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TMI Blog2018 (11) TMI 1857X X X X Extracts X X X X X X X X Extracts X X X X ..... rity with the reliefs as mentioned below: (a) Allow the present Application and approve the Resolution Plan of Formation Textiles LLC (Successful Resolution Plan) in terms of Section 31(1) of the Code; (b) Declare that the order of moratorium dated 29 September 2017 shall cease to have effect in terms of Section 31(3)(a) of the Code, consequent to the approval/sanction of the Successful Resolution Plan as prayed hereinabove; (c) Direct that the Successful Resolution Plan approved/sanctioned by this Hon'ble Adjudicating Authority shall be binding on the Corporate Debtor, its employees, members/shareholders, creditors, guarantors and other stakeholders involved in the Successful Resolution Plan; (d) Pass such order or further relief(s) as this Hon'ble Adjudicating Authority may deem fit and proper in facts and circumstances of the case. 2. The applicant herein is a Resolution Professional appointed in this case to carry out the Corporate Insolvency Resolution Process in respect to this Corporate Debtor against which a company petition filed under Section 7 of the IBC was admitted on 29.9.2017. The Applicant, Ms. Charu Desai was initially appointed as Interim Resolution Professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by 80.92% voting share. Creditors constituting 17.61% voting share voted against the resolution and 1.46% voting share abstained from voting. 8. The Resolution Applicant Formation Textiles LLC has two shareholders namely Mr. Piyush Viradia and Mr. Jiten Parikh with 80% and 20% shareholding respectively. 9. A resolution plan needs to meet the criteria laid down in Section 30(2) of the IBC along with the regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter 'CIRP Regulations'). The table below ascertains the compliance: Sub-clause of S. 30(2) Requirement How dealt with in the Plan (a) Plan must provide for payment of CIRP cost in priority to repayment of other debts of CD in the manner specified by the Board At page 64, clause 3, the plan provides that CIRP Costs of upto Rs. 4 crores shall be paid upfront within 30 days from the Effective Date and such payment will be made in priority to any other repayment. Also at page 68, clause 7.7 "Dues of Creditors during CIRP" - Except clause 5 & 6 above, any liabilities and/or claims that arise between the Insolvency Commencement Date and the Effective Date, shall sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors and operational creditors, of CD At page 69, in clause 12, the plan deals with the interests of all stakeholders. 38(2)(a) Plan shall provide the term of the Plan and its implementation schedule At page 78, in chapter VII, the plan provides, inter alia, for term of the plan, approvals required for the plan and compliance with law, indicative timeline for implementation. 38(2)(b) Plan shall provide for the management and control of the business of Corporate Debtor during its term At page 76, in chapter VI, the plan provides for Control of Corporate Debtor. The Resolution Applicant shall take over the management control of the Company and appoint new directors. 38(2)(c) Plan shall provide for adequate means for supervising its implementation a) At page 78, in chapter VII, the plan provides for Implementation and Supervision. b) At page 76, in chapter VI, inter alia, the plan provides for either extension of Resolution Professional's role for the purpose of monitoring and supervising the plan or appointment of any reputed firm by the Resolution Applicant. 38(3) Plan shall contain details of resolution applicant and other connected persons as mentioned in Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of a common pool and no preferential treatment can be afforded to any creditor based on its nature of charge over the properties of the Corporate Debtor. Reliance was also placed on Central Bank of India v. Resolution professional of Sirpur Paper Mills Ltd. [Company Appeal (AT) Insolvency No. 526 of 2018], to contend (a) that there can be no discrimination between the Financial Creditors of a Corporate Debtor in a Resolution Plan; (b) that the question of granting any liquidation value to a dissenting financial creditor cannot be applied at the stage of Corporate Insolvency Resolution Process and that the provisions of Section 53 would be applicable only at the stage of liquidation. It was also contended that the Insolvency and Bankruptcy Board of India, by a notification dated 5th October, 2018 deleted regulation which provided for the payment of liquidation value to dissenting financial creditors. In view of the Hon'ble NCLAT's order and amendment in regulations, the Assenting Financial Creditors submitted that the provisions of Regulation 38(1) of the CIRP Regulations would not be applicable in the case of a Resolution Plan being approved by the Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors are intact so therefore if the sale proceeds of security of Axis Bank, the sole charge holder, is being utilized to make payment, Axis Bank is to be given priority as it is just and legal. Therefore, different treatment given to secured financial creditor Axis Bank regarding priority payment in respect to other creditors is just and reasonable. This Bench is of the considered view that the prayer of Axis Bank, a secured creditor who is losing its security, to receive its share of dues in priority to other creditors is justified. 19. This Bench is of the considered view that following clauses have to be deleted from the Resolution Plan for being non-compliant to law: (a) Clause 7.7 "Dues of Creditors during CIRP" - Except clause 5 & 6 above, any liabilities and/or claims that arise between the Insolvency Commencement Date and the Effective Date, shall stand waived, extinguished, abated, discharged in perpetuity as on Effective Date. (b) Chapter VIII of the resolution plan seeking reliefs and concessions. (c) References to payment of liquidation value to dissenting financial creditors, in the Resolution Plan, including but not limited to clause 9. 20. This Bench furth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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