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TMI Blog2019 (2) TMI 2005X X X X Extracts X X X X X X X X Extracts X X X X ..... No Resolution Plan was approved by the CoC. In fact, on the Application filed by Resolution Professional on the direction of CoC, CIRP was extended by 90 days beyond 180 days. CIRP continued for about 270 days, the maximum period allowed. The CoC has not approved any Resolution Plan. CoC decided before conclusion of CIRP period for liquidation of Corporate Debtor which is also made clear by the Resolution Professional that he would file a separate Application for passing order of liquidation under Section 33 of IBC. The Applicant being Director has no locus standi to seek exclusion of time. Decision is to be taken by CoC with majority if any. The Applicant is only a Director (Suspended Board) - the present Application does not survive. Even otherwise the allegations made by Applicant are found not to be true and correct as Resolution Professional filed sufficient proof that during entire period of CIRP, the proceedings are conducted in accordance with the provisions of IBC, 2016 and Regulations thereunder. The present Application is filed with a view to prolong the CIRP and it is nothing but misuse of the process, Therefore, the present Application deserves to be dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2018 since there was replacement of RPs and finally the process of CIRP commenced after a lapse of 122 days. f. It is averred in the 3rd COC Meeting held on 09.07.2018, the Resolution Professional informed the CoC that promoters of the Corporate Debtor also submitted EOI for submission of Resolution Plan and CoC, after due deliberations, extended the date for submission of EOI till 13.07.2018. g. It is averred the Resolution Plan submitted by Applicant was found not eligible in view of Applicant's disqualification to act as Director and Applicant was barred by Section 29 A of the Code. The Applicant was Director of another Company viz Steri Care Private Ltd and due to defaults in statutory compliances and RoC (Hyderabad) struck off the Company under Section 248 of the Companies Act, 2013. Subsequently, Company filed an Application to this Tribunal for restoration of the Company, and DIN Nos. which was allowed on 09.08.2018 Further CoC also extended time for receipt of Resolution plans upto 18.08.2018, pursuant to which Applicant filed Resolution Plan which was placed before the CoC. h. It is averred in the 4th CoC Meeting, the CoC passed a resolution and directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. It is also the case of Applicant that in the absence of brand, the Corporate Debtor will fetch only ₹ 5000 lacs for the value of the assets because Corporate Debtor only owns assets and not the brand. As such its liquidation value practically will be substantially lower and alleges no one would be willing to purchase the assets even under liquidation. The Applicant contended the observation of COC that it will get higher realization in lesser period is unfounded and not factually correct and thus the decision taken by COC to reject the Resolution Plan of the Applicant is unjustified, p. The applicant also relied on a similar order passed by Hon'ble Principal Bench, New Delhi vide order dated 09.02.2018. q. It is the case of Applicant that the Resolution plan submitted by the Applicant is eligible for approval by the COC members not only because of the fact that liquidation value of the Corporate Debtor is only ₹ 5000 Lacs whereas as per the resolution plan a total payment of ₹ 16405.91 Lacs is proposed but other factors as mentioned in the application are to be considered. 3. Reply/counter filed by Resolution Professional. Brief averments in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for recovery of amount. The Applicant is unable to pay around ₹ 800 Crores to all the stake holders of Corporate Debtor. It is alleged the Applicant is threatening the CoC members and Resolution Professional to accept the Resolution Plan submitted by him by sending emails before the CoC meeting dates. It is contended Resolution Professional cannot insist or force the COC member to accept the resolution plan. 4. I heard the counsels for Applicant and Resolution Professional. The Applicant is Director (Suspended Board) of Corporate Debtor. The Application is filed under Section 60 (5) (c) of IBC, 2016 seeking exclusion of 122 days from the CIRP period on the ground the IRP by name Shri Pavan Kankani was appointed by order dated 22.02.2018 which was received on 26.02.2018. It is contended IRP was able to conduct 1st CoC meeting on 28.03.2018 and constituted CoC. The contention of the Applicant is that IRP Shri Pavan Kankani did not take any worthwhile steps in respect of CIRP of Corporate Debtor. 5. The contention of the Applicant that Shri Pavan Kankani, IRP was replaced by Shri K.V. Srinivas as Resolution Professional and a resolution was passed by CoC for replacing him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. As many as 09 CoC meetings were held and meetings were being held regularly since the day of constitution of CoC. No Resolution Plan was approved by the CoC. In fact, on. the Application filed by Resolution Professional on the direction of CoC, CIRP was extended by 90 days beyond 180 days. CIRP continued for about 270 days, the maximum period allowed. The CoC has not approved any Resolution Plan. CoC decided before conclusion of CIRP period for liquidation of Corporate Debtor which is also made clear by the Resolution Professional that he would file separate Application for passing order of liquidation under Section 33 of IBC. The Applicant being Director has no locus standi to seek exclusion of time. Decision is to be. taken by CoC with majority if any. The Applicant is only a Director (Suspended Board). 