10th September, 2024 Approval of Resolution Plan - Perfect Engine Component Private Limited [I.A. No. 20 of 2024 in C.P. No.1166 of 2020] (1.05 MB)
IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI, BENCH-V
I.A. No. 20 of 2024
IN
C.P. No.1166 of 2020
In the matter of an Application under
Section 30(6) and Section 31 of the Insolvency and Bankruptcy Code, 2016.
M/S ARCK Resolution Professional LLP,
(Resolution professional M/S Perfect Engine Components Private Limited )
…Applicant/Resolution Professional
In the matter of
Edelweiss Asset Reconstruction Company Limited
… Financial Creditor
V/s.
Perfect Engine Component Private
Limited
... Corporate Debtor
Order Dated :05.09.2024
Coram:
Hon’ble Ms. Reeta Kohli Member (Judicial)
Hon’ble Ms. Madhu Sinha Member (Technical)
Appearance:
For the Applicant/RP: Adv. Abhishek Anand (VC)
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ORDER
Per: Madhu Sinha Member(Technical) 1. The above captioned Application was filed under Section 30(6) and Section 31, of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”) by the Resolution Professional (hereinafter referred as the “Applicant”), seeking approval of the Resolution Plan, submitted by the Resolution Applicant –MAYUR INDUSTRIES PRIVATE LIMITED, which was approved by 100% voting shares of the members of the Committee of Creditors (hereinafter referred to as ‘COC’).
The facts leading to the Application are as under:
a.
A Financial Creditor (i.e. Edelwess Asset Reconsturction
Company Limited), filed a Company Petition (IB) No.
1166 of 2020 under Section 7 of the Insolvency and
Bankruptcy Code, 2016 (hereinafter referred to as "the
Code"). The Corporate Insolvency Resolution Process
(CIRP) of the Corporate Debtor was initiated by an order
dated 25.04.2023, and ARCK Resolution Professional
LLP (Through its designated partner Mr, Anil Kohli) was
appointed as the Interim Resolution Professional and
later confirmed as Resolution Professional by the COC
in its 1st meeting held on 23.05.2023. A public
announcement as per Section 15 of the Code, inviting
claims from the creditors of the Corporate Debtor.
b. The Applicant published a Public Announcement in
Form A in accordance with Section 15 of the Code read
with Regulation 6 of the CIRP Regulations, on
27.04.2023, inviting submission of proof of claims from
the creditors of the Corporate Debtor, on or before
09.05.2023.
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c. The claims received and accepted by the Interim Resolution Professional are as under:
Creditors
Claims Received
Claims Admitted
Edelweiss
Asset
Reconstruction
Company
Limited
(Secured
Financial
Creditor)
350,79,95,972
350,79,95,972
Total
350,79,95,972
350,79,95,972
Creditors
Amount Claimed (in
INR)
Amount Admitted (in
INR)
Shrem
Investments
Private
Limited
Financial
Creditor
(Unsecured
Creditor)(Related Party)
l5,74,71,65l
15,74,71,651
Total
l5,74,71,65l
15,74,71,651
Creditors
Amount Claimed (in
INR)
Amount Admitted (in
INR)
Operational
Creditor(Workmen
Employees)
53,06,349
53,06,349
Total
53,06,349
53,06,349
Creditors
Amount Claimed (in
INR)
Amount Admitted (in
INR)
Operational
Creditor(Vendors
for
Goods & Services)
93,460,473
93,460,473
Total
93,460,473
93,460,473
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Creditors
Amount Claimed (in
INR)
Amount Admitted (in
INR)
Operational
Creditor(Government
Authorities/ Statutory
Bodies)
57,90,179
57,90,179
Total
57,90,179
57,90,179
After receiving the claims, the Committee of Creditors was constituted.
The constitution of COC is as under:
Sr.
No.
Name
of the Claim
Received
Claim
admitted
Voting Share
(percentage
%)
1.
Edelweiss
Asset
Reconstruction
Company Limited
350,79,95,972
100%
4.
The Resolution Professional accordingly appointed One Registered
Valuer namely (i.e. Future value Advisors India (P) Ltd. and Adroit) for
conducting valuation across different asset classes, namely Land &
Building Plant & Machinery and Securities and Financial Assets to
determine its fair value and Liquidation value, as required under the
Regulation 27 of the IBBI(IRP for Corporate Person)Regulations,2016.
5.
These Registered Valuers submitted their reports. The Liquidation
and fair value is stated as under:
Fair Value and Liquidation Value :-
Sr No. Particulars of Asset Avg. Fair value
Avg. Liquidation Value
- Land & Building 13,72,69,981 10,60,35,985
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- Plant & Machinery 4,78,81,000 3,05,94,750
- Securities or Financial Assets 6,25,21,279 4,70,0l ,403
Total
24,76,84,260
18,36,32,137
The Applicant asserts that Form G, inviting Expression of Interest (EOI)
from Prospective Resolution Applicants (PRAs), was first published on
June 24, 2023, with a deadline of July 14, 2023. The Resolution
Professional received Earnest Money Deposits (EMDs) from three PRAs
by the deadline. Subsequently, the Committee of Creditors (CoC)
decided to issue a corrigendum to extend the deadline for Form G to
attract additional PRAs, leading to the receipt of five EMDs. During the
7th CoC meeting, it was discussed that the plan received from the PRA
till the last date of submission of Plans (i.e. Consortium Plan M/s
Maharashtra auto Stampings Private Limited) was under liquidation
value. The CoC resolved to republish Form G, which resulted in
receiving five EMDs from PRAs. Namely:
Sr
No.
