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TMI Blog2019 (7) TMI 1986X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.2018 [ 2018 (7) TMI 1741 - BOMBAY HIGH COURT] to state that pendency of a winding up petition before the Hon ble High Court cannot be a ground to reject any claim/ application made under IBC. As far as MA 689/2017 for approval of Resolution Plan u/s 30(6), IBC read with Regulation 39(4) of CIRP Regulations for approval of the resolution plan submitted by Dalmia, is concerned, it is understood that the plan has been approved by 100% vote share of the Committee of Creditors in the 11th CoC meeting held on 20.12.2017. With due regard to the decision of the Hon ble Supreme Court in K Sashidhar Indian Overseas Bank Ors.[Civil Appeal No. 10673/2018], Date of order: 05.02.2019, [ 2019 (2) TMI 1043 - SUPREME COURT ] the role of COC now is quite vital for deciding the fate of the company. It has been held that the Adjudicating authority is not required to go into the merits or reasoning of the decision taken by the COC for approval or rejection of a resolution plan. The only benchmark which is set up to be determined by the AA is to see whether the plan has been approved by 66% voting of the COC or not. Therefore, the commercial wisdom is not allowed to be interfered with. In this case, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since certain modifications to the Resolution Plan, it further requires the acceptance by the Resolution Applicant. Therefore Resolution Professional is directed for seeking acceptance from the Resolution Applicant regarding proposed modifications - The acceptance report of the Resolution Applicant is to be filed by 12.07.2019. If acceptance of the proposed modification in the resolution plan is not submitted, then we shall proceed with the liquidation. List on 12.07.2019 for filing additional affidavit of Resoution applicant regarding accepetence of the modifications in the Resolution Plan. X X X X Extracts X X X X X X X X Extracts X X X X ..... P subject to conditions. One of the conditions was the extension of the last date of submission of claims. 8. It is worth to note that in the 11th CoC meeting held on 20.12.2017, the resolution plan dated 20.12.2017 submitted by Dalmia was approved by 100% voting share of the CoC. The CIRP period of 270 days was expiring on 31.12.2017, and the Resolution Professional filed miscellaneous application bearing no. 689 of 2017 under Section 30(6), IBC read with Regulation 39(4) of CIRP Regulations on 22.12.2017 seeking approval of this Tribunal. The application for approval of resolution plan was heard by this Tribunal and reserved for orders, but could not be decided due to the order dated 22.03.2018 passed by the Hon'ble High Court. 9. Meanwhile, erstwhile promoter, Mr Sunil Maloo filed MA No. 54 of 2018 &Gajanan Industries Limited ("Gajanan") filed MA No. 70 of 2018 praying for rejection of the resolution plan of Dalmia. The Dalmia filed applications seeking intervention on the applications filed by the erstwhile promoter and Gajanan. 10. Given the Hon'ble High Court's order dated 2.11.2018, whereby conditional leave was granted to the RP to continue with the CIRP, the RP released ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.3 32.5% 239.6 Grand Total 2,416.8 100% 331.5 14. The Resolution Professional has stated that he prepared Information Memorandum by S. 29, IBC read with Regulation 36, CIRP Regulations. The Resolution Professional was contacted by ten potential resolution applicants, of whom only three potential resolution applicants submitted resolution plans. One of these three potential resolution applicants, one withdrew from the process, one was Dalmia, and one was Gajanan. The resolution plans of Dalmia and Gajananwere scrutinised by the Resolution Professional for compliances under IBC including the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 dated 23.11.2017. These two plans were put to the vote in the 11th CoC meeting held on 20.12.2017, and the plan of Gajanan Industries Limited was not approved for failing to comply with the criteria laid down by the CoC and the plan of Dalmia was approved unanimously by CoC, i.e. with a vote share of 100%. 15. The Resolution Professional has provided the following table to aver that the resolution plan of Dalmia complies with the provisions of Code: Sr. No. Relevant provisions / Regulations How dealt with in the Plan 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce from the date of approval by the Hon'ble Adjudicating Authority and shall continue till the Effective Date or Long Stop Date (defined at the end of the table) 5. A statement as to how it has dealt with the interest of all stakeholders, including Financial Creditors and Operational Creditors of the Corporate Debtor. (Regulation 38(1A) of the CIRP Regulations) Schedule 8 "Financial Plan" of the Resolution Plan 6. Details of the Resolution Applicant and other connected persons to enable the committee to assess the credibility of such applicant and other connected persons. (Regulation 38(3) of the CIRP Regulations) Schedule 10 "Prescribed Details of Resolution Applicant and Connected Persons", which was provided separately. 