10. The Applicant has sought three reliefs in this Application which are as follows:- (a) To direct the CoC members to reconsider the Resolution Plan as submitted by the Applicant as the orders have been passed by the coordinate bench of this Hon'ble Authority warranting such order when the Resolution Plan has been rejected without due justification. (b) Notto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is an Application filed by Promoter / Director of the Suspended Board of Corporate Debtor M/s Servomax India Private Limited under Section 60 (5) of Insolvency Bankruptcy Code, 2016 praying for extension of CIRP period for further 122 days stating that the said period was not utilized for CIRP on account of replacement of Resolution Professionals. 2. Brief averments in the Application are:- (1) M/s Servomax India Private Limited (Corporate Debtor) was incorporated on 12.09.2000 as a Private Limited Company under Companies Act, 1956 under the name and style of Servo Max Precious Electronics Limited which was subsequently changed to Servomax India Private Limited. Further on 1.04.2015, the Corporate Debtor was converted into Public Limited in the name and style Servomax India Ltd. It is also averred the Corporate Debtor is a leading manufacturer in the field of Power Conditioning and Power Saving Systems. (2) It is the case of the Applicant that Corporate Debtor availed financial facilities from State Bank of India, Indian Overseas Bank, Kotak Mahindra Bank and L T Finance Limited and was regular in paying the instalments in terms of agreement/ contract entered into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teri Care Private Ltd and due to defaults in statutory compliances and RoC (Hyderabad) struck off the Company under Section 248 of the Companies Act, 2013. Subsequently, Company filed an Application to this Tribunal for restoration of the Company, and DIN Nos. which was allowed on 09.08.2018 Further CoC also extended time for receipt of Resolution plans upto 18.08.2018, pursuant to which Applicant filed Resolution Plan which was placed before the CoC. (7) It is averred in the 4! CoC Meeting, CoC passed a resolution and directed the Resolution Professional to move an application for extension of CIRP for a further period of 90 days which was allowed vide this Tribunal order dated 20.08.2018. (8) Further in the 5th CoC meeting held on 31.08.2018, CoC suggested some improvements in the Resolution Plan submitted by Mr. Harish, Director of Corporate Debtor. (9) It is averred, in the 661 CoC meeting held on 10.10.2018, Resolution Plans submitted by Resolution Applicants including the Applicant herein were deliberated and CoC without looking into the Resolution Plan of the Applicant, asked to submit revised Resolution Plan. (10) In the 7th CoC meeting held on 24.10.2018, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities carried out by IRP. Further it is averred by Resolution Professional that 292 emails were exchanged between the IRP and Corporate Debtor apart from various activities carried out by IRP as per log book. Hence, denied the allegation of Applicant that IRP/Resolution Professional did not perform their duties as per IBC, 2016. (4) Further, Resolution Professional has mentioned various instances which show the misuse of IBC by way of initiation of CIRP by the Creditor who proposed the IRP name and then replaced with another Resolution Professional who was channel partner of Director of Corporate Debtor and partner of IRP. (5) It is the case of Resolution Professional that it is only on the direction from CoC members, Resolution professional moved an Application for extending the CIRP period by 90 days. (6) It is further contented by the Resolution Professional that the two letters received from Applicant were placed before the CoC within 2 hours of receipt of the letters and decision of CoC on the Resolution Plan submitted by Applicant were communicated to the Applicant. Further CoC and minutes of CoC was also given to the Applicant. (7) It is the case of Resolution P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Applicant who is Director (Suspended Board) of Corporate Debtor to file Application for exclusion of time. 8. The Resolution Professional has filed along with counter the summary of emails between IRP Shri Pavan Kankani and then Resolution Professional Shri K.V. Srinivas on one hand and Corporate Debtor on the other hand during the period which is sought to be excluded from the CIRP. The summary of emails are shown at page 46-99 and 104-113. Other supporting documents are also shown at page No. 114-127 of the Counter. I have gone through the emails and other documents filed by the Resolution Professional. The IRP Shri Pavan Kankani and then Resolution Professional Shri K.V. Srinivas discharged functions during the relevant period. It is not as if no worthwhile transactions were done during the said period as alleged by the Applicant. The emails filed by Resolution Professional falsify the contention of the Applicant that nothing worthwhile was done during the said period by Shri Pavan Kankani IRP and the then Resolution Professional Shri K.V. Srinivas, 9. As many as 09 CoC meetings were held and meetings were being held regularly since the day of constitution of CoC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No of the Financial Creditor Voting Percentage 1. State Bank of India 78.14% 2. Indian Overseas Bank 21.86% (3) Later vide this Tribunal order dated 