Name of the PRA’s
Date of Submission
of EoI
EMD
Details
1.
Anand
Vihar
Reality
Private Limited
16.11.2023
RTGS-
16.11.2023
2.
Mayur Industries Pvt. Ltd. 16.11.2023
DD-
16.11.2023
3.
Kanungo Ferromet Private
Limited
08.1 1 .2023
RTGS-07.1
1 .2023
4.
United Biotech Pvt. Ltd
17.11.2023
RTGS-17.1
1 .2023
5.
Maharashtra
auto
Stamping Private Limited
(in consortium)
24.07.2023
RTGS-
24.07.2023
The Applicant further submitted that in 8th meeting of the COC the COC approved the minimum eligibility criteria, Request for Resolution
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Plan (RFRP) along with evaluation matrix and the Information
Memorandum to the PRAs on 22.11.2023.
7.
On 08.01.2024, 5 (FIVE) Resolution Plans were received for the
Corporate Debtor from the following PRAs (“Resolution Applicants”/
“RAs”):
i.
Mayur Industries Pvt. Ltd..
ii.
Anand Vihar Reality Private Limited
iii.
United Biotech Pvt. Ltd
iv.
Maharashtra auto Stamping Private Limited (in consortium)
v.
Kanungo Ferromet Private Limited
8.
The COC, in its 13th meeting held on 08.03.2024, approved
Resolution Plan submitted by Mayur Industries Pvt. Ltd.with a
voting share of 100%. Thereafter, the Applicant has issued
compliance certificate in Form “H”.
The Salient Features of the Resolution Plan are as under:
A. Brief Background of the Corporate debtor
i. Perfect Engine Components Private Limited (PECPL) formerly known as Sarod Engineering Private Limited (“Corporate Debtor” or “CD”) was incorporated on 13th January 2005 and is registered at Registrar of Companies, Mumbai. Its registered address is 1101 Viraj Towers, Junction of Andheri Kurla Road, Western Express Highway, Andheri (E) Mumbai- 400069. The corporate debtor was engaged in the business in the manufacturing of engine valves, and valve seat inserts for all types of automotive engines, captive powers,
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transport industry, locomotive, and marine engines. The company caters to the automobile and engineering sectors. Its clientele includes Bajaj Auto , Tata Motors, Eicher, Ashok Leyland, Mahindra Rise, and Escorts. Major customers as on date are Bajaj Auto & Tata Motors
ii. The Corporate Insolvency Resolution Process (“CIRP”) of Perfect Engine Component Private Limited has been initiated as per the provisions of the Insolvency and Bankruptcy Code (“IBC”) under Section 7. The application was moved before the Hon’ble National Company Law Tribunal, Mumbai Bench (“NCLT”) and was admitted vide its order dated 25.04.2023 (“CIRP Order”). Pursuant to such order, ARCK Resolution Professionals LLP through its designated partner Mr. Anil Kohli appointed as Interim Resolution Professional. B. Background of the Resolution Applicant
i. Mayur Industries Private Limited was incorporated in the year 1994. The company has its operations at multiple locations. The company has six manufacturing plants, one each at Gurgaon, Rudrapur (Uttrakhand), Bhiwadi (Rajasthan), Sanand (Gujarat) and two at Pune (Bhosari & Chakan).The company employs a workforce of 2000 workmen at its above manufacturing facilities. ii. The company is engaged in manufacture of automotive components such as Door Trims, Floor carpets, Luggage floor, Air conditioner Ducts and other Interior components and is OE Supplier to almost all major
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automobile manufacturers, such as Maruti Suzuki
India Ltd., Mahindra & Mahindra, Tata Motors, Ashok
Leyland, Honda Cars, and others .
The Resolution Applicant is eligible to act as a Resolution Applicant of the
Corporate Debtor and is not ineligible under section 29A of Insolvency and
Bankruptcy Code and also satisfies the eligibility criteria as mentioned in
clause (h) of sub-section (2) of section 25 of the Code.
10.
