the Company The Resolution Applicants propose to acquire 100% equity shareholding of the company. And replace the existing suspended Board of Directors after the resolution plan approved by the CoC is finally approved by NCLT by way of an order. The Company has currently Authorised Capital of ₹ 14 Cr. and Paid up Capital of ₹ 9.82 Cr. The accumulated losses of the company are more than the existing paid up share capital of the ₹ 9.82 Cr. As per provision of section 66 of companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds infusion; Source of Funds First 30 -180 days Equity 14,00,00,000 Debt 21,00,00,000 Working Capital Limits 10,00,00,000 Total Sources of Funds 45,00,00,000 It is understood that in order to raise working capital limits of ₹ 10 Cr. as indicated above, the existing lenders shall be required to release all charges/ liens/ securities of assets of the company. The secured creditors shall release such charge only for the purpose and subject to raising such funds. In case the amount of ₹ 18.53 Cr. is not paid to banks within timelines indicated under this plan, the lenders shall regain the charges so released. In that case, the earnest money shall be forfeited and default shall be penalised. Fixed deposit Of ₹ 15 Lakhs is secured against the Bank guarantee for Corporate Debtor, Karad Urban Co-op Bank ltd will take the deposit back and nullifies the transaction against Bank guarantee. The conditional NOC will be required from Karad Urban Co Bank Ltd t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed financial creditors. j. Payment of dues to related parties Debts from related parties amount to ₹ 2. Cr as per the last audited balance sheet. Any related party payables shall not be paid and shall be extinguished in full. k. Summary of proposed recovery to the financial creditor Particulars Claims (Rs. Cr.) Total Recovery (Rs. Cr.) % Recovery (Approx) Karad urban Co-op Bank Limited 30.27 18.16 60 Janakalyan Nagari Sah. Patasanstha 0.62 0.37 60 Total 30.89 18.53 60 l. Treatment of claims of various stakeholders and operational creditors As per Regulation 38(1) of Insolvency and Bankruptcy Regulations 2016, the amount due to the operational creditors shall be paid in priority to the financial creditors which shall in any event be made before expiry of 30 days after the approval of a resolution plan by the Adjudicating Authority. In the current case, the liquidati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kely to make in case of liquidation. The proposed payment towards trade payables dues under the plan is 40% as against NIL payment in liquidation scenario. Currency of Payment All payments proposed to be made pursuant to this Proposed Plan will be in Indian Rupees (Rs.). m. Balancing the interest of all stakeholders The proposed plan balances the interests of all the stakeholders of the company as explained above. Although, as per the provisions of the code, no liquidation value is payable to any creditor other than secured creditors and workers, the Resolution Applicants propose to pay all other creditors in a manner explained above. Additionally, all workers and employees will continue to be employed with the company. This makes this proposed plan balanced. n. Claims after approval of the Proposed Plan The Code and the CIRP Regulations entitle all creditors of a corporate debtor to submit their claims to the RP on or prior to the date on which the resolution plan gets approved by the adjudicating authority. As a result, in the event any Creditor of the Company does not submit claims to the RP prior to the Effective Date, the said Creditor will not be enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.70 Cr. (100%) To be paid Within 180 Days from the effective date NIL 2 Statutory Dues 0.24 0.24Cr. (100%) To be paid Within 180 Days from the effective date NIL 3. Secured financial creditor 30.89 18.53 Cr. (60%) Payment to secured financial creditors of ₹ 18.53 Cr. Shall be made within 180 days from the Effective date Gross amount ₹ 13.53 (43.8%) 4. Trade Payable 1.50 0.60Cr. (40%) To be paid within 180 days from the effective date NIL 5. Other Creditors 24.16 9.67Cr.(40%) To be paid within 24 months from the effective date NIL Total 57.49 30 13.53 The CIRP cost including all taxes shall be paid in full and shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E+90 2. Transfer of shares to RA s and infusion of funds towards equity 3. Change in Memorandum and Articles of Association and other documentation 4. i. Formation of a professionally managed Board; ii. Appointment of statutory auditors 5. Raising of further debt by the company E + 180 6. Additional capex NOTE The Resolution Applicant seeks a time period of 180 days to obtain all the necessary approvals from various authorities required for implementation of the Proposed Plan. During this period, the operations of the Company would be monitored by the monitoring agency appointed under the Proposed Plan under the supervision of the Resolution Applicants. 180 days is only an estimate and the actual time of completion of approvals from authorities and regulators may be different. The implementation timelines indicated above may accordingly change and this Proposed Plan will be implemented in accordance with such approvals and changed timelines. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be dissolved with effect from the Effective Date. h. Retention of the Existing Employees The Company shall continue with the existing manpower. Employee head count can be increased or reduced based on the operational performance and growth of the Company. Key members of the current management, if any (excluding promoters/erstwhile directors) shall be retained for a period of at least 6 12 months to ensure smooth transition of management and stabilization of operations. 