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TMI Blog2020 (9) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... PPLICATION NO. 1010 OF 2020 in COMPANY PETITION NO. 3638 OF 2018 - - - Dated:- 31-8-2020 - Hon ble Member ( Judicial ) , Janab Mohammed Ajmal And Hon ble Member ( Technical ) , Shri V. Nallasenapathy For the Applicant : Mr Aditya Sikka , Advocate For the Respondent : Mr Manmohan Juneja , Regional Director ( WR ) , Mumbai ORDER Per : V. Nallasenapathy, Member ( Technical ) 1. The Applicant filed this Application seeking the following reliefs: A. Approve the sale of the shares of Schoolnet India Limited (formerly known as IL FS Education Technology Services Limited) held by Infrastructure Leasing Financial Services Limited and IL FS Employee Welfare Trust to Falafal Technology Private Limited, free and clear of all encumbrances, liens, security interest and third party claims (including any statutory or tax claims) upon completion of the conditions as contemplated in terms of the Share Purchase Agreement dated June 24, 2020 and encashment of the demand drafts submitted by Falafal Technology Private Limited as consideration under the Share Purchase Agreement; B. Approve the sale of the identified business undertaking of each of IL FS Cluster Devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IL FS Employee Welfare Trust in the Upfront Consideration to an escrow/bank account as may be intimated by the IL FS Employee Welfare Trust and direct that funds when deposited into the relevant bank/ escrow account for IL FS Employee Welfare Trust shall be maintained as interest bearing fixed deposits and should not be adjusted or set off against any dues of any bank and/or financial institution. F. Direct that, apart from utilization or transfer of funds as contemplated by prayer (E) (i) and E (ii) above, any amounts deposited into the relevant bank/escrow account towards Upfront Consideration, shall be maintained as interest bearing fixed deposits and not be adjusted or set off or adjusted against any dues pertaining to any bank and/or financial institution; G. Direct that the Deferred Consideration of INR 6,29,47,786/- in lieu of the Subsidiary Debt to be paid to the Applicant and IL FS Employee Welfare Trust as per the Share Purchase Agreement dated 24 June 2020, be deposited/encashed into the relevant escrow/bank account of the Applicant or IL FS Employee Welfare Trust and that such amount deposited in the relevant escrow/bank account of the Applicant or IL FS Employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hoolnet India Limited (Formerly known as IL FS Education and Technology Services Limited) (Schoolnet), Skill Training Assessment Management Partners Limited (STAMP) and IL FS Cluster Development Initiative Limited (ICDI) were the group concerns of IL FS and all these concerns are collectively called Education Assets of the Applicant Group and the Applicant has filed this Application for resolution of these entities. The shareholding of Schoolnet is as below: a. The Applicant - 68.93% b. IL FS Employee Welfare Trust (IEWT) - 4.76% c. India Equity Partners [through its portfolio company Lexington Equity Holdings Limited (LEHL)] 26.13% d. Other Individuals 0.18% 6. STAMP and ICDI are wholly own subsidiaries of Schoolnet i.e. stepdown indirect subsidiaries of the Applicant. Further Schoolnet has another subsidiary i.e. IL FS Skill Development Corporation Limited (ISDC), a joint venture with National Skill Development Corporation Limited (NSDC), in which Schoolnet holds 80.01% and the balance 19.99% is held by NSDC. 7. The Resolution Framework approved by the concerned Board of the group concern and IL FS have to be submitted to the Hon ble Justice (Ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those entities which are able to only meet their respective operational payment obligations and payment obligations to senior secured financial creditors from their operating cash flows during the Testing Period; and iii. Red Entities are those entities that are unable to meet their respective payment obligations towards even senior secured financial creditors [or in an appropriate case the unsecured (operational and financial)] from their operating cash flows, as and when such amounts fall due in the Testing Period. 10. It is submitted that the Schoolnet and ICDI have been classified as Amber Entities whereas STAMP has been classified by the Resolution Consultant as a Red Entity . 11. It is submitted that the inter-se rights and obligations of the Applicant, IEWT and LEHL, shareholders of the Schoolnet, are governed under the Subscription-cum-Shareholders Agreement dated 18.01.2010 (SSHA). As far SSHA, LEHL have pre-emptive rights in respect of shares of Schoolnet i.e. right of first offer and the right to cause the sale of its equity interest in Schoolnet in an offer for sale. LEHL and the Applicant have executed consent cum waiver letters dated 18.12.2018 and 27.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue will be received by selling IL FS shareholder(s) and it is further contemplated that CoC consisting of all financial creditors of the selling Applicant Group will be constituted. 