Summary of Payments under the Resolution Plan
The amounts provided for the stakeholders under the Resolution Plan is
as under:
(Amount in Rs. lakh) Sr. No. Category of Stakeholder* Sub-Category of Stakeholder Amount Claime d Amount Admitt ed Amount Provided under the Plan# Amount Provided to the Amount Claimed (%) (1) (2) (3) (4) (5) (6) (7) 1 Secured Financial Creditors
(a) Creditors not having a right to vote under sub- section (2) of section 21 NA NA NA NA (b) Other than (a) above: (i) who did not vote in favour of the resolution Plan
(ii) who voted in favour of the resolution plan
NA
35,079. 96
NA
35,014. 96
NA
1651.94
NA
4.71 Total[(a) + (b)] 35,079. 96 35,014. 96 1651.94 4.71
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2 Unsecured Financial Creditors
(a) Creditors not having a right to vote under sub- section (2) of section 21 1,574.7 2 1,574.7 2 1 0.06 (b) Other than (a) above: (i) who did not vote in favour of the resolution Plan (ii) who voted in favour of the resolution plan
NA NA
NA NA NA
NA NA NA
NA NA NA
NA Total[(a) + (b)] 1,574.7 2 1,574.7 2 1 0.06 3 Operational Creditors
(a) Related Party of
Corporate Debtor
NA
NA
NA
NA
(b) Other than (a)
above:
(i)Government
(ii)Workmen
(iii)Employees
(iv) Operational Creditors other than Government Dues*
57.90
NA
53.06
940.43
57.90
NA
53.06
934.77
0.06
NA
53.06
0.93
0.10
NA
100
0.10
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Total[(a) + (b)] 1,051.4 0 1,045.7 4 54.06 5.14 4 Other debts and dues NA NA NA NA NA Grand Total
37,706. 08 37,635. 41 1707.00 4.53
*Application for condonation of delay in filing of claim of one Operational Creditor under regulation 13 amounting to Rs. 3,60,426/- is filed before Hon’ble NCLT(i.e. IA No.3583 of 2024 was withdrawn and Disposed off vide order dated 12.07.2024 of this Tribunal)
Amount provided over time under the Resolution Plan and includes estimated
value of non-cash components. It is not NPV.] The interests of existing shareholders have been altered by the Resolution plan as under: Sl. No Category of Share Holder No. of Shares held before CIRP No. of Shares held after the CIRP Voting Share (%) held before CIRP Voting Share (%) held after CIRP 1 Equity 3,10,000 NIL 100 NIL 2 Preference NIL NIL NIL NIL
- Sources of Funds
During the 12th meeting of the Committee of Creditors (CoC), also stated that the “Resolution Applicant seems to be strong considering the size of the business and that the said RA has relevant experience in the same industry. Further the plan value offered is more than the net worth of the RA. Accordingly, the implementation of the Resolution Plan seems to be feasible and viable”. The Bench has noted that the Resolution Applicant has annexed the Financial Statements for the year 2023, which demonstrate adequate reserves to facilitate the implementation of the Resolution Plan.
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Payments proposals of the various stakeholders under the Resolution Plan:
Summary of Payment terms under the Proposed Plan
( Rs. in Crore)
Particulars
Timelines
from
Effective
Date
Instrum
ent used
for
Paymen
t
Amoun
t in Cr.
Remarks
Total Committed
funds by RA,
Within 90
days
(Upfront)
Bank
Transfer
17.07
The RA will deposit the
committed funds in the
Designated account of
CD as per payment
timelines proposed in
this
plan.
All
the
payments/
dues
payable to respective
creditors will be paid
from
the
said
designated account as
per
the
timelines
proposed
in
this
Resolution Plan.
CIRP Cost (as approved/ratified by COC) Within 30 days Bank Transfer
As per details received
from RP, there is no
outstanding CIRP cost
payable.
Operational
Creditors
Within
30
days
Bank
Transfer
0.541
As per detailed chart in
3.4.1
Value available for Financial Creditors
16.529
Dissenting Financial Creditors
Edelweiss Asset Reconstruction Company Limited (EARCL) being only financial creditor, the clause would not apply. Financial Creditors (secured) Within 90 days Bank Transfer 16.519 The complete payment would be made within 90 days
Unsecured
Financial Creditor
Within
90
days
Bank
Transfer
0.010
The complete payment
would be made within 90
days
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The Payment mechanism for each class of Creditor(s)/ Stakeholder is tabled below:
(Rs. in Crore)
Sr.
No.
Category of
Creditor
Admitted
Claims
Amount
provided in
the Plan
Remarks
1
Insolvency
Resolution
Process Cost
Actual
0.00
Though,
as
per
latest
information , there is no
CIRP cost pending. Amount
payable, if any, would be
paid in priority to any other
payment within 30 days
2
Workmen
and
Employees
0.53
0.541
Within 30 Days
3
Operational
Creditors for
supply
of
Goods/
Services
9.35
4
Government
/Statutory
Authorities
0.58
5
Dissenting
Financial
Creditors
16.519 The payment is provided for Financial Creditors, who are part of COC and doesn’t include any related party, who has provided financial debt to the CD. 6 Secured Financial Creditors 350.80 7 Unsecured Financial Creditors 15.74 0.010 The payment is towards unsecured financial debt of related party 8 Any Other Operational Creditor
9 Preference Shareholder s
NA
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10 Equity Shareholder s
Existing Equity share capital shall be written off fully. No claim has been filed by existing Shareholders.