7. Resolution Plan does not contravene any provision of law for the time being in force. (Section 30(2)(e) of the Code) No contraventions to any law for the time being in force at the time of placing the resolution plan for approval of resolution plan by the CoC were observed by the Resolution Professional. 8. Resolution Applicant is not ineligible to submit the Resolution Plan. (Section 29A of the Code) The Resolution applicant confirms they vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Foremost contention of Mr Lalchand Maloo is that despite the CIRP expiring on 31.12.2017, the Resolution Professional has called meetings of CoC on 22.10.2018 and 15.1.2019. It is further averred that the suspended board of directors, though notified about the meetings by S. 24(3)(b), IBC, were not allowed to the attend the CoC meetings except for the CoC meeting dated 15.1.2019. 20. It is stated that the Liquidation Value calculated to be Rs. 2,311,000,000/- is irregular and untenable as a valuation carried in the year 2013 at the behest of the lending institutions of the Corporate Debtor shows the total distress value as Rs. 19,433,700,000/-. It is stated that the liquidation value of Rs. 231.1 Cr. arrived during the CIRP is only 11.89% of the distress sale value, and the Corporate Debtor has been undervalued to enable the Resolution Applicant to take over at a fraction of its true value. 21. The Applicant herein has further pointed out that the resolution plan is a sale in disguise as it proposes to revive only the cement unit sell the other business units of paper and solvent extraction. Also, the Plan provides that the workmen would be terminated. Only 1183 employed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required/ directed to remain as custodian of the Corporate Debtor until further orders. The meeting of 15.01.2019 was convened to update the CoC about the status of verification of claims. 28. Regarding the liquidation value of the Corporate Debtor, it is stated that the RP had appointed two registered valuers namely Mitcon Consultancy & Engineering Services Limited and Kishore Karamsey & Co. whose valuation reports after seeking clarifications were accepted in the 5th CoC meeting dated 27.9.2017. The RP has further stated that resolution of insolvency under CIRP is not a distressed sale of assets and therefore, a distress sale valuation of the Corporate Debtor obtained in 2013 is not relevant for approval of the resolution plan. 29. The resolution plan of Dalmia states that the Paper and Solvent Extraction undertakings of the Corporate Debtor do not appear to be viable and therefore, resolution plan seeks to revive the Corporate Debtor by reviving its Cement undertaking. The RPstates that sale of all or part of the assets of the Corporate Debtor is very much one of the measures for implementation that a resolution plan may provide for. 30. The RPstates that reduction of share c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for running all three industrial units of the Corporate Debtor including paper and solvent extraction units as a going concern. 37. Dalmia has filed IA No. 20/2018 praying for intervention in MA No. 119/2018. Dalmia has stated that the application for insolvency resolution is maintainable under IBC notwithstanding the pendency of a winding-up petition in the Hon'ble High Court as no order of winding-up has been passed. 38. MA No. 70/2018 has been filed u/s 60(5), IBC by Gajanan praying¸ inter-alia, (i) rejection of resolution plan of Dalmia, (ii) calling of complete records of the CoC, (iii) declare conditions imposed vide email dated 13.12.2017 illegal, and (iv) the resolution plan of Gajanan is approved. 39. It is stated by Gajanan that despite offering Rs. 609.60 crores, proposing to run all three units of the Corporate Debtor, the resolution of Gajanan has not been approved, and resolution plan of Dalmia has been approved despite the same providing for the closure of two units out of total three units of the Corporate Debtor and offering Rs. 401.62 crores. Gajanan has averred that its plan has been rejected for not meeting the alleged criteria suggested by C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its wisdom approved the resolution plan of Dalmia. 49. With regards to the contention that MA No. 689/2017 suffers from misjoinder of parties, the Resolution Professional has stated that he is not required to make the management or any shareholder of the Corporate Debtor a party to such application as per the provisions of IBC. 50. With regards to the contents of Schedule 2, 5 & 6 of the resolution plan of Dalmia, the RP has stated that the same shall be considered by this Tribunal while determining the plan approval. 