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TMI Blog2021 (1) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion, are as follows: (1) C.P. (IB) NO.43/BB/2019 is filed by M/s. Sri Arumuga Sugars Limited, ('Petitioner/Financial Creditor') U/s 7 of I&B Code, 2016 R/w Rule 4 of the I&B (Application to Adjudicating Authority) Rules, 2016, by inter alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor i.e. M/s. Badami Sugars Limited. The same was admitted by the Adjudicating Authority vide Order dated 27-9-2019 by appointing Mr. Madhugiri Venkatarayappa Sudarshan as the Interim Resolution Professional and imposing moratorium in terms of section 14 of the Code, etc. (2) In compliance with the provisions of sections 13 and 15 of the Code r/w Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (in short 'Regulations 2016'), the IRP made a public announcement in Form-A on 10-10-2019 intimating the commencement of CIRP against the CD and calling upon the Creditors of Corporate Debtor to submit proof of claims on or before 23-10-2019. Upon receipt of claims, in due course of time, a Committee of Creditors of the Corporate Debtor was formed. (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 17.00 crore. Since the CoC consists of 5 District Cooperative Banks, 2 State owned Banks, 8 other Co-operative banks/societies and 1 corporate person, total CoC members are 16 in number, the members informed the RP that before any resolution plan is considered, approval from their respective Boards will be required. (7) The CoC in its 5th meeting held on 28-2-2020 inter alia discussed the two Resolution Plans of Shri Sai Priya Sugars Limited and Sri T Rajkumar and thereafter approved the Resolution Plan submitted by M/s. Shri Sai Priya Sugars Ltd., with absolute majority, after considering its feasibility and viability, taking into consideration the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a Secured Creditor. (8) It is stated that the RP, having complied with the protocol in all its procedural propriety, declared the need for E-voting considering that not all the members of the CoC were present. The CoC were initially appraised of the discussion that had taken place in the previous CoC meeting held on 18-2-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oever (the same being a dispute amongst the consortium members of the Corporate Debtor), and having no bearing with the CIRP or the voting shares thereto warranted no further discussion. (12) The CoC duly appointed Resolution Professional M. V. Sudarshan as the Chairman of the meeting of CoC of Badami Sugars Limited with absolute majority by the members therein by way of both physical and electronic voting in the ratio of 47.63% and 53.37%, totalling 100%. (13) The members of the Committee were apprised that only the Resolution Plans of Potential Resolution Applicants who had complied with all the requirements - under the Code as well as the RFRP were evaluated and shared with the Committee, the Chairman presented the Compliance Checklist performed on the Resolution Plans submitted, and the details as to the compliances met by the Resolution Plan submitted by M/s. Shri Sai Priya Sugars Limited. The Chairman further brought to the notice of the COC the Revised Resolution Plan of M/s. Shri Sai Priya Sugars Limited pursuant to the discussion in that behalf at the last COC meeting -amounting to Rs. 1700 lakh from that of the previously quoted/valued sum of Rs. 1035 lakh. (14) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Evaluation Matrix approved in 3rd COC meeting held on 27-12-2019 and accordingly, prepared the Evaluation table as under: S. No. Evaluation Parameters Marks T Rajkumar Shri Sai Priya Amt. Rs. Crs. Marks Amt. Rs. Crs. Marks 1. Upfront cash recovery for financial creditors 60 9.10 (30% in 90 days & rest in 6 months) 45 16.50 (within 30 days) 60 2. NPV of residual loan 5 Nil 0 Nil 0 3. Equity upside offered to existing financial creditors NA NA NA 4. Upfront equity contribution by the Resolution Applicant 5 11 Cr. 5 17.00 5 5. Reasonableness of assumptions in the Resolution Plan 10 Good 5 Excellent 10 6. Track record of the Resolution Applicant in the banking system 10 Excellent 10 Excellent 10 7. Turnaround/transaction expertise of the Resolution Applicant 5 NA 0 2 cases $ 5 8. Financial strength of the RA 5 2 Good Excellent 5 Total 100 60 95 Note: $ Successfully completed takeovers of two sick entities - Sai Priya Sugars Ltd and Rathna Cements Ltd. and added to their credit as turning around sick/closed businesses. (19) It is stated that the Chairman of the COC educated the members as to the requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilization in Sugar Season 2018-19 despite severe drought and production losses of sugarcane. The Company is implementing expansion program of increasing Distillery capacity from existing 120 to 240 KLPD with an outlay of Rs. 165.10 Crores for which financial closure is recently achieved. ii. Brief background of Promoters: (a) Shri Murugesh R Nirani: Besides what is stated herein above, Shri Murugesh R Nirani has also established a Cooperative Bank in the name of Vijaya Sourda Credit Society Ltd, which has over 46 branches in and around Mudhol. He has started MRN (Nirani) Foundation for serving the poor and indigent students, pregnant mothers, and socially backward people with various schemes for their upliftment through the Corporate Social Responsibility funds and other contributions. He has forayed into Educational arena by establishing Schools in Mudhol and Bagalkot to offer modern education to the students who are deprived of the same so far. He has been awarded by the State & Central Government many times