a. Insolvency resolution process cost
The unpaid CIRP Costs, if any, in terms of Section 5(13) of the
Code or Regulation 31 of CIRP Regulations duly approved by the
COC will be paid in full and in priority to any other creditors of
the company within 30 days from the Effective Date. Since there
is nothing mentioned as unpaid CIRP Cost, hence none has been
provided. If and when there is any pendency arising on account
of CIRP cost left unpaid, the same shall be paid from the total
committed funds provided by the RA. Remaining amounts shall
be payable to the stakeholders proportionately.
b. Payment to Operational Creditors
As per the Information Memorandum and Financial Statements
for the Year 2023, it seems Liquidation Value of the encumbered
assets may not be sufficient to cover the debt of Financial
Creditors of the Company in full. In that scenario, the Liquidation
Value due to the Operational Creditors or the other creditors or
stakeholders, government dues, taxes etc. and other creditors and
stakeholders would be NIL and therefore they may not be entitled
to receive any payment on that account. However, the Resolution
Applicant in order to take care of the interest of all stakeholders
proposes to bring in a payment to Operational Creditors. The
payment mechanism of respective category are as follows
Category
Composition
Admitted
Claims
(INR)
%
proposed
to
be
paid
against
Amount
Payable
(INR)
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admitted claim OC-1 Workmen and Employees 5,306,349 100% 5,306,349 OC-2 Vendors for Goods and Services 93,460,473 0.1% 93,460 OC-3 Government Authorities/Statu tory Bodies 5,790,179 0.1% 5,790
Total 104,557,0 01
54,05,600
The payments will be made within 30 days. Post acceptance of
these payments, no OC (irrespective of class or category) shall
have any right whatsoever for its past dues against the Corporate
Debtor. All proceedings shall automatically stand abated from
the Effective Date.
The claims remaining unverified/unadmitted till the date of
submission of plan shall be deemed to have been rejected by the
RP and no payments would accrue against them.
Any amount otherwise payable to any Operational Creditor
from above, but not paid due to any reason (including non-
submission of relevant documents, etc.), shall be kept in a
separate bank account (to be claimed within next 2 years).
The total amount allocated above for the payments to OC’s
shall be coordinated by the Resolution Professional in
proportion to the total claims so made, or as per applicable
provisions, if a different treatment is prescribed.
The Resolution Applicant, through an affidavit, has affirmed that the
dues owed to the workmen for a period of twenty-four months and to the
employees for a period of twelve months, in compliance with Section
30(2)(b) of the Insolvency and Bankruptcy Code, 2016, amount to a total
of ₹53,06,349. The Applicant further undertakes that these payments are
either provided for or will be made over and above the provisions set out
in the Resolution Plan, in compliance with the order of the Hon’ble
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National Company Law Appellate Tribunal (NCLAT). in the Case of M/s Jet Airways India Ltd.; upheld by the Hon ’ble Supreme Court in Civil Appeal No 407 of2023 with Civil Appeal Nos 465-469 of 2023 (i) The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii). (ii) The workmen are entitled to receive their dues from the Corporate Debtor for period of 24 months as per provision of Section 53(l)(b) at least to minimum liquidation value envisaged under Section 30(2)(b) read with Section 53(1). The same is not applicable since there are no dues of EPFO
- Financial Creditors
The RA proposes to make the total payment of Rs. 17.07 crores against
dues of Financial Creditors. RA would deposit the same, as and when
due (as per proposed payment terms) in the designated bank account
of CD within specified timelines.
As per the proviso to Section 21(2) of the Code, “a related party shall
not have any right of representation, participation or voting in a meeting
of the committee of creditors.” Accordingly, its pertinent to note here
that related parties having a financial debt doesn’t get any right of
participation or voting in the COC meeting. Thus, the question of
dissent or assent upon a plan wouldn’t arise.
In term of IBC, a Resolution Plan is amongst other things, required to pay liquidation value due to the Dissenting Financial Creditors and provide that such payment is made before any recoveries are made to the Financial Creditors, who have voted in favour of the Resolution Plan. The Dissenting Financial Creditors will be entitled to receive an amount as they would have received in the event of Liquidation, in
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priority to the creditors voting in favour of the Resolution Plan within
45 days from Effective Date.
As the COC comprises of only one eligible Financial creditor, the
situation of having a dissenting financial creditor would not arise.
The Resolution Professional will disclose the liquidation value to the
monitoring committee to fix the amount of liquidation value due and
payable to the dissenting Financial Creditors. The amount is proposed
to be paid within 45 days of Effective Date in priority to the creditors
voting in favour of the Resolution Plan
The Financial Creditors other than Dissenting Financial Creditors i.e.
who have voted in favour of the Resolution Plan will get paid within a
period of 90 days from the Effective Date. Based on above the payments
proposed for Financial Creditors shall be as follows
Name
of
Financial
Creditor
Amount
Admitted
Proposed
in
the
plan
Remarks
Quantum and
timelines
Edelweiss
Asset
Reconstructi
on Company
Limited
3,507,995,9
72
165,194,4
00
Secured
Within
90
days
Shrem
Investments
Private
Limited
157,471,651
100,000
Unsecure
d related
party
Within
90
days
The Liquidation Value due to the Dissenting Financial Creditors if any
will be discussed with the Monitoring Committee and to be paid
within 45 days of Effective Date in priority to the creditors voting in
favour of the Resolution Plan.
