06th August, 2024 Approval of Resolution Plan - Frugal Developers Private Limited [I.A.–21-2024 in C.P.(IB) – 110 (ND)-2023] (3.01 MB)

IA. No. 21/2024 in (IB)-110/(ND)/2023 Covet Financial Service Pvt. Ltd. Vs Frugal Developers Pvt. Ltd.

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THE NATIONAL COMPANY LAW TRIBUNAL NEW DELHI BENCH (COURT-II) I.A.–21/2024
IN C.P.(IB) – 110 (ND)/2023

IN THE MATTER OF: Covet Financial Service Private Limited. … Financial Creditor

                               Versus 

Frugal Developers Private Limited … Corporate Debtor

AND IN THE MATTER OF IA. NO. 21/2024:

Anil Kumar Singhal Resolution Professional
Frugal Developers Private Limited Registered Address-: A2/10, DLF Sector -11, Faridabad-121001.

   … Applicant/RP 

Order delivered on: 01.08.2024 UNDER SECTION: 30(6) of IBC, 2016

CORAM: SH. ASHOK KUMAR BHARDWAJ, HON’BLE MEMBER (J) SH. SUBRATA KUMAR DASH HON’BLE MEMBER (T)

PRESENT: For the RP : Adv. Abhishek Parmar

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ORDER The present IA No. 21 of 2024 has been preferred by Mr. Anil Kumar Singhal, Resolution Professional qua Frugal Developers Private Limited (hereinafter referred to as, the ‘Applicant/RP’) under Section 30(6) of IBC, 2016, seeking the following reliefs:

“a) Allow the present Application and approve the Resolution Plan submitted by Appu Financial Services Limited and approved by the Committee of Creditors of the Corporate Debtor with 100% voting share in 11th CoC meeting;

(b) Declare that upon approval of the Resolution Plan by this Hon'ble Adjudicating Authority, provisions of the Resolution Plan shall be binding on the Corporate Debtor, its creditors, guarantors, members, employees and other stakeholders and the Successful Resolution Applicant in accordance with Section 31 of the Code, and shall be given effect to and implemented pursuant to the order of this Hon'ble Adjudicating Authority;

(c) Pass such other further order / order(s) as may be deemed fit and proper in the facts and circumstances of the case.”

2. To put the facts concisely, the underlying main petition C.P.(IB)- 110/(PB)/2023 was filed by Covet Financial Services Private Limited against the Corporate Debtor, namely, Frugal Developers Private Limited under Section 7 of the IBC, 2016, which was admitted vide Order dated 03.07.2023 of this Adjudicating Authority and the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor was initiated. The Corporate Debtor is currently represented through its RP, Mr. Anil Kumar Singhal.
3. This Tribunal appointed Mr. Anil Kumar Singhal as the IRP of the Corporate Debtor. Subsequently, the CoC resolved to appoint the IRP as RP in the 1st CoC meeting dated 02.08.2023.

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It is stated by the Applicant that in terms of Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Applicant made a Public Announcement in Form-A on 05.07.2023 in English in “Financial Express” and in Hindi in “Jansatta” to invite claims. A copy of the same was also uploaded on the website of Insolvency and Bankruptcy Board of India (IBBI).
5. It is further stated by the Applicant that it had constituted CoC with both the Unsecured Financial Creditors i.e., Covet Financial Service Private Limited and Lenient Consultants Private Limited.
6. The RP has got the assets of the Corporate Debtor valued under the relevant rules and the Fair Value and Liquidation Value are as below:

The Unsecured Financial Creditors in the CoC are Covet Financial Service Private Limited and Lenient Consultants Private Limited, constituting 100% voting share and the entire claim of the two Financial Creditors amounting to Rs. 1,96,15,658/- has been admitted.

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A total of 11 meetings of the CoC were held and the details of the same, as stated in the Application, is reproduced here below:

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9. The ‘Form-G’ was published on 01.09.2023 to invite Expressions of Interest (EOI) from the Prospective Resolution Applicants with the last date of submission of EOI being 16.09.2023. The Applicant submits that it had received EOIs from 03 interested parties viz. Resurgent Property Ventures Private Limited, Instant Finserve Private Limited and Appu Financial Services Limited.