for his contributions in the field of Industry, including Bharat Udyog Ratna award, Sir M. Vishweshwarayya Ratna Award and Make in India award recently in 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * The Resolution Applicant and its promoter group being present in this geographical area with multiple sugar plants, have immense exposure of dealing with the local stakeholders including crane growing farmer. They have been engaging the farmer, administration and other local stakeholders successfully for more than a decade. (22) The restarting of the Plant would entail additional infusion of funds to the tune of Rs. 5-10 Crore in addition to the pay-out to the creditors. The Applicant and its Promotor Group have the requisite Financial capability to infuse funds for operations as well as upgradation of technology, capacity etc. (23) Brickwork Ratings assigns BWR BB+ (Pronounced as BWR Double B Plus) for the bank facilities of Rs. 303.40 Crores of Shri Sai Priya Sugars Limited. BWR believes Shri Sai Priya Sugars Limited's business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the company shows improved operating performance and supply-demand dynamics are favourable with resultant higher sugar prices. (24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of the CIRP Costs, payment of the operational creditors and payment of the admitted workmen and employees' dues, the admitted Financial Debt of the secured Financial Creditors will be treated proportionately in the following manner: It is deemed that all the secured financial creditors would relinquish the security held by them, upon payment of full amount proposed to them under the Resolution Plan. The Resolution Applicant proposes to pay Rs. 16.50 Crores (Rupees Sixteen Crores and Fifty Lakhs only) to all Secured Financial Creditors since the Resolution Applicant's assessment of the current value of the security may not yield more than the value proposed. (e) Distribution table to the Secured Financial Creditors is as follows: Sl. No. Name of the Financial Creditor Debt amount admitted in Rs. Distribution share-% Distribution in Rs. 1 The Bagalkot District Central Co-Operative Bank Ltd. Bagalkot 57,74,80,000 28.09% 4,63,55,600 2 The Vijayapur District Central Co-operative Bank Ltd. Bijapur 14,39,98,946 7.01% 1,15,59,100 3 The Karnataka State Co-operative Apex Bank Ltd. Bangalore 39,10,38,000 19.02% 3,13,89,500 4 The South Canara Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is proposed to provide for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the CD. In case, there would be any dissenting financial creditors which may be known to us after the voting is done for approval of Resolution Plan, that financial creditor would be paid liquidation value due in priority to other financial creditor. (i) Financial Debts owed to unsecured Creditors -related party: As per the Information Memorandum provided by the Resolution Professional, the Financial Debt payables to unsecured creditors - Related Party stands at Rs. 2.54 Crore. It is proposed to pay NIL towards the Financial debts of the Unsecured Creditors- Related Party as no liquidation value is due to them as per waterfall arrangement under section 53 of IBC. (j) Operational Creditors (Claim Filed and verified and admitted) - Other than Related Parties: Liquidation Value of the Company is Rs. 8.54 Crores. The Applicant has assumed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is NIL. (m) Payment to Shareholders: The exact shareholding of the company has not been shared. But from the nomenclature it appears to be an unlisted public company. There may be large number of cane-growing farmer shareholders, but this need to be clarified and facts to be shared. Liquidation Value of the Company is Rs. 854.07 Lakhs. The Applicant has assumed that the Liquidation Value of the Company is less than the Admitted Debt for Financial Creditors which aggregates to approximately INR 241.80 Crores. Accordingly, the Liquidation Value is not sufficient to cover the debt of the Financial Creditors of the Company in full. Hence, no payment is proposed under this plan for any of the shareholder including Sugar Cane Farmer Shareholders. (25) It is submitted that the Resolution Plan provides for plan for revival, period of implementation of the said plan, and the source of funds is as under: i. The operations/Plant can be revived by addressing the causes, as enlisted below: a. Instituting Strict Financial Discipline: As mentioned supra, the Applicant's promoter has a proven track record of prudent financial management. Neither the Applicant nor any of the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intment as per mutual agreement, between the monitoring professional and Resolution Applicants and will be paid by Resolution applicants/CD. (a) The Monitoring Professional shall have the following responsibilities: i. Coordination amongst the stakeholders for smooth implementation of the plan. ii. Looking into various compliances as per Resolution Plan during implementation period. iii. Providing specified information to stakeholders regarding implementation of resolution plan. iv. Issue a certificate that the Resolution Plan has been duly implemented and the mandatory payments contemplated in this Resolution Plan have been duly completed. v. In issuing this certificate, if a person has not collected its payment, despite the Company having notified such person, and accordingly the Company has created a special reserve for payment of such amount - it shall be deemed to be a discharge of Company's payment obligations. vi. Issuance of a certificate by the Monitoring Professional shall be a discharge of the Resolution Applicant from their obligations under this Resolution Plan. (b) Any modification in the terms of this Resolution Plan post approval of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting of the Committee of Creditors of Badami Sugars Limited, the Corporate Debtor, held on 28th February, 2020 at Conference Room, III Floor, New Building, The Karnataka State Cooperative Apex Bank Limited, No.1, Head Office, 'Uthunga', wherein, the revised Resolution Plan ('Resolution Plan') dated 26th February, 2020 filed by M/s Shri Sai Priya Sugars Limited, was considered in depth. He has also submitted the proceedings of the COC held on various dates and also filed Compliance Certificate in Form-H dated 29-5-2020, under Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by inter alia furnishing all the requisite details. 