51. Concerning the CIRP costs, the RP states that these costs have been provided by the CoC by forming a reserve fund for the sole purpose of conducting the CIRP. It is also stated that the Resolution Professional had retained/ appointed five employees during the CIRP and the CIRP costs inter-alia includes cost towards fees of the RP, insurance, valuation, CoC meetings, publishing advertisements, e-voting platform fees, salaries of employees, security fees, operation & maintenance charges, IT return & auditing fees, costs related to preservation of assets of the Corporate Debtor and other operational costs. The RP has stated that there has been no outsourcing of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors of the Corporate Debtor is prepared to offer a one-time settlement to the bank/ financial institutions for a sum of Rs. 550,00,00,000/- structured as to demonstrate the seriousness, cheques totalling Rs. 20,00,000/- have already been provided to the lead bank to be kept in no lien account, some Rs. Twentyfive crores shall be deposited immediately upon receipt of written approval from the bank, financial institutions within 15 days, the remaining amount of Rs. 524.80 crores would be paid to the bank/ financial institutions would be paid to the bank/ financial institutions within6 months from the date of receipt of written approval and the remaining liabilities of the Corporate Debtor shall remain unchanged. 59. It is stated that the approval of resolution plan of Dalmia is vitiated as it was not by Sections 21, 24 & 30, IBC and the order passed by the Hon'ble Supreme Court in the case of Vijay Kumar Jain v. Standard Chartered Bank [Civil Appeal No. 8430 of 2018] Order dated 31.01.2019, in accordance of which the suspended board of directors is entitled to copy of the resolution plan and other documents and participation in the CoC meeting. Reliance has also been placed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r -I Commissionerate, Nagpur has applied to state that rejection of its claim was communicated only through email to mail ID about Division=III, Chandrapur which was not accessible. The RP has filed an affidavit-in-reply stating that the claim was not in the prescribed form as per CIRP Regulations and hence could not be verified. 66. We have heard the parties and perused the records. 67. This Company Petition No. 66/2017 is maintainable as no order of liquidation was passed, and only a Provisional Liquidator was appointed. Therefore, MA No. 105/2018 has been filed by Primo Pick N Pack Private Limited is rejected, keeping in view the order passed by the Hon'ble Bombay High Court in Jotun India Private Limited v PSL Limited [APPEAL LODGING NO. 68 OF 2018], ORDER DATED 26.07.2018to state that pendency of a winding up petition before the Hon'ble High Court cannot be a ground to reject any claim/ application made under IBC. 68. As far as MA 689/2017 for approval of Resolution Plan u/s 30(6), IBC read with Regulation 39(4) of CIRP Regulations for approval of the resolution plan submitted by Dalmia, is concerned, it is understood that the plan has been approved by 100% vote share of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable". 69. In this case, it is seen that the Resolution Plan provides for a total payment of ₹401,62,00,000/-, as against the liquidation value of the Corporate Debtor which is ₹231,10,00,000/-. Hence, one of the justifications for approval of the Resolution Plan is that the Liquidation Value is less comparing the proposals made in the Resolution Plan. 70. The segregation of the total payments prescribed in the resolution plan is given below: i. Payment of ₹9,00,00,000/- as CIRP costs in full and in priority to other creditors, ii. payment of ₹347,74,00,000/- to Financial Creditors iii. payment of 13% of workmen dues subject to a maximum of ₹12,86,00,000/-. iv. Payment of ₹25,00,00,000/- as „statutory dues settlement amountR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor is Rs. 231,10,00,000/-. The valuation report of the two registered valuers, namely Mitcon Consultancy & Engineering Services Ltd and Kisore Karamsey & Co. (cost of the valuation is ₹26,50,000/-) submitted by the counsel on Friday 28th, June 2019. Upon perusal of the report, it is observed that the report estimated the fair market value (100%), realisable value (85% of fair market value) and liquidation value (30% of the fair market value). The valuation has to be as per the internationally accepted valuation standards as per Regulation 35 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. However, CoC has approved the Resolution Plan with 100% vote share with its commercial wisdom. 75. Since the successful resolution applicant wants to continue with only the cement undertaking and wishes to sell the assets of paper, solvent extraction units, both the units have a land bank of more than 64 Acres of land which will be sold by the Resolution Applicant. The liquidation value of the cement unit is approximately is ₹165 Crores, and realisable value is around ₹460 Crores whereas the Resolution Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-compliances relating to such mining leases. Such a wider approval cannot be granted by this Adjudicating Authority, and the Resolution Applicant has to comply with the directions of Directorate of Geology Government of Maharashtra. 81. As regards Clause 11.5 of the plan which entitles Dalmia to seek suitable modification or withdrawal of the plan and exercise its rights under applicable law, the Resolution applicant shall not be allowed to modify or withdraw the plan without an order from this Adjudicating Authority. 82. Also, as far as the compliance of taking necessary approvals from the government under Industrial Disputes Act, particularly S. 25(O) are concerned, the Resolution Applicant is directed to do the same within one year as prescribed under section 31(4) of the I&B Code. 83. The Plan provides for management of affairs of the Corporate Debtor and implementation & supervision of the plan. The RP has given a statement as required under Section 30(2) of the I&B Code and Regulation 38 of CIRP Regulations, that the plan deals with interests of all stakeholders. 