15. Accordingly, the New Board authorised the constitution of Committee of Creditors (CoC) comprising of all the financial creditors (as understood in the context of Insolvency and Bankruptcy Code, 2016) of the Applicant (IL FS CoC) to consider the revised bid. The revised bid was considered by IL FS CoC at the meeting convened on 17.10.2019 and the bid was approved by the CoC by a majority of 78.46% (by value) of the voting of CoC. 16. Further, the New Board also approved the lumpsum consideration of INR 1/- each (Indian Rupee One only) for acquiring the business undertaking of ICDI and STAMP on slump sale basis and dispensed with the requirement of constituting a CoC in relation to ICDI and STAMP since all the existing loans of ICDI and STAMP (except for the loans availed from IL FS Financial Services Limited (IFIN)) were proposed to be acquired by CPPL. The New Board approved the revised bid for sale of Education Assets and recommended the same to be placed before Hon ble Justice (Ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter of intent. The Applicant by letter dated 03.03.2020 agreed to return the EMD of INR 3,00,00,000/- to CPPL. 21. On 28.01.2020, LEHL through its wholly own subsidiary Falafal Technology Private Limited (Falafal) submitted an unsolicited bid for the Education Assets of the Applicant. The key terms of the bid are: A. Falafal agrees to acquire 73.90% of the shares of Schoolnet held by the Applicant, IEWT and certain individual shareholders at a price of INR 7,39,00,000/- and a lump sum consideration of INR 1/- each for acquiring the business undertaking of each of ICDI and STAMP on slump sale basis. B. In the event of LEHL realising an amount in excess of INR 171,62,10,200/- (Upside Amount), upon sale of 100% equity of Schoolnet held by LEHL, it shall pay the Applicant 5% of such Upside Amount. C. Schoolnet shall repay debt of INR 73,30,00,000/- advanced by the Applicant to Schoolnet (Promoter Debt) as per the repayment schedule agreed with the Applicant and on the closing date under SPA (Closing date) but in any event not later than 12 months from the closing date, it shall on the best efforts basis replace the Promoter Debt. D. Within 18 months from the closing dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of STAMP (STAMP BTA) on a slump sale basis. As per the changes to the SPA, the upfront purchase consideration is INR 7,36,90,000/- (Upfront Consideration) and deferred purchase consideration is INR 6,29,47,786/- in lieu of the Subsidiary Debt, to be paid to the Applicant and IEWT each (in proportion of their respective shareholding in Schoolnet) in terms of the SPA (Deferred Consideration). 26. The Upfront Consideration would be paid to the Applicant by way of a demand draft which would be submitted on the date of execution of the Confirmation Intimation which would be encashed on date of execution of the Schoolnet SPA and thereafter the Upfront Consideration would be transferred as follows: i. The resolution process cost incurred in the resolution process (Resolution Process Costs) would be deducted from the Upfront Consideration and will be transferred to a designated account for Resolution Process Costs, ii. After Resolution Process Cost, an amount proportionate to IEWT s shareholding in Schoolnet would be transferred to IEWT s account, and iii. Remainder of the amount will be retained in the designated bank account of the Applicant. The Deferred Consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquire the business undertaking of each of ICDI and STAMP on a slump sale basis on the terms and conditions set out in the ICDI BTA and the STAMP BTA respectively for a lump sum consideration of INR 1/- each and submit demand drafts of INR 1/- each on the date of the issuance of the letter of intent by the Applicant; c. authorized Schoolnet to sell 100% of the share capital of each of ICDI and STAMP held by Schoolnet to the Applicant for a consideration of INR 1/- each; d. approved the transfer of the loan aggregating to INR 6,86,00,000/- advanced by Schoolnet to ICDI and loan aggregating to INR 1,68,18,068/- advanced by Schoolnet to STAMP as part of the business undertaking of each of ICDI and STAMP respectively; and e. authorized Schoolnet to approach Yes Bank to obtain the consent of Yes Bank for (a) rolling over the credit facilities aggregating to INR 71,36,00,000/- advanced by Yes Bank to Schoolnet and the credit facility aggregating to INR 7,42,00,000/- advanced by Yes Bank to ISDC; and (b) assumption of the debt including the loan of INR 18,41,00,000/- (advanced by Yes Bank to ICDI) forming part of the business undertaking of each of ICDI and STAMP into Schoolnet. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch amount on the date of receipt of the Confirmation Intimation which would be encashed on the date of the signing of the SPA. It is submitted that the Demand Draft for the abovesaid purchase consideration for INR 4,36,90,000/- is available with the Applicant. 