6. In order to approve a Resolution Plan U/s 31(1) of the Code, Resolution Professional shall examine each Resolution Plan as prescribed inter alia under section 30(2) of the Code, as mentioned below: (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of the debts of operational creditors in such manner as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idation value Rs. 8,54,06,500/- 20 Number of Meetings of CoC held 5 (Five) (b) The Resolution Plan is received from Resolution Applicant M/s Shri Sai Priya Sugars Limited and is approved by Committee of Creditors (CoC) of Badami Sugars Limited. (c) The Resolution Professional also certified that: i. The said Resolution Plan complies with all the provisions of the Insolvency and Bankruptcy, Code 2016 (Code), the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) and does not contravene any of the provisions of the law for the time being in force. ii. The Resolution Applicant M/s Shri Sai Priya Sugars Limited has submitted an affidavit pursuant to sec. 30(1) of the Code confirming its eligibility u/s 29A of the Code to submit a Resolution Plan. The contents of the said affidavit are in order. iii. The said Resolution Plan has been approved by the CoC in accordance with the provisions of the Code and the CIRP Regulations made thereunder. The Resolution Plan has been approved by 100% of voting share of financial creditors after considering its feasibility and viability and other requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs not having a right to vote under sub-section (2) of section 21 20555.07 20555.07 1650.00 8.03% (b) Other than (a) above: NA NA NA NA (i) who did not vote in favour of the resolution Plan Nil Nil Nil Nil (ii) who voted in favour of the resolution plan All All All All Total[(a) + (b)] 20555.07 20555.07 1650.00 8.03% 2 Unsecured Financial Creditors (a) Creditors not having a right to vote under sub-section (2) of section 21 Nil Nil Nil Nil (b) Other than (a) above: 3625.17 3625.17 Nil 0 (i) who did not vote in favour of the resolution Plan All All All All (ii) who voted in favour of the resolution plan Nil Nil Nil Nil Total[(a) + (b)] 3625.17 3625.17 - - 3 Operational Creditors (a) Related Party of Corporate Debtor Nil Nil Nil Nil (b) Other than (a) above: (i) Government (ii) Workmen 1.80 1.80 Nil Nil (iii) Employees (iv).......... Total[(a) + (b)] 1.80 1.80 Nil Nil 4 Other debts and dues Nil Nil Nil Nil Grand Total 24182.04 24182.04 1650.00 - *If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th day of the insolvency commencement date, under intimation to the Board? 27-11-2019 YES Regulation 38(1) Whether the amount due to the operational creditors under the resolution plan has been given priority in payment over financial creditors? 9.C.(i) & 10.10 (no claims) NA Regulation 38(1A) Whether the resolution plan includes a statement as to how it has dealt with the interests of all stakeholders? 9.C.(iii) Yes Regulation 38(1B) (i) Whether the Resolution Applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any resolution plan approved under the Code. (ii) If so, whether the Resolution Applicant has submitted the statement giving details of such non-implementation? 9.C.(iv) No Regulation 38(2) Whether the Resolution Plan provides: 9.C.(v)&14& Annexure II Yes (a) the term of the plan and its implementation schedule? (b) for the management and control of the business of the corporate debtor during its term? (c) adequate means for supervising its implementation? 38(3) Whether the resolution plan demonstrates that - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, it appears that the Resolution Plan dated 26th February, 2020 as duly approved by the Committee of Creditors on 28th February, 2020 for Badami Sugars Limited, submitted by M/s. Sri Sai Priya Sugars Limited, satisfies all the requisite conditions for its approval under section 31(1) of the Code. Details of the fund infusion, and the sources from which the Resolution Applicant shall arrange the same have been provided in the Resolution Plan. The same provides for the creditors in the distribution table filed with the Plan, and provides adequate details of the infusion of funds required as working capital as well as for payment of the debts. Details of projected profits and cash flows have also been provided. Considering also the past experience in similar business and credentials of the Directors and Promoters of the Resolution Applicant, as mentioned in the Resolution Plan, we are satisfied about the viability of the same. The Resolution Plan also provides for the appointment of a Monitoring Professional, to oversee the implementation of the Resolution Plan. The Resolution Plan is approved by the CoC with 100% in accordance with law. No prejudice would be caused to any party ..... X X X X Extracts X X X X X X X X Extracts X X X X
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