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TMI Blog2019 (9) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... an K. R. , Member ( J ) All the above applications taken together for convenience and for avoiding repetition of facts and since common questions arises for consideration. CA(IB)No. 352/KB/2019 1. This is an Application filed by the Resolution Professional for approval of the Resolution Plan of M/s. Ramsarup Industries Limited/ Corporate Applicant which has been approved by the Committee of Creditors by a voting share of 74.41%. The Corporate Applicant/ M/s. Ramsarup Industries Limited had filed the CP(IB) No. 349/KB/2017 for initiating Corporate Insolvency Resolution Process (in short CIRP) on the allegations of inability to pay the debt. 2. The Application was admitted vide Order dated 08-01-2019 by appointing Mr. Nilesh Sharma as the Interim Resolution Professional. However at the request of the CoC vide order dated May 2, 2018 Resolution Professional Mr. Nilesh Sharma was replaced by Mr. Kshitiz Chhawchharia. Upon appointment of the Resolution Professional, the CIRP commenced against the Corporate Applicant, M/s. Ramsarup Industries Limited. While continuing with the Resolution Plan, the extended period of CIRP also expired on 04-10-2018. Due to various reasons, including p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven priority in payment over the Financial Creditors. Some of the Operational Creditors also raised objection that none of the Operational Creditors were given notice in participating the meeting and no copy of the Resolution Plan has been given to the Operational Creditors and therefore, there is flagrant violation of the provisions of the Insolvency & Bankruptcy Code, 2016 (in the Code) and Regulations and therefore, the Resolution Plan cannot be approved. 9. The RP has objected all these applications. Upon hearing the arguments on both sides and considering the evidence and on perusal of the resolution plan, we come to the following conclusions:- (i) The amount claimed by the operational creditors need not be given priority in payment over financial creditors, but the amount due to the operational creditors under a resolution plan must be given priority in payment over financial creditors as per Regulation 38(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"). As per the plan under consideration the amount found due to the operational creditors under the resolution plan was given prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code, so we also do not find any merit in the above said objection on the side of the OCs. 10. Upon perusal of the proposed offer of the resolution applicant, it is understood that the very same treatment is proposed to be given to the OCs as is seen given to the Financial creditors as per the resolution plan. This is a case in which FCs have agreed to have a haircut of 94% and they would get 5.8% of their admitted claim of Rs. 5853.00 crores, and OCs in total would get 10.50 Crores out of the total admitted claim of 224.05 crores. That would come to 38.82%. The payment to the workmen is 90% of the admitted claim. The Statutory Authorities have been offered Rs. 3,00,00,000/- (Rupees Three Crores Only). Thus total percentage of aggregated claim of Operational Creditors inclusive of statutory Authorities would come to 5.82%. The above sad distribution of the bid amount clearly indicates that the Operational Creditors are given similar treatment as being given to the Financial Creditors. In the above said peculiar nature and circumstances of the case, we are of the view that the objections raised on the side of the OCs are devoid of any merits. 11. As regards priority in the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of objection objecting to the approval of the resolution plan challenging the methodology. The Kotak Mahindra Bank and Bank of India have not voted in favour of the Resolution Plan and therefore, they are dissenting Financial Creditors. The challenge against the distribution methodology on the basis of security interest is not at all sustainable under law for two reasons. 16. Firstly, this methodology as per the available records and as per the averments advanced on the side of the Resolution Professional, has been deliberated within the Committee of Creditors from 02-02-2019 onwards till the final deliberation in regard to voting for approval of the Resolution Plan, held on 16-03-2019. The copy of resolution brought to our notice also proves that the distribution methodology on the basis of security interest was approved by the Committee of Creditors by a vote of 74.41%. This distribution cannot be challenged under law by the dissenting Financial Creditors who are Kotak Mahindra Bank and Bank of India. Moreover, this methodology is not in violation of Section 30 of the Code which has been amended vide notification dated 06-08-2019. The relevant portion of Section 30(b) reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined the mortgage deed executed by IDBI and according to Ld. Counsel for the Resolution Professional, the Mortgage Deed executed by IDBI indicates that IDBI had a charge of the property of the Corporate Applicant situated at Kharagpur. 