The Resolution Professional to make entire financial commitment
within 90 days from the effective date and would accordingly be out
of pocket by the entire Resolution plan value by putting the entire
amount in the designated bank Account. We propose that the
distribution methodology undertaken by the RP/COC is as per the
provision of law and all the creditors/stakeholders be paid their net
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dues against their deliverables (including issuing No Dues Certificate, release letter etc., This includes all the process/procedures for the acquisition of the CD (including but not limited to release of all charges)
c. Any Other Creditors or Contingent Liabilities
Any claims not received by cut-off date shall be extinguished and will not
be payable and shall stand to be extinguished and NIL amount be paid
against it. No interest on any claim (both financial and operational) as on
CIRP Commencement Date shall be paid by the RA. However, Additional
claims from any creditor(s) (which were not part of the Information
Memorandum, verified/admitted subsequently by the RP including
related to any statutory departments like EPFO, GST etc., if any till
Effective date) shall not be taken into consideration and shall deemed to
be extinguished.
13.
Implementation Schedule:
Implementation of the Resolution Plan shall commence from the NCLT
Approval Date. Subject to Clause 3.9 The Resolution Plan is effective
for a term of 90 days. The Resolution Applicant will undertake the
following steps to implement the Resolution Plan in the indicative
timeline provided below:
Activity
Reference
Days
Term of Plan
Receipt of Letter of Intent from
the CoC and constitution of
Caretaker Committee
R
Issuance
of
Performance
Security – Performance Security
will be provided within 3 days of
issuance of LOI
pt15 of RFRP
R+3
15%
of
payment
proposed
Approval
from
Adjudicating
Authority
T 0
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Physical
possession
of
the
assets of the Corporate debtor
from the RP
3.8.2
T
0
Infusion of Equity Capital
3.10.3
T+7
7
First
Meeting
of
Monitoring
Committee
3.8.2
T+7
7
Appointment
of
Board
of
Directors
3.8.4
T+15
15
Finalisation
and
signing
of
Deeds, Definitive Agreements
etc.
3.8.10
T+30
30
Payment for CIRP Process Cost
3.3.1
T+30
30
Payment to Operational Creditor
3.4.1
T+30
30
Payment to Dissenting Financial
Creditors
3.5.4
T+45
45
Release of Performance Bank
Guarantee
3.5.9
T+90
90
Payment to Financial Creditors
voted in favour of Resolution
Plan
3.5.6
T+90
90
Financial Creditors to release
Encumbrances
(including
making filings with ROC/ sub-
registrar of assurances and
other governmental agencies for
recording such release), execute
re-conveyance deeds, issuance
of
no-dues
certificates
and
redeliver documents in relation
to the Resolution Plan and
Handover of Documents of the
assets of the Corporate debtor
3.5.8
&
3.10.11
T+91
91
The RA would infuse funds in the designated bank account as per the
terms of this resolution plan. The amounts shall be distributed as per
the terms of this Resolution Plan. The bank will be operated by the
erstwhile RP, as per the directions of the MC.
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Earnest Money Deposit
The Resolution Applicant has submitted Earnest Money Deposit I of INR
Rs.10,00,000/- and Earnest Money Deposit II of INR 50,00,0 00(Indian
Rupees Fifty Lakhs Only) along with this Resolution Plan.
15.
Monitoring Committee
The Monitoring Committee shall comprise of 5 (Five) members
comprising of the following:
a) 1 (One) Nominee/Representative of the Financial Creditor
b) 3 (Three) Nominee/Representative of the Resolution Applicant (i.e.
one representing the new Shareholders, one of the Directors and
one Advisor/Monitoring Agency) and
c) The Erstwhile Resolution Professional.
The Monitoring Committee shall be constituted within 7 (Seven)
Business Days of NCLT Approval Date and pending constitution of the
Monitoring Committee, the Resolution Professional shall be authorised
to exercise all his powers and shall observe all its duties in accordance
with the Code.
16. Avoidance Transactions
As per the requirements of Regulation 38(2) (d) of the CIRP Regulations,
avoidance transactions application filed by the Resolution Professional, if
any, under Chapter III or fraudulent or wrongful trading under Chapter
VI of Part II of the Code, will be pursued after the approval of the
resolution plan to its logical end by the Chairman of monitoring
Committee and the proceeds shall be distributed to the Secured Financial
Creditors in the manner approved by the COC while approving this
Resolution plan.
The Resolution Applicant states in Affidavit and Resolution Plan that the
Resolution Plan specifying disbursement of amounts recoverable from
PUFE transaction to Creditors:
Clause 3.9.8 of the Resolution Plan at Page no. 26 (Page No. 409 of IA.