84. The resolution plan provides that the affairs of the Corporate Debtor shall be managed by Deloitte Tou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment/ retrenchment benefit to be extended to employees/ workmen of the paper undertaking and solvent extraction undertaking, totaling to 843 employees, which is the main concern even to the Union. The other applicants have also questioned the method used by the RP to arrive at the settlement amount proposed/ provided in the Information Memorandum/ Resolution Plan. 92. The workmen and employees of all the undertakings shall be treated strictly as per the Industrial Disputes Act, 1947. No exemptions can be granted by this Adjudicating Authority regarding this. 93. The Resolution Applicant has sought extinguishment of all claims. However, it is clarified that only crystallised liabilities of the Corporate Debtor shall stand extinguished on the approval of this resolution plan. The contingent liabilities shall exist, and no waiver can be provided for them. 94. The Resolution Applicant has sought extinguishment of all claims along with abatement of any related legal proceeding including criminal proceedings; however, this Adjudicating Authority cannot grant any such reliefs. Such proceedings shall proceed by the law. Any undertaking relating to applicability of law will not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to issue the Public Advertisement for inviting further claims. Accordingly, the RP has issued the advertisement in newspapers dated 30.11.2018 in "Times of India" and "Sakal" (Nagpur edition) inviting fresh claims and verified the claims and place before the CoC for approval. The CoC was apprised of the status of claim verification post the order of Hon'ble High Court dated 02.11.2018 in its meeting held on 15.01.2019. The matter was also listed before this bench on various dates since 11.12.2018, and the counsel submitted the valuation report only on 28.06.2019. Given the above background, the submission of the Resolution Applicant is uncalled for. 98. The Resolution Professional has provided his certificate under Regulation 39(4) of the CIRP Regulations. 99. The objections raised in MA No. 306 of 2019 by Mr Lalchand Maloo, MA No. 119/2018 by Mr Santosh Vasantrao Walokar, MA No. 54/2018 by Mr Sunil Kumar Maloo and MA No. 70/2018 by Gajanan are dealt in preceding paragraphs. Given the order passed by the Hon'ble Supreme Court in the matter of K. Sashidhar v. Indian Overseas Bank & Ors. [Civil Appeal No. 10673 of 2018], the objections relating to commercial wisdom of the resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsed is also not the same percentage to all the Operational Creditors. As per the Resolution Plan, the total amount claimed by various statutory authority is Rs. 309 Crores and the amount verified is Rs.229 Crores out of which the plan provides for Rs, 25 Crores to be paid in five equal annual installments on deferred payment basis. 108. The revival of the Corporate Debtor as envisaged under this plan shall contribute significantly to the society and Government by putting the natural resources to best use and contributing to significant direct and indirect employment and income generation opportunity in the region. However, the Resolution Plan proposed that the Resolution Applicant has submitted the plan for the Corporate Debtor as a going concern. Further, the plan also provides for the sale of assets of the paper undertaking and solvent extraction undertaking and would continue with the operations of only cement unit. Therefore, the plan submitted by the Resolution Applicant appears to be contradictory to the statement of the going concern as more than 843 employees will be terminated. Suggestions to the Government :- 109. It is observed that in any CIRP, three major entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% in cases where the total outstanding is more than Rs. 500 crores is not an ordinary course of business and shareholders who are the ultimate owners of the Financial Creditors and without their approval would undermine their ultimate rights as Shareholders and corporate democracy. 113. Sometimes Board of Directors is professional directors, who cannot take such a loss/haircut/write off bad debts without the approval of the Shareholders i.e. ultimate owners whose interest is paramount/supremacy -- considering the fact that most of the banks are also listed companies, and their shares are bought in the secondary market, i.e. through Stock Exchange platform even at many multiples of its face value/issue price. Therefore, huge haircut/loss in loan recovery is the ultimate loss to the Shareholders and not to the Professional Board of Directors/Employees. If this suggestion is not found merit for any reason the alternative could be at least notice may be sent to the shareholders for their approval/comments within fifteen days from the date of dispatch of the notice that could be done only by e-voting or postal ballot. Otherwise, the shareholders are deemed to have approved the Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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