21. Both these objectors are the members of the Committee of Creditors and it is also understood that the security interest recorded for each Creditors has been made available to all the members of the Committee of Creditors before finalization of the approval of the Resolution Plan. Therefore, the challenge raised by the above said Financial Creditors claiming exclusive charge over the above said Plants is found devoid of any merits. They are estopped from contending that the RP has erred in recording the value of security interest of FCs after the approval of the methodology by the required majority wherein they were parties and participated in the discussions. On the other hand, the records available in the case proves that the position in regard to pari passu charges has been accepted and acted upon by the members of Committee of Creditors themselves including the Financial Creditors who came forward objecting to the methodology and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re already recovered by Enforcement Directorate under the SARFAESI Act, 2002 and that the sale of the assets has been confirmed and the Applicant has realized the sale value. The Ld. Senior Counsel appearing for the Resolution Professional submits that the above said objection is unsustainable because the Debt Recovery Tribunal, Aurangabad stayed the sale stating that it was not conducted in accordance with the provisions of the SARFAESI Act, 2002 and that an Appeal preferred against the order of stay is pending before the Debt Recovery Appellate Tribunal. He further submits that the information memorandum includes the details of the pending litigation. Therefore, the Resolution Applicant is aware of the proceedings initiated under the SARFAESI Act, 2002. According to him, the Applicant IRDAI has been invited to be a member of the Committee of Creditors of the Corporate Applicant in regard to its claim against the Corporate Applicant and therefore, no prejudice is even caused to the Applicant herein in approving the Resolution Plan. 25. Being satisfied that the claim of the IRDAI is being considered by the RP, inclusion of the assets which were evidently sold illegally would in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to pay the security expenses incurred by the Applicant which has been admitted in the Resolution Plan to be included in the upfront payment. The Ld. Counsel, appearing for the Resolution Applicant, also showed his readiness to pay the admitted amount of security expenses incurred by the Applicant as an upfront amount. Having regard to the above we are inclined to issue directions as prayed for. The said Application can be disposed of accordingly. 28. CA(IB)No. 461/KB/2019 is an Application filed by Shri Aashish Jhunjhunwala, Promoter Director of the Corporate Applicant/corporate Debtor challenging the approval of the Resolution Plan on the following grounds:- (i) The resolution bid amount is substantially below the liquidation value of the Corporate Debtor of which Resolution Plan does not conform to the maximization of the assets of the Corporate Debtor for the Financial Creditors and other stakeholders, (ii) The distribution modification must be on the basis of voting share and not on the basis of security share, (iii) Charge of ARCIL with respect to IDBI Bank has been recorded erroneously. (iv) The Resolution Plan approved by the Committee of Creditors must be uncondi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to one BRG iron and steel Company Ltd in respect of which CIRP is already initiated. (e) The resolution plan deserves to be rejected since the entire CIRP has been manipulated and has been conducted not in accordance with the provisions of the Code and regulations. 31. Although several contentions are raised in the application filed by the Aashish Jhunjhunwala promoter Director of corporate applicant/corporate debtor, at the hearing of the applications (CA 461 and 462) Ld. Sr. Counsel Mr. Abhrajit Mitra restricted his argument to the following objections:- (a) The upfront amount payable by the Resolution Applicant is substantially below the liquidation value and the Resolution Plan does not call for maximization of the assets of the Corporate Debtor and therefore, liable to be rejected (b) That the charge in favour of ARCIL which has given 55% voting shares among the members in the Committee of Creditors has been recorded incorrectly. ARCIL is only holding second charge over the movable and fixed assets of the Corporate Applicant. According to him the AXIS Bank and Punjab National Bank who were the original lenders to whom Vanguard Credit Holding Private Limited stood as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors specified under the Code : Particulars Amount (in Rs. Crores) CIRP Process cost * [*i Sustainable Debt to be paid upfront to the Financial Creditors 351.0 Payment to Operational Creditors 3.50 Payment to Workmen 7.00 Payment towards Statutory Liabilities 3.00 Capex/Working Capital 306.00 *To be paid at actual 35. The above being the offers based on the admitted claim of the creditors, the distribution of the resolution bid amount is found not in contravention of any of the provisions of the Code or Regulations. The total bid amount comes to 670.50 Crores which is higher than the liquidation value of Rs. 610.29 crores. The facts in the given case being not similar to the Padmanavan Venkatesh case above referred, the principle of distribution if any in the said case cannot be applied in the case in hand. 36. An argument also was advanced that the Operational Creditors were treated differently and thereby discriminated among similar class of Creditors. According to the Ld. Sr. Counsel the distribution among workmen and operational creditor is not equal and therefore there is evidence of discrimination. Ld. Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecommended amendment to the CIRP regulation. He read over its para No. 7 as under:- "7. Regulation 38(1)(c) provides that the liquidation value due to dissenting financial creditors shall be paid before any recoveries are made by the financial creditors who voted in favour of the resolution plan. Though the enterprise value (resolution value) is usually higher than the liquidation value, the reverse is possible in some cases, Moreover, liquidation value, as estimated, may not be realizable and realised value is usually liquidation value minus cost of realisation. It may be difficult to pay out liquidation value in all cases, that too, before any payment to other financial creditors. In a sense, this becomes an incentive for a financial creditor to dissent. Further, it may be difficult to arrange liquid cash to pay upfront to dissenting creditors and such payment may impinge on resolution of the corporate debtor. However, the Advisory Committee felt that those who remain vested in the future of the debtor should give way to those who would like to exit. It is, therefore, proposed to leave the regulations as they are in this regard." 39. Referring to the above said observation the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominating voting percentage over others, decided to vote in favour of the Resolution Plan. 41. The above-said objection was also raised by the dissenting financial creditors and we found that the said objections are not sustainable as per the records available in this case. The Corporate guarantee and the mortgage deeds executed by the CD and Vanguard in the case in hand prove that the assignors, who are Axis Bank, and Punjab National Bank were given pari passu charge over the movable and immovable properties of the Corporate Debtor and Vanguard Credit Holding Private Limited (vanguard). Vanguard is a Company owned by the Promoter Director. He is holding 99.9% of the total shareholding of the Corporate guarantor, Vanguard Credit Holding Private Limited. The lenders, namely, Axis Bank, Punjab National Bank on the strength of mortgaging the land of the Corporate Applicant as well as the land owned by Vanguard Credit Holding Private Limited, (Vanguard) provided the loan on the basis that the repayment by the Corporate Applicant of the loan was secured by way of mortgage over the land provided by Vanguard Credit Holding Private Limited and by way of corporate guarantee provided by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in hand. 43. At this juncture, an argument is also advanced from the side of the Promoter/Director of the Corporate Applicant referring to Section 18(1) (f) and Explanation (b) of section 8 of the Code and Regulation 37(a) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, that the mortgagee has no right to transfer title of the properties of vanguard and therefore resolution plan is liable to be rejected. According to him, as per the Resolution Plan, Clause 15.1, a mechanism for the transfer of the land to the Resolution Applicant has been laid down in regard to Durgapur land owned by the Vanguard Credit Holding Private Limited. According to him, Section 18, Explanation (b) of the Code and Regulation 37(a) of (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 restricts transfer of title of a third party or subsidiary of the Corporate Applicant in favour of the Resolution Applicant and therefore, is contrary to the said provisions and therefore, the Resolution Plan is liable to be rejected. 44. Vanguard Credit Holding Private Limited, admittedly, a Corporate guarantor, provided corporate guarantee dated April 23, 2009 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 and therefore, transfer of all rights and interests in the Durgapur land and its marketable title to the Resolution Application, is perfectly legal and valid. 46. The third objection is about the distribution methodology which has been approved by the CoC by 74.41 % vote. According the Ld. Sr. counsel, the distribution of bid amount as per the Resolution Plan is discriminatory and contrary to the judgment of the Hon'ble NCLATin Binani Industries Limited Vs. Bank of Baroda and another and that the Resolution Applicant has discriminated between the same set of group, such as, Financial Creditors or the Operational Creditors and the Operational Creditors are not getting the same treatment as that of Financial Creditors. The above said objection seen raised by the Operational Creditors. By answering their objection in this regard, we have already come to a conclusion that the Resolution Applicant has not discriminated between the Financial Creditors on the basis of charge held by the respective Financial Creditors and the Operational Creditors have not been differently treated as per the Resolution Plan. From a reading of the citation of Binani Industries Limited, what we und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a legitimate conclusion that any one of the objections on the side of the promoter director of the CD and Vanguard are sustainable under law and both applications deserve dismissal. 