No. 20 of 2024) states as under: “3.9.8: The IM doesn’t have any
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information about any avoidance proceedings. The RA would seek a
complete immunity from any proceedings or effects of any avoidance
proceedings initiated by erstwhile RP during the CIRP process or any time
later. The success of the plan is independent of the results of these
proceedings. Any
future
monetary
inflows resulting from
these
proceedings, if any, will be directly allocated to the members of the
Committee of Creditors (COC). Any expenses incurred in relation to these
proceedings will not be the responsibility’ of the RA or the monitoring
committee. Owing to the lack of pertinent information, the RA will not
partake in these proceedings”.
Therefore, this bench directs the Secured Financial Creditor (i.e.
Edelweiss Asset Reconstruction Company Limited) to ensure effective
pursuance of the IA bearing number IA 1642 of 2024, IA 3794 of 2023,
IA 2372 of 2023 and 2985 of 2024 mentioned at page no 26 of the
Affidavit
17. The compliance of the Resolution Plan is as under:
Section
of
the Code /
Regulation
No.
Requirement with respect to Resolution Plan
Clause
of
Resolution
Plan
Complianc
e (Yes / No)
25(2)(h)
Whether the Resolution Applicant meets the
criteria approved by the CoC having regard to the
complexity and scale of operations of business of
the CD?
YES
Section 29A
Whether the Resolution Applicant is eligible to
submit resolution plan as per final list of
Resolution Professional or Order, if any, of the
Adjudicating Authority?
Submitted as
AnnexureA-
24
YES
Section 30(1)
Whether the Resolution Applicant has submitted
an affidavit stating that it is eligible?
APPENDIX 10
YES
Section 30(2) Whether the Resolution Plan-
(a) provides for the payment of insolvency
resolution process costs?
(b) provides for the payment to the operational
creditors?
Pt 3.3, Pg 18
Pt 3.4.2, Pg 20
Pt 3.5.5, Pg 21
YES
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I.A. No. 20 of 2024
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(c) provides for the payment to the financial
creditors who did not vote in favour of the
resolution plan?
(d) provides for the management of the affairs of
the corporate debtor?
(e)
provides
for
the
implementation
and
supervision of the resolution plan?
(f) contravenes any of the provisions of the law for
the time being in force?]
Pt 3.7, Pg 22
Pt 3.8, Pg 24
Pt 3.9.7, Pg 26
Section 30(4)
Whether the Resolution Plan
(a) is feasible and viable, according to the CoC?
(b) has been approved by the CoC with 66% voting
share?
Minutes & E-
voting
result
of 12th COC
Meeting
YES
Section 31(1)
Whether the Resolution Plan has provisions for its
effective implementation plan, according to the
CoC?
Pt 3.8, Pg 24
YES
Regulation38
(1)
Whether the amount due to the operational
creditors under the resolution plan has been given
priority in payment over financial creditors?]
Pt 3.4.2, Pg 20 YES
Regulation
38(1A)
Whether the resolution plan includes a statement
as to how it has dealt with the interests of all
stakeholders?
Pt 3.9, Pg 25
&
Pt 3.2, Pg 16
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?]
Pt 3.9.2, Pg 26
NO
NA
Regulation
38(2)
Whether the Resolution Plan provides:
(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?
Pt 3.9.3, Pg
25
Pt 3.7, Pg 22
Pt 3.8, Pg 24
YES
38(3)
Whether the resolution plan demonstrates that –
Pt 3.9.5, Pg
26
Pt 3.7.9, Pg
24 & Pg 38
YES
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(a) it addresses the cause of default?
(b) it is feasible and viable?
(c) it has provisions for its effective implementation?
(d) it has provisions for approvals required and the
timeline for the same?
(e) the resolution applicant has the capability to
implement the resolution plan?
Pt 3.8.5, Pg
25
Pg 14, Pg 33
Pg 38
39(2)
Whether the RP has filed applications in respect of
transactions observed, found or determined by
him?
Pt 9.9, Pg 29
YES
Regulation
39(4)
Provide details of performance security received,
as referred to in sub-regulation (4A) of regulation
36B.]
YES
Observation and Findings:
17. On perusal of the Resolution Plan, we find that the Resolution
Plan provides for the following
i.
As per IBC Code 30(2)(a) – A Resolution Plan 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.
ii.
As per Section 30(2)(b), the Respondent has agreed to pay
Operational Creditors an amount which shall not be less than
liquidation value or the amount that would have been paid to
such creditors if the amount to be distributed under the
Resolution Plan is distributed in accordance with priority under
Section 53(1), whichever is higher.
iii.
The Resolution Applicant has also agreed that dissenting
financial creditors shall be paid not less than the value they
would have been paid in the event of liquidation of the Corporate
Debtor.
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iv.
The plan provides for the management of the affairs of the
Corporate Debtor after approval of the Resolution Plan. Section
30(2)(d).
v.
The Resolution Plan does not contravene any of the provisions of
the law for the time being in force - Resolution Plan provides for
the implementation and supervision of the resolution plan
as per Section 30(2) (e)
vi.
