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TMI Blog2022 (3) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... 018. The IRP issued public announcement on 19.05.2018 in Business Standard, Indian Express and Loksatta newspaper in terms of Section 15 of the Code read with Regulation 6(1) of CIRP Regulation. The last date for receiving the claim in pursuance of the public announcement was 31.05.2021. 3. The Committee of Creditors was constituted on 06.06.2018, which comprises of following Members: - (a) State Bank of India (b) IDBI Bank (c) ICICI Bank (d) Oriental Bank of Commerce (e) Dena Bank (f) Bank of Maharashtra (g) Indian Overseas Bank (h) Central Bank of India (i) Andhra Bank (j) Bank of Baroda (k) Canara Bank (l) UCO Bank (m) Lodha Development Management Pvt. Ltd. 4. The applicant re-constituted the Committee of Creditors as per Section 17(1) of the CIRP Regulation on 21.01.2021 on the basis of additional claim received from another financial creditor. The revised list of CoC are as follows- (a) State Bank of India (b) IDBI Bank (c) ICICI Bank (d) Oriental Bank of Commerce (e) Dena Bank (f) Bank of Maharashtra (g) Indian Overseas Bank (h) Central Bank of India (i) Andhra Bank (j) Bank of Baroda (k) Canara Bank (l) UCO Bank (m) Allah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted his report on 29.09.2018. In accordance with the direction of the CoC, the applicant filed interim applications under Section 43, 45 and 66 of the Code and the same are pending for adjudication by the Tribunal. Filing of application for liquidation of the Corporate Debtor. 11. Upon issuance of EOI, three potential resolution applicants submitted EOI. The applicant are listed below:- (a) M/s Taguda Pte Ltd., Singapore (Trading House), (b) M/s Anika Industries Pvt. Ltd. (Trading House); and (c) M/s Langley (UK) jointly with M/s. Bowline Capital Partners, Netherland (Fund House). 12. M/s. Taguda Pte limited the eligible prospective applicant submitted the bid and paid the bid bond amount on 28.09.2018. The other two bidders were disqualified for the following reasons: - (a) M/s Anika Industries Pvt. Ltd. (Trading House) - They did not have the network as required; and (b) M/s Langley (UK) jointly with M/s. Bowline Capital Partners, Netherland (Fund House) - Brown Capital was in the fore-front backed by a fund house, M/s Langley. Although they were ready to bid as a consortium, appropriate papers (hard copy receipt of M/s Langley and statement of bidding as a cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17th CoC meeting and again on 18.05.2021 the applicant convened the 18th CoC meeting wherein it was discussed that the Order of Hon'ble NCLAT had only provided six weeks to the stakeholders to discuss and evaluate upon the revised resolution plan of the Resolution Applicant and therefore, the applicant must approach the Hon'ble NCLAT seeking extension of such time period. On 31.05.2021, the Hon'ble NCLAT modified its order and provided further time till 25.06.2021. 18. The Resolution Applicant submitted revised resolution plan and the applicant convened the 21st meeting of CoC of Corporate Debtor on 23.06.2021, wherein the applicant placed the compliant revised resolution plan before the CoC. The minutes of meeting captured the discussion of the CoC with respect to feasibility and viability of the revised resolution plan and it was concluded by the CoC that the revised resolution plan is feasible and viable. The member of the CoC consented to stop/cancel the voting which was ongoing. It was unanimously decided to cancel the voting and placed the revised resolution plan before the CoC. The CoC then decided to open the e-voting platform on 12 noon of 24.06.2021 till 12 noon of 25.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dissenting financial creditor ICICI Bank would be entitled to liquidation value in terms of s. 53 of the Code and the payment to the remaining Financial Creditors shall be adjusted accordingly7 based on their voting share. (2) Any further recoveries, pay-outs and amounts paid to the Financial Creditors on redemption/transfer of the New Preferences Shares shall be distributed amongst the Financial Creditors (other than the Dissenting Creditors, if any) in proportion to their respective voting shares as stated above (adjusted after removal of voting share of the Dissenting Creditors, if any). ** Under the Resolution Plan, CIRP Costs shall be paid in full on actual basis. The Resolution Applicant shall through the Company pay an amount of INR 1.00 Crore which shall be utilized for making payments of the CIRP Costs. In case the amount of INR 1.00 Crore proposed to be infused by the Resolution Applicant towards payment of the CIRP Costs is less than the amount required to pay the CIRP Costs in Full, then the balance amount payable towards the CIRP Costs shall be paid out of the first tranche of INR 48.14 Crores to be paid by the Resolution Applicant to the Financial Creditors. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capability of Resolution Applicant:- 24. Resolution Applicant has consolidated annual turnover of approximately USD 722,494,194 (United States Dollars seven hundred twenty-two million four hundred ninety-four thousand and one hundred ninety-four) and net assets of approximately USD 84mn (United States Dollars eighty-four million). The audited consolidated financial statements of the Resolution Applicant for the financial year ending 31st March 2020 and financial statements for the financial years ending 31st March 2019 and 31st March 2018 have been separately provided. Please refer to Annexure I of this Resolution Plan for further details in relation to the financial standing of the Resolution Applicant. Resolution Applicant has financing lines available of USD 40,000,000 with a financial institution in addition to the equity support from its promoter. Proposal for Financial Creditors 25. This Financial Proposal is based on the statement of assets and liabilities of the Company as set out in the Information Memorandum which is also summarized in Schedule III (Provisional Balance Sheet). The following table summarizes the proposed offer as part of the Resolution Plan to the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted Debt (Unpaid Debt), (i.e. the Admitted Debt as reduced by the amounts mentioned in (1) above and the Residual Debt of INR 200 crore), is proposed to be converted into Non- Convertible Redeemable Preference Shares (New Preference Shares) of the Company being zero dividend and non-cumulative in nature at their face value. If the cash recoveries made by the Resolution Applicant and/or the Company from the Existing Receivables during the period of 3 years from the Closing Date are in excess of INR 75 crores, the Financial Creditors shall be paid 75% of the actual amounts recovered that are in excess of INR 75 crore (after paying all costs and expenses incurred in making cash recoveries and costs and expenses incurred for the Monitoring Committee) and the New Preference Shares of an equivalent amount shall stand redeemed. The Financial Creditors shall be paid their pro rata share at the end of each year for 3 years from the Closing Date. If however, the Company does not have adequate profits to redeem the New Preference Shares and pay the Financial Creditors an amount equivalent to their entitlement of the cash recoveries made by the Company, then the Identified Affiliate shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Resolution Professional and summarized in Schedule III of Resolution Plan. Payment for the employee & workmen dues shall be on actual basis and in priority to any other creditor of the Company, except CIRP Costs, upon the Resolution Plan becoming effective. 2. The Resolution Applicant shall through the Company pay an amount of INR 36 lacs which shall be utilized for making payments for the employee & workmen dues. For the avoidance of doubt, it is hereby clarified that the cash balances available with the Company as on the Closing Date shall be retained by the Company and the Financial Creditors shall not have any right or claim on such surplus. The Company shall have full discretion to utilize such surplus amount in such manner and for such purpose as may be determined by the Resolution Applicant. 5. Payments for Operational Creditors (other than the employee &workmen dues and the statutory liabilities) Subject to the provisions of Section 30(2)(b) of the IBC, the Resolution Applicant shall, in priority to Financial Creditors, through the Company pay an amount of: a) INR 25 lac; or b) the Liquidation Value owed to Operational Creditors (other than the employee & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is for the CIRP Costs, INR 36 lacs is for the employee & workmen dues, INR 25 lac is for the Operational Creditors and INR 25 lac is for the statutory liabilities. In addition to this, the Resolution Applicant shall infuse additional funds in the Company for meeting the capital expenditure and working capital requirements of the Company as and when the need arises during the period of 12 months commencing from the Closing Date. Further, the cash balances available in the Company shall also be utilized for payment of the CIRP Costs and the employee & workmen dues. Details of payment to the Financial Creditor as per the Resolution Plan. 26. The Resolution Plan provides for payment of the Financial Creditor as per the table supra and also expressly captured that as on final settlement debt the financial debt is equivalent to Rs. 200 crores (residual debt) out of admitted debt shall be written off and permanently extinguished in the book of account of the company against the payment of 'Nil' consideration. Clause 3.3 (iii) (c) is reproduced below: - (c) The Resolution Applicant proposes that on the Final Settlement Date, the Financial Debt of the Company of amount equal to INR 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinue be available with the Financial Creditors in accordance with their terms, which may be exercised by the Financial Creditors at their discretion for its debt. All other securities or other Encumbrances provided by the Company including on the fixed assets of the Company shall be extinguished as on the Final Settlement Date. The Financial Creditors reserve the right to take any action against the Promoters. 30. The dissenting Financial Creditor were defined as follow: - Dissenting Financial Creditor: The Financial Creditors who do not vote in favour of this Resolution Plan shall be paid an amount equivalent to the amount to be paid to such financial creditors in accordance with sub-section (1) of section 53 of the IBC in the event of liquidation of the Company ("LV to the dissenting FCs"). The LV to the dissenting FCs shall be paid in priority to the Financial Creditors who vote in favour of the Resolution Plan. It is hereby clarified that the payment to the Financial Creditors who do not vote in favour of this Resolution Plan will be made out of the Upfront FC Payment and the Resolution Applicant shall not be required to infuse any funds over and above the Upfront FC Paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant acknowledges that there are no outstanding preference shares that are issued by the Company, hence, not required to be dealt with in this Resolution Plan. (ii) All outstanding Equity Shares held by the Promoters constituting 49.04% of the entire paid up share capital of the Company will be cancelled against the payment of NIL consideration by way of capital reduction process as set out in Schedule V. Other than the cancellation of the outstanding Equity Shares held by the Promoters, the Resolution Applicant proposes that all outstanding Equity Shares that are held by any shareholder forming part of the public shareholders, who is holding more than 0.50% of outstanding Equity Shares, will be cancelled against payment of NIL consideration by way of capital reduction process as set out in Schedule V. Nil consideration is proposed on the expectation that the Liquidation Value due to the equity shareholders of the Company shall be a Nil amount. To encourage participation of Retail Shareholders, Resolution Applicant proposes to transfer part of its shareholding in the Company to Retail Shareholders in proportion to shares held by Retail Shareholders as on the Closing Date. Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against such amount. (b) On or before the 30th day from the Closing Date, the Resolution Applicant shall cause the Identified Affiliate to pay an amount aggregating to INR 50 crore towards Assigned Debt. The Identified Affiliate is compliant with Section 29A of IBC and the manner of payment to the Financial Creditors shall be on a proportionate basis in compliance with the requirements of IBC. (c) The funding of the aforesaid amount of INR 100 crore by the Resolution Applicant is sourced from the internal accruals or funds arranged by the Resolution Applicant. (d) This amount shall be utilized to pay for the CIRP Costs and settlement of the Financial Creditors, workmen/employees, statutory liabilities and the other Operational Creditors in accordance with the terms of this Resolution Plan. (e) Notwithstanding anything stated herein, if any unforeseen amounts are required to be paid to any other Person or settlement of any other creditors of the Company, including by an order, direction or request by the Adjudicating Authority or any Person, which is currently not contemplated and required as per this Resolution Plan, the Resolution Applicant shall not be liable to provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, including Equity Shares, convertible preference shares or convertible/non-convertible debentures as the Resolution Applicant may decide in its sole discretion. Management of the Company and Supervision of the Implementation of the Resolution Plan On and from the date of approval of this Resolution Plan by the Adjudicating Authority and until the Final Settlement Date (Interim Period), the Resolution Applicant and the CoC will constitute a monitoring agency (IMA) for the supervision of the implementation of this Resolution Plan and for the day-to-day operations and management of the Company. The IMA shall comprise of 4 members out of which 2 members shall be appointed by the Resolution Applicant and the remaining 2 members shall be appointed by the CoC. IMA shall be required and entitled to do all such acts, deeds and things as may be desirable and expedient in order to implement and give effect to this Resolution Plan and supervise the management and operations of the Company, in a manner consistent with this Resolution Plan. Management after CoC's Approval After approval by the CoC and until the approval of the Resolution Plan by the Adjudicating Authority, all major busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities are no longer enforceable as defined under the resolution plan. 2. The approval of the Resolution Plan shall not be construed as waiver of any statutory obligations/liabilities of the Corporate Debtor and shall be dealt by the appropriate Authorizes in accordance with law. Any waiver sought in the Resolution Plan, shall be subject to approval by the Authorities concerned. Findings:- 1. The approval of the resolution plan has been sought under Section 31 of the Code, we have carefully considered the submissions of the learned counsel for the RP and perused the records. The conditions provided under Section 31(1) are that the resolution plan is approved by Committee of Creditors under Section 34 of the Code and that the resolution plan so approved meets the requirement of Section 30(2) and that the Resolution plan has provisions for its effective implementation. 2. The resolution plan was approved by 91.06% majority of the CoC and therefore, the conditions of Section 30 (4) are satisfied. 3. The provisions of Section 30(2) are as follow: The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res capital of the company will be cancelled against nil consideration. The RA has proposed share swap arrangement as an integrated part of revised resolution plan. 7. Section 30(2)(c) (d) the resolution plan provides that upon approval, the RA will constitute an Interim Monitoring Agency, which shall comprise of four members out of which two members shall be appointed of RA and two members shall be appointed by the CoC. 8. Section 30(2) (e), the RP has certified that the Resolution Plan complied with the provision of the Code and regulation and does not contravene any provision of law from the time being in force. 9. We further rely on the judgement of the Hon'ble Supreme Court in case of Shashidhar Vs IOB, wherein it was held inter alia that no corresponding provision has been envisage by the legislature to empower the Resolution Professional, Adjudicating Authority, of that matter NCLAT to reverse the commercial decision of the CoC. It is also held that the commercial decision of Financial Creditor is not open for judicial review by Adjudicating authority and by Appellate Authority. Therefore, in view of the above discussion. The decision taken by the Financial Creditor/Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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