49. An argument was advanced at this juncture on the side of the Resolution Professional as well as on the side of the ARCIL that the Promoter Director is only attempting to waste the precious time of this Tribunal by filing malicious applications. According to them, the resolution process has been completed and conducted legally and diligently and conducted the voting among the members of Committee of Creditors in accordance with Section 26 of the Code. All the objections including ineligibility of the resolution applicant was raised by the promoter before the CoC and the CoC deliberated the said issue and found the objections are not sustainable for want of supporting evidence. The only attempt on the side of the Promoter Director/Corporate Applicant is to see that the Resolution Plan could not be approved so as to see the Adjudicating Authority to pass an order of liquidation of the Corporate Applicant. They would further submit that the Promoter Director/Corporate Applicant has concocted and misre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal and the above said application is liable to be dismissed with exemplary costs. 52. In order to highlight his conduct in dealing with the shares he holds in the Ramsarup Industries Ltd/Corporate Applicant, he has cited an Adjudication Order (SS/AS/2018-19/1625) of the Securities and Exchange Board of India and referred to paragraph 14 in the above judgement, which is worthwhile to read, which reads as follows :- "In this case, from the material available on record, any quantifiable gain or unfair advantage accrued to the Noticee or the extent of loss suffered by the investors as a result of the default cannot be computed. It is noted that the Noticee has not paid the disgorgement amount and interest thereof. It is to be noted that the Noticee had avoided potential loss of Rs. 98,11,465.32 by trading on the basis of Unpublished Price Sensitive Information ("UPSI") regarding un-audited financial results of the Company. Apart from such heinous act of insider trading, misusing the UPSI and abusing the fiduciary position of the Chairman and Managing Director of the Company, he has also disobeyed, disregarded and defied the directions of SEBI as confirmed by the Hon'ble SA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bajranglal Agarwal has got control over the management of Shyam Emco Infrastructure Limited. From the available records and arguments advanced on both side what we understood is that the applicant is trying to set up a case that Mr. Bajranglal Agarwal is a shareholder in BRG Iron & Steel Company Private Ltd. which has been declared as NPA and CIRP proceedings has already been initiated against the BRG Iron & Steel Company Private Ltd., SS Natural is connected with the said company and, therefore, is ineligible. 55. According to him, SS Natural's shareholders are also shareholders in Shyam Emco Infrastructure Ltd. along with the Emco Power Ltd. and therefore, SS Natural is ineligible. For strengthening the above arguments no materials was brought in. Admittedly, Shyam Emco Infrastructure Ltd. is not an NPA company and does not have any investment in a company, who was declared as NPA. So also there are no allegations that Shyam Emco Infrastructure Ltd. or Emco Power Limited is declared as a NPA company. There are no allegations that the above company has any investment in a company declared as NPA. Therefore, in the absence of any evidence to prove the averments in the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tribunal and interfered in the process of approval of the plan without any justifiable or sufficient cause. In the said circumstances, we are of the considered view that this application deserve dismissal with costs. Considering the nature and circumstances of the contentions raised, awarding a cost of Rs. 5 lakh would be fair and just. 58. CA(IB) NO. 1093/KB/ 2019 is one another application filed by SREI Multiple Asset Investment Trust-Vison India Fund(SREI), an unsuccessful bidder challenging the approval of the resolution plan. The SREI contends that Mr. Anoop Krishna, is an employee of Grant Thornton India LLP Process advisers to the RP. He had leaked information regarding the offers of bid to the SS Naturals (SSN) and SSN had access to bids of the other resolution applicants and thereby influenced the outcome of the outbidding process that was conducted to finalize selection of successful bidder. 