Thereafter, the resolution plans received by the CoC were put on voting by the Applicant in the 11th CoC meeting held on 10.04.2024. In the said meeting, the CoC approved the resolution plan submitted by Appu Financial Services Limited with 100% Votes. 11. The details of compliances made under relevant sections of IBC, 2016 and IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 as stated in the Form-H which reads thus:

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The other compliances under the relevant Sections of the Code and the Regulations made thereunder are as below:

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12.1 The Resolution Professional has certified in Form H that the Resolution Applicant has given an affidavit to the effect that it is not disqualified under the provisions of Section 29A of the Code.
12.2. As regards the compliance of Section 30(2) of the Code, the Resolution Applicant has proposed to pay a lump sum amount of Rs.10,00,000/- towards CIRP Cost in priority to the repayment of any other dues of the Corporate Debtor. Further, no claim by any operational creditor was admitted by the Resolution Professional and thus, the payment for operational creditors in the Resolution Plan has been shown as Nil.
12.3 Similarly, the Resolution Professional has not received any claim from workmen/ employees as well as from the Government/ statutory authorities of any liability. Consequently, the Resolution Plan does not provide any payment for the aforesaid categories.
12.4 It is pertinent to mention that in the affidavit dated 15.07.2024 filed by the Applicant/ RP, it has been explicitly stated that “no claim has been received from the EPFO, till the date of approval of resolution plan by the CoC”. It has further stated that there are nil employees/workmen as on date of insolvency commencement date and Corporate Debtor was non-functional since last 5 years.
12.5 As per the Transaction Audit Report filed by the Resolution Professional, no PUFE transactions have been detected and hence, there is no requirement to file any application in this regard.
12.6 Considering the averment by the Successful Resolution Applicant in its Affidavit dated 23.11.2022 that the new management does not have any

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person who was promoter or in the management or control of Corporate Debtor earlier, or a related party of such a person, the liability of prior offences shall cease and the Corporate Debtor shall not be prosecuted for such an offence from the date of approval of resolution plan. 13. This position as regard to the claims admitted and the amount proposed to be paid in that respect in the Resolution Plan has been captured in Paragraph 4.1 of the Plan which is extracted here below for ease of reference:

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The summary of the financial proposal as made in Paragraph 4.2 of the Resolution Application is extracted here below:

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15. The details of source of funds as stated in Paragraph 4.3 of the Resolution plan is reproduced here below:

Furthermore, as part of the resolution plan, it has been proposed that the entire paid-up share capital, including equity or preference share capital, of the Corporate Debtor will continue to exist and shall stand

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transferred in the name of the Resolution Applicant or its nominee/associate person.
17. It is further stated that the Resolution Plan envisages a duration of 90 days for the payment to all the creditors of the Corporate Debtor as proposed in the Plan and that the above-mentioned period will commence from the effective date after the approval of the Resolution Plan by the Adjudicating Authority. The details of the implementation schedule of the plan is extracted here below:

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The details of Management and Control of the business of Corporate Debtor during the term of Resolution Plan is stated under Chapter 7 of the Resolution Plan contents of which reads thus:

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As can be seen from the facts available before this Tribunal, the Resolution Applicant has proposed to pay much less than the amount of claim admitted by the RP. Nevertheless the Hon’ble Apex Court in the cases of Vallal RCK vs. M/s Siva Industries and Holdings Limited and Others, (Civil Appeal Nos. 1811-1812 of 2022) and Ebix Singapore Private Limited Vs Committee of Creditors of Educomp Solutions Limited &

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Anr., (Civil Appeal No. 3224 of 2020) has categorically 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 is not open for this AA to interfere with the same. 20. The Applicant/RP has also filed on record, the proof of the Performance Security worth Rs. 3,31,000/- deposited by the SRA vide RTGS Mode, in compliance of Regulation 36-B(4-A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
21. It is pertinent to mention that the Applicant has sought various reliefs and concessions stipulated under Chapter -10 of the Resolution Plan submitted by the Appu Financial Service Limited, which reads thus:-