The Resolution Applicant has given a declaration that the
Resolution Plan does not contravene any provisions of the law
for the time being in force as per Section 30(2)(f).
vii. The resolution applicant or any of its related parties has not
failed
to
implement
or
contributed
to
the
failure
of
implementation of any other resolution plan approved by the
Adjudicating Authority at any time in the past. viii. The
Resolution Plan is in compliance of the Regulation 38 of the
Regulations in terms of Section 30(2)(f) as under:
a. The amount due to the operational creditors under a
resolution plan shall be given priority in payment over
financial creditors. Regulation 38(1).
b. The Resolution Plan has all the adequate means of
supervising of the implementation of the Plan as required
under Regulation 38(2) (c), of the IBBI, Insolvency resolution
process for corporate persons, Regulation 2016.
c. Provides for the payment of CIRP Costs in priority to the
repayment of any other debts of the Company (Regulation
38(1)(a)).
d. Provides for the manner of implementation and supervision
of
the
Resolution
Plan
and
adequate
means
for
implementation and supervision of the Resolution Plan.
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e. The Resolution Applicant confirms that to the best of the
knowledge of the Resolution Applicant, the Resolution Plan
is not in contravention of the provisions of Applicable Law
and is in compliance with the Code and the CIRP
Regulations.
f. The Resolution Applicant confirms that the Resolution
Applicant and its connected persons are not disqualified from
submitting a resolution plan under Section 29A of the Code
and other provisions of the Code and any other Applicable
Law.
g. The plan provides for the management and control of the
business of the Corporate Debtor during its term.
h. All the above factors demonstrate that the plan address as
the cause of default and the Resolution Applicant has the
capacity to implement the Resolution Plan.
i. That the Resolution Applicant or any of its related parties has
never failed to implement or contributed to the failure of
implementation of any other Resolution Plan approved by the
Adjudicating Authority at any time in the past. This is in
compliance of Regulation 38(1)(b) of the Regulations.
j. The interests of all stakeholders (including Financial
Creditors, Operational Creditors and other creditors,
guarantors, members, employees and other stakeholders of
the Company, keeping in view the objectives of the Code
(Regulation 38(1A)).
- The Resolution Plan has been approved in the 7th COC meeting held on 05.08.2023 with 100% voting in accordance with the provisions of the Code.
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-
Regarding the issue of the source of funds, this Bench places reliance on the judgment of the Hon’ble Supreme Court in the case of Vallal RCK v. M/s Siva Industries and Holdings Limited and Others, Civil Appeal Nos. 1811-1812 of 2022, wherein it was held that
“This Court has consistently held that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully
informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be made to the judgments of this Court in the cases of
K. Sashidhar v.Indian Overseas Bank and
Others, Committee of Creditors of Essar Steel
India Limited through Authorised Signatory
v. Satish Kumar Gupta and Others3, Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others4, Kalpraj Dharamshi and Another v. Kotak
Investment Advisors Limited and Another5, and Jaypee Kensington Boulevard Apartments
Welfare Association and Others v.
NBCC(India) Limited and Others6 -
In K. Sashidhar v. Indian Overseas Bank & Others: 2019 SCC Online SC 257 (2019) 12 SCC 150) the Hon’ble Apex Court held that
“if the CoC had approved the Resolution Plan by requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that
MUMBAI, BENCH-V
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the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2). The Hon’ble Court observed that the role of the NCLT is ‘no more and no less’. The Hon’ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 and is limited to scrutiny of the Resolution Plan “as approved” by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the Adjudicating Authority can reject the Resolution Plan is in reference to matters specified in Section 30(2) when the Resolution Plan does not conform to the stated requirements”.
- In India Resurgence Arc Private Limited vs. Amit Metaliks Limited and Ors. (2021) the Hon’ble Apex Court held that
“the process of consideration and approval of resolution plan is essentially within the commercial wisdom of Committee of Creditors (CoC). The scope of judicial review remains limited under Section 30(2) of the Insolvency and Bankruptcy Code (IBC), 2016 by which the court would examine that the resolution plan does not contravene any statutory provisions and it conforms to such other requirements as may be specified by the Board. The court held that the process of judicial review cannot be stretched if all the above- mentioned requirements have been duly complied with and that dissenting financial creditor, expressing dissent over the value of security interest held by it, cannot seek to challenge an approved Resolution Plan. Lastly, it was held that Section 30 of the IBC, 2016 only amplified the considerations for the CoC while exercising its commercial wisdom so as to take an informed decision in regard to the viability and feasibility of resolution plan, with fairness of distribution amongst similarly situated creditors; and that the business decision taken in exercise of the commercial wisdom of CoC does not call for
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interference unless creditors belonging to a class being similarly situated are denied fair and equitable treatment.
- The Hon’ble Apex Court at para 42 in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.: (2019) SCC Online, has clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved.
“Para 42- Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and section 32 read with section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar (supra).”