37. It is submitted that pursuant to receipt of the Hon ble Justice Jain s Approval, the following steps have been taken to consummate the resolution of the Education Assets: i. Issuance of the Confirmation Intimation to Falafal on 18.06.2020, which is considered as the final letter of intent confirming (a) Falafal as the purchaser of up to 73.90% of the issued and outstanding equity shares of Schoolnet; and (b) Schoolnet as the purchaser of the business undertaking of ICDI and STAMP on a slump sale basis respectively. ii. Falafal submitted a demand draft towards the Balance Upfront Consideration with the Applicant; iii. Execution of the: (a) the SPA by Falafal; (b) the ICDI BTA and the STAMP BTA by Schoolnet; and (c) the side letter to the SPA; and (d) the IL FS SPA and compliance with the conditions as set out therein; iv. Falafal (on behalf of Schoolnet) submitted demand drafts towards the New ICDI H1 Bid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 was filed. This Tribunal by an order dated 01.10.2018, ordered supersession of the erstwhile Board of Directors of the Applicant (Respondent i.e. IL FS in the Company Petition) and constituted a new Board of six directors as Board Members of the Respondent Company with mandate to resolve the debt contagion ploughing the Applicant s group companies. 3. It is submitted that the Hon ble NCLAT by their order dated 15.10.2018 (Company Appeal (AT) No. 346 of 2018 with Company Appeal (AT) No. 347 of 2018) granted interim stay against any coercive action by the creditors against the Applicant and its group concerns, in larger public interest. In the meantime, the new Board of Directors tried to conceive a Resolution framework for the Resolution of the group concerns of the Respondent. Accordingly, a Resolution framework was prepared. The Hon ble NCLAT by order dated 12.03.2020 permitted the Resolution of IL FS group to continue as per the procedure suggested by the Petitioner which includes the Resolution Framework. The Resolution Framework provided for Asset Level Resolution , i.e. an asset by asset solution explored through various methods as a viable option for the Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. Further, on account of default on the part of IIDL to discharge its financial obligations, the Dubai Courts on 07.10.2019, issued default notice to IIDL and an Authority s notice to the Bank of Baroda (the lead lender of the Car Park Project). The shareholders of PLL, IIDL and NGP conveyed their inability to take on any additional obligation or liability towards completion of the Car Park Project vide letters dated 3rd 4th November, 2019 respectively which was also communicated by PLL to Dubai Courts. Bank of Baroda attempted to substitute PLL with another entity to complete the Car Park Project but in vain. The same led to the Dubai Courts issuing termination notice dated 04.03.2020. 11. The Applicant further submits that due to the termination of Car Park Project, IIDL neither could generate revenue nor have sufficient cash flows to discharge its liabilities. IIDL owed IIDMCC a sum of AED 17,29,191 for services rendered by IIDMCC in respect of Car Park Project. IIDMCC was not in a position to discharge its liabilities to its vendors and employees. IIDMCC has no significant operations and thus there is no separate divestment process for IIDMCC. The outstanding liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant is now before us stating that this Bench may record the proposal to initiate the bankruptcy proceedings for IIDMCC and IIDL before the Dubai Courts as provided under UAE Federal Degree Law No.9 of 2016 on Bankruptcy. 15. Heard the Counsel for the Applicant and the Regional Director (WR), MCA, Mumbai on behalf of the Union of India (Petitioner). There is no objection from the Petitioner for the proposal of the Applicant. After hearing both the sides and on perusal of records, this Bench is of the view that the initiation of bankruptcy proceedings is the best option in the given scenario. The same is recorded as prayed for. In the circumstances, the proposal of the Applicant for initiation of insolvency proceedings of IIDL and IIDMCC is taken on record. 16. The request of the Applicant for exempting them from affixing the stamp on the affidavit and notarising the Application is also granted. ORDER Per : V. Nallasenapathy, Member (Technical) 1. The applicant filed this application seeking the following prayers: a. take on record the proposal for filing application(s) for initiating process of striking off of IIPL Laos Pte. Ltd. in accordance with laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with laws of Singapore. 6. The applicant submits as below: a. IIPL Laos was incorporated on April 24, 2017 under the laws of Singapore for the development of a project in Laos. IIPL Laos is the subsidiary of ITNL International Pte Limited (IIPL), which in turn is wholly owned subsidiary of IL FS Transportation Networks Limited (ITNL). The applicant is holding approximately 73% of the shareholding in ITNL. b. Due to non-receipt of regulatory approvals, the project work did not materialise and hence IIPL Laos has not commenced any business since its inception and there are no operations in the company. c. Hence no separate asset divestment process was carried out with respect to IIPL Laos and the applicant proposes to strike off IIPL Laos before the Accounting and Corporate Regulatory Authority, Singapore (ACRA) in accordance with the laws of Singapore. d. The Board of Directors of ITNL at its meeting held on 24.03.2020 approved the process for striking off of IIPL Laos. The cost for the process will be borne by IIPL and ITNL. e. The Board of Directors of IIPL and IIPL Laos vide its respective Resolution dated 12.05.2020, consented for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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