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In the Resolution plan, a number of reliefs and concession have been sought by the SRA with the following undertaking.
“Further it is clarified that whether any or all the reliefs sought by the RA is granted or not by the adjudicating authority, this resolution plan shall remain in effect.” 23. As can be seen from the above, the Resolution Applicant has sought, inter alia, certain reliefs and concessions which fall in the jurisdiction of different Government Authorities, and/or are subjected to the provisions of different laws for the time being in force. In this connection, it is made clear that the amount payable by the SRA in terms of the plan to different creditors, stakeholders, and to keep the Corporate Debtor as a going concern is not a subject matter of any condition, assumptions, relief/concessions and/or qualification. It also needs to be underlined that the provisions of Section 31(4) of IBC, 2016 mandates the Resolution Applicant to obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under Section 31 of the IBC, 2016. In terms of the provisions of Section 14 of the Code even during the period of CIRP, no default in payment of current dues is a precondition for continuation of the License, Permit, Registration and similar rights. Thus, even during the moratorium period, some of the facilities forming part of the reliefs and concessions sought are made available to the CD only when there is no default in payment of the current dues. On approval of the Resolution Plan, the SRA/CD cannot be put on a better footing by exempting it from paying its legitimate dues under the law. For the sake of

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convenience, the explanation below Section 14 of the code is extracted below: “14. Moratorium. – (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) ….. (b) ….. (c) ….. (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Explanation.- For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;” (Emphasis Supplied) 24. Furthermore, the Code provides for consideration of the claims, by the IRP/RP in terms of the provisions of Section 18(b) and Section 25(b) read with the relevant regulations. 25. The Code, further, provides for preparation of an Information Memorandum in terms of the provisions of Regulation 36(2) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which contains, inter alia, a list of creditors along with the amounts claimed by them. Regulation 36(1) of the regulations (ibid), provides for submission of the said Information Memorandum to each member of the COC.

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Regulation 36A provides for invitation for expression of interest and Regulation 36B provides for a request for a Resolution Plan. It is with reference to the Information Memorandum and Evaluation Matrix that the RP issues a Request for Resolution Plan. The Request for Resolution Plan details each step in the process and the manner and purposes of interaction between the Resolution Professional and the Prospective Resolution Applicant. The Resolution Plan submitted after consideration of the IM, EM and the RFRP is then examined by the Committee of Creditors. Even then, it needs to satisfy the requirements of Regulations 37 and 38 of the extant regulations and only then it can be approved by the COC in terms of the provisions of Regulation 39 of the aforementioned regulations. After such approval, the Plan effectively becomes a contract entered into between CD represented through RP, SRA, the creditors of the CD, and other stakeholders and is binding on all of them. Section 31(1) of IBC, 2016, thus, takes care of most of the reliefs/concessions/waivers which are required by the Resolution Applicant. Furthermore, Section 32A of the Code provides for cessation of the liability for offences committed by the CD prior to initiation of the CIRP subject to the conditions laid down in the said section. 26. In this context a reference is also made to the decision of Hon’ble NCLAT in Worldfa Exports Pvt. Ltd Vs. Vivek Raheja and Anr. [Company Appeal (AT) (Insolvency) No. 827 of 2024 & I.A. No. 2994 of 2024] dated 30.04.2024 wherein a challenge was laid against the following observation of the NCLT:
“16. However, the resolution plan shall not be construed as waiver to any statutory obligations/liabilities arising out of the approved resolution plan and the same shall be dealt in accordance with the appropriate authorities concerned as per relevant laws. We are of the considered view that if any waiver is sought in the resolution plan, the same shall be subject to approval by the concerned authorities. The

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same view has been held by the Hon’ble Supreme Court in Ghanshyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Limited and Embassy Property Development case (supra).” The Hon’ble NCLAT, however, dismissed the Appeal with the following observation:
“Adjudicating Authority has already referred to the Judgment of the Hon’ble Supreme Court in the matter of Ghanshyam Mishra & Sons Private Limited’ Vs. Edelweiss Asset Reconstruction Company Limited’, in