3rd April 2018 Mr Kondapalli Venkata Srinivas (Reg No. IBBI/IPA-001/IP-P00520/2017-18/10945) was appointed as Resolution Professional and subsequently on 1 May 2018, COC unanimously decided to replace Mr Kondapalli Venkata Srinivas with Mr G Madhusudhan Rao (Reg No. IBBI/IPA-001/IP-P00181/2017- 18/10360) as Resolution Professional. This Tribunal replaced Mr Kondapalli Venkata Srinivas and appointed Mr G Madhusudhan Rao as Resolution Professional. vide orders passed in IA 165 of 2018 dated 2gth May 2018 who reconstituted the COC as under: S. No No of the Financial Creditor Claim Admitted Voting Percentage 1 State Bank of India 527,25,01,108 77.64% 2 Indian Overseas Bank 147,47,65,487 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, COC members analyzed and discussed all other resolution plans received, their Evaluation Matrix marks, Resolution Applicant(RA)s Net worth certificates, RAs Statement of the availability of the Funds for payment of the Resolution Plan Consideration, RAs experience in the similar business line/any other business experience, Proposed Upfront payments and other repayment schedule and Net Present Value (NPVs) and other terms and conditions of the resolution plans such as sanction of the additional Loans to RAs, sale of the assets of the Corporate Debtor, release of the cases against the Old Promoters, etc. Further COC members also analyzed and discussed the above terms of the Resolution Plans by comparing available Immovable Assets of the Company, Possibility of recovery of Debtors including provision made over 4 years and Retention monies and Other Current and Non-Current Assets of the Company, Brand image/value in the market with reference to the Financial Statements of the Company as on the date of the commencement Date of CIRP, Valuation Reports, Statutory Auditors observations, other years financial statements, available personal guarantees etc., (10) In view of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.2018 submitted EOI but was not eligible in view of disqualification to act as Director under Section 29A of the Code. He stated that he was Director of Steri Care Pvt Ltd which was stuck off by Registrar of Companies (Hyd) due to defaults in statutory compliance and RoC (H) initiated proceedings against the Company. It is averred subsequently the said Company was restored and DINs activated after complying the statutory compliance vide this Tribunal order passed in CA No. 745/252/HDB/2018 on 09.08.2018 u/s 252 of Companies Act. Thereafter, Respondent No.3 submitted Resolution Plan on 27.09.2018 and requested the Resolution Professional to place before CoC. (6) It is contended though the Resolution Plan of Respondent No.3 was placed before CoC, yet CoC again asked him to submit revised Resolution Plan even after knowing the fact that the offer made by Respondent No.3 is far excess to the Liquidation Value. Further is the case of Respondent No.3 that vide letter dated 10.11.2018 he brought to the notice of Resolution Professional about the lapse of 122 days in commencement of CIRP, consequent to which Resolution Professional called for 9617 CoC meeting on 13.11.2018. It is alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 came on record who is Director (Suspended Board) of Corporate Debtor. He alleged that CoC ought to have moved through Resolution Professional, the Adjudicating Authority for exclusion of 122 days. The CoC has not properly considered the Plan submitted by Respondent No.3. 6. The contention of Respondent No.3 that Resolution Plan submitted by him be approved by CoC on the ground that payment offered under the Resolution Plan is ₹ 16405.91 lakhs whereas Liquidation value is ₹ 5000 Lakhs and therefore Plan ought to have been approved by the CoC taking into account the interest of the stakeholders. It is contended Resolution is the Rule and Liquidation is an exception. It is contended that the object of the Code is for resolution and liquidation is only a last resort. 7. The main contention of Respondent No.3 that his Resolution Plan is most viable and feasible and CoC ought to have approved the same. His contention is his Resolution Plan will bring maximization of value of the assets of the Corporate Debtor, even higher than the Liquidation Value. 8. The Resolution Professional has contended CoC has not approved any of the plan including the plan submitted by Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th an order to be passed for liquidation, which is as follows:- Section 33 (1) where Adjudicating Authority: - (a)Before the expiry of the Insolvency resolution process period or the maximum period permitted for completion of corporate Insolvency resolution process under section 12 or the fast tract corporate insolvency resolution process under section 56, as the case may be does not receive a resolution plan under subsection( 6) of section 30; It shall- (I) Pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this chapter; 15. Since no resolution plan is received by the Adjudicating Authority under Section 30 (6) of IBC, 2016, therefore. Tribunal has to pass an order of Liquidation against Corporate Debtor. 16. The Application is allowed and Corporate Debtor M/s Servomax India Private Limited is ordered to be liquidated. Shri Madhusudhan Rao Gonugunta is appointed as 17. Liquidator who has submitted his written consent on 16.11.2018. 18. All powers of the Board of Directors, key managerial personnel and the partners of the Corporate Debtor, as the case may be, shall cease to have effect and shall be vested in the Liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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