- This Bench noted that the Resolution Plan value is under liquidation value this Bench relies on the Hon’ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.: (2019) SCC Online, and in the matter of Maharashtra Seamless Limited vs Padmanabhan Venkatesh and Ors held that:
“there is no provision in the Regulations or Code which provides that the bid of any Resolution Applicant has to match the liquidation value. It further articulated that the object behind prescribing such a valuation process is to assist the CoC to take decisions on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is just to test the Resolution Plan with reference to provisions of Section 30(2) of the Code.”
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The Hon’ble Supreme Court in Ghanashyam Mishra and Sons (P)
Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. has clearly
established that the once a Resolution Plan is approved by the
Adjudicating Authority (AA), the same, irrespective of whether or not
they participated in the CIRP, binds all creditors and any claims not
forming part of the approved Resolution Plan shall stand
extinguished.
“with respect to any statutory dues owed/claims
raised in relation to the period prior to the 2019
Amendment, the resolution plan shall still be binding
on the statutory creditors concerned, and the statutory
dues owed to them, which were not included in the
resolution plan, and such claims shall stand
extinguished.”
- Regarding to the Relief and Concessions the Resolution Applicant will
approach all the consent Authorities for reliefs and concessions, if
any hindrance faced by the Resolution Applicant from any Authority
at latter stage, the Resolution Applicant may approach the Tribunal
after the sanction of the Plan. The carry forward loses if any are
permitted under Section 79 of the Income Tax Act 1961. The law has
been well settled by the Hon'ble Supreme Court in the case of
Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss
Asset Reconstruction Company Limited and Ors. in the following
words:
I. "The legislative intent behind this is, to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plan would go haywire and the plan would be unworkable.
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II.
87. We have no hesitation to that the word "other
stakeholders" would squarely cover the Central
Government any State Government or any local
authorities. The legislature, noticing that on
account
of
obvious
omission
certain
tax
authorities were not abiding by the mandate of
I&B Code and continuing with the proceedings,
has brought out the 2019 amendment so as to
cure the said mischief…
III.
In view of the above we hold that the Resolution
Applicant cannot be saddled with any previous
claim against the Corporate Debtor prior to
initiation of its CIRP..."
IV.
Consequently, all the dues including the
statutory dues owed to the Central Government,
any State Government or any local authority, if
not part of the resolution plan, shall stand
extinguished and no proceedings in respect of
such dues for the period prior to the date on
which the adjudicating authority grants its
approval under Section 31 could be continued.”
- In view of the above cited case law, the legislature has given
paramount importance to the commercial wisdom of committee of
creditors (CoC) and the scope of judicial review by the Adjudicating
Authority (AA) is limited to the extent of scrutiny provided under
section 31 of Code and the direction of the Appellate Authority is
limited to the extent provided under sub-section (3) of section 61
of the Code. - In view of the discussions, this Bench is of the considered view that the instant Resolution Plan meets the requirements of Section 30(2)
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of the Code and Regulations 37, 38, 38(1A) and 39(4) of the
Regulations. The Resolution Plan is not in contravention of any of the
provisions of Section 29A of the Code and is in accordance with law.
The Resolution Plan is feasible and viable and has been duly
approved by the CoC in their Commercial Wisdom and under the
requisite proceedings of ‘Code’. The Resolution Plan balances the
interest of all the stakeholders and thus it deserves to be approved
as follows:
a) The Interlocutory Application No. 20 of 2024 is allowed. The
Resolution Plan submitted by MAYUR INDUSTRIES PRIVATE
LIMITED, is hereby approved. It shall become effective from
this date and shall form part of this order. It shall be binding
on the Corporate Debtor, its employees, members, creditors,
including the Central Government, any State Government or any
local authority to whom a debt in respect of payment of dues
arising under any law for the time being in force is due.
b) The Memorandum of Association (MoA) Articles of Association
(AoA) shall accordingly be amended and filed with the Registrar
of Companies (ROC), concerned for information and record. The
Resolution Applicant, for effective implementation of the Plan,
shall obtain all necessary approvals, under any law for the time
being in force, within such period as may be prescribed.
c) The moratorium under Section 14 of the Code shall cease to have
effect from this date.
d) The Monitoring Committee shall supervise the implementation of
the Resolution Plan and shall file status of its implementation
before this Authority from time to time, preferably every quarter.
e) The Applicant shall forward all records relating to the conduct of
the CIRP and the Resolution Plan to the IBBI along with copy of
this Order for information.
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f) The Applicant shall forthwith send a copy of this Order to the
CoC and the Resolution Applicant for necessary compliance.
g) The Resolution Professional shall submit the records collected
during the commencement of the proceedings to the Insolvency
& Bankruptcy Board of India for their record.
h) The Resolution Professional shall stand discharged from his
duties with effect from the date of this Order, save and except
those duties that are enjoined upon him for implementation of
the approved Resolution Plan.
i) The Registry is directed to send copies of the order forthwith to
all the parties and their Ld. Counsel for information and for
taking necessary steps.
j) The Interlocutory Application No. 20 of 2024 is accordingly
Allowed.
Sd/- Sd/-
Madhu Sinha
Reeta Kohli
Member (Technical)
Member (Judicial)
/priyanka/
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