8. SUPERVISION OF THE PLAN The newly appointed Board shall have the responsibility of effective implementation of the Proposed Plan. The actions necessary for independent supervision of plan are as follows: Agency to monitor implementation of the Plan The Resolution Applicants have appointed M/s 7Circles Business Advisors LLP as the Monitoring Agency, whose role will start immediately after effective date and shall have the following responsibilities: i. To ensure implementation of resolution plan as approved by NCLT, by the new management of the Company; ii. To provide regular updates to the consortium formed by the lenders; iii. To provide updates to Insolvency and Bankruptcy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive Date. Subsequent to approval of resolution plan, in case of any liability arising out of pending disputes consequent to any judicial pronouncement, the same shall be settled in accordance with recovery provided for the respective category of creditor under this plan. e. Governing Law The Company and the new management shall be governed by the laws of India giving effect to NCLT order approving the Proposed Plan and any agreements, documents and instruments executed in connection with the Proposed Plan. f. Severability and right to modify In the event it is determined that any provisions of the Proposed Plan is unenforceable either on its face or as applied to any claims or transaction and/or in the event any provision of the Proposed Plan becomes invalid for reasons other than by breach of any party, the Resolution Applicants may apply to the NCLT for appropriate modification of such provisions of the Proposed Plan, in satisfaction of the NCLT, and such invalidity and/or unenforceability of the provision of the Proposed Plan shall not render the whole Proposal Plan ineffective, unless otherwise directed by the NCLT by order. In case any such modification is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been waived and/or modified pursuant to this Proposed Plan and the other relevant documents executed thereof. l. Payment of Stamp Duty In the event any material agreements are executed / proposed to be executed to give effect to any provision in the Proposed Plan, such material agreement shall be stamped as per the schedule of stamp laws applicable in the State in which it is executed m. Term Sheet, Resolution Plan and Business Plan The binding term sheet shall be read along with this resolution plan and terms included in term sheet but not included in this resolution plan shall also be applicable. Treatment of claims of unsecured financial creditors and the operational creditors and their payment terms shall be as per the resolution plan. Business Plan is annexed hereunder as Annexure - A 10. Compliance with laws in force Resolution Applicant hereby confirms that the terms provided in the resolution plan are in compliance with Applicable Law including any prospective change of such terms pursuant to discussions with CoC. The Resolution Applicants and the proposed plan agree to comply with all applicable laws under the proposed resolution plan, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the Resolution Plan has provisions for its effective implementation plan, according to the CoC? Clause 9 Yes Regulation 35A Where the resolution professional made a determination if the corporate debtor has been subjected to any transaction of the nature covered under sections 43, 45, 50 or 66, before the one hundred and fifteenth day of the insolvency commencement date, under intimation to the Board? No Regulation 38 (1) Whether the Resolution Plan identifies specific sources of funds that will be used to pay the - Annexure and 5.13 Yes a. Insolvency resolution process costs? Yes b. Liquidation value due to operational creditors? Yes c. Liquidation value due to dissenting financial creditors? Yes Regulation 38(1A) Whether the resolution plan includes a statement as to how it has dealt with the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s we have requisite surplus to pay the resolution amount mentioned under the Resolution plan submitted by us. (Net-worth certificates and in principal Approval letter is attached) I/we further confirm that these funds are derived from legitimate sources as stated above and that I/we will also provide the required evidence of the source of funds if required to do so in future. I/we declare the foregoing details to be true. Mr. Vijay Nade Resolution Applicant Mr. Satish Dandnaik (Resolution Applicant) SELF-DECLARATION CERTIFICATE OF RESOLUTION APPLICANT S AS PER REGULATION 38 OF IBBI CIRP REGULATIONS This is a self-declaration certificate address to the Committee of Creditors (CoC) and Resolution Professional (RP) in addition to the Resolution Plan and other disclosers submitted by us, to enable the COC and RP to assess our credibility to take a prudent decision while considering the resolution plan for its approval. Sr No. Creditability Contents Declaration (a) Identity; PAN and Aadhar Card are provided. (b) Convictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan is required to be submitted by a Resolution Application U/s 30 of The Code. On approval, the Resolution Professional is to submit U/s 30(6) the Resolution Plan, as approved by the Committee of Creditors, to the AA. Thereafter, u/s 31, as reproduced supra, AA is to examine the contents of the Resolution Plan. The mandate of this section is that if the AA is satisfied that the Resolution Plan as approved by the Committee of Creditors meets the requirement as referred to in section 30(2), shall by an Order, approve the Resolution Plan. So the prerequisite is that recording of satisfaction by AA is a condition precedent. A satisfaction is to be recorded in writing in the Judgment approving the Resolution Plan. Satisfaction is required to be based upon a conscious decision on examination of the terms of the Resolution Plan. In our humble opinion a thorough study of a Resolution Plan is required before recording a satisfaction in writing by AA. The satisfaction as mandated in the statute can either objective or subjective or both, but it is a condition precedent. Naturally satisfaction is to be recorded in writing with reasons after proper application of mind. The pros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC muchless to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the Corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I B Code. There is an intrinsic assumption that financial creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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