59. One another allegation also raised by the Ld. Counsel appearing for the SREI is that the said Mr. Anoop Krishna is a director of the flagship company of the group to which SSN belonged since 18.02.2019 onwards. According to him SSN is a consortium company including Shyam Metal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CP, and he rushed in front of us denying the allegation and submits that he never wished to have an order liquidating his company. He also sought permission to make his submissions in person which we declined since Sr. Counsel was already appearing for him. 62. We also do not find any merit in the submission of the Ld. Counsel for the SREI that Mr. Anoop Krishna being a director of Shayam Metalics and Energy Limited SSN is a disqualified resolution applicant. It is significant to note here that Shayam Metalics and Energy Limited is not a successful resolution applicant. Truly the successful resolution applicant is a consortium of SSN and Shayam SEL and Power Ltd. In the absence of any materials brought out to prove that he is connected in any manner with SSN or its consortium members we are unable to hold that Mr. Anoop Krishna is connected with a company allegedly a group company of SSN and thereby entire process is vitiated by undue influence of an employee. 63. The above-said circumstance leads us to a legitimate and irresistible conclusion that this CA which was filed two days before the final hearing of the pending applications in the case in hand is to be dismissed with he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock exchange, statutory liabilities other than operational debt specified in the information memorandum, Stamp duty and ROC fees in case of increase in the authorised capital etc., claimed as per the plan which according to us cannot be approved for the reason that those statutory fees, and taxes claimed in the case in hand are liable to be paid by the resolution applicant in accordance with applicable law. Any exemption for payment would be dealt with by the respective authorities if applied for. With the above observations, we are not inclined to approve the waiver as prayed for in the plan. It is left open for determination by the appropriate authorities if applied for the wavier/exemption as prayed for in the Plan. 68. As per clause 15.3 of the resolution plan, the resolution applicant has given an undertaking that "if the approvals, extinguishments and waivers sought under Annexure 3 are not granted, it will not any way jeopardize the implementation of the Resolution Plan, and the resolution applicant shall remain responsible for such implementation of the resolution plan " The Ld. Counsel appearing for the resolution applicant was asked about the possibility of increasing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Iron and Steel/Ferro alloys Sector. As per the data furnished the group company namely Shayam group has an established position in the ferro-alloy industry with track record of around two decades and huge experience of successful running and scaling up operations. Having run similar business like that of the corporate debtor the choosing of resolution applicant appears to us is a wise selection and we believe that the Corporate Debtor is to be transferred to safer and healthy hands. It would benefit all its stakeholders inclusive of its workmen and employees. 73. As per Regulation 39A of the CIRP Regulations, liquidation value due to the operational creditors should be paid in priority to the Financial Creditors. Provision is seen made in the plan to pay aforesaid amount within 30 days from the Effective Date and in any event 1 (one) day prior to the payment to the Financial Creditors. 74. Insolvency resolution cost is agreed to be paid in full in priority over payments to be made of any other debt as per the Code. It is also made clear that resolution applicant and its group companies have sufficient funds and do not envisage any challenge in terms of source for the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor/ West Bengal Industrial Development Corporation Limited(WBIDCL) which is admitted by the RP in the upfront amount payable by the Resolution Applicant to the Creditors. iii) The Resolution Plan, shall come into force from the date of pronouncement of this order. iv) The moratorium order passed under Section 14 shall cease to have effect. v) The Resolution Professional shall forward all records relating to the conduct of the Corporate Insolvency Resolution Process and the Resolution Plan to the Insolvency and Bankruptcy Board of India to be recorded in its database. vi) CA(IB) No. 352/KB/2019 is allowed. vii) CA (IB) No 921/KB/2019 is disposed of as directed above. viii) CA (IB) No. 343/KB/2019, CA(IB) No. 349/KB/2019, CA(IB) No. 440/KB/2019, CA(IB) No. 460/KB/2019, CA(IB) No. 523/KB/2019, CA(IB)No.636/KB/2019, CA(IB)No. 637/KB/2019, CA(IB) No. 685/KB/2019, CA(IB)No.511/KB/2019, CA(IB) No. 522/KB/2019, CA(IB) No. 37/KB/2019, CA(IB) No. 424/KB/2019, CA(IB) No. 1026/KB/2019 & CA(IB) No. 527/KB/2019 are dismissed. However, without costs. ix) CA(IB) No. 461/KB/2019 and CA(IB) No. 462 /KB/2019 is dismissed with cost of Rs. 25 lakh payable by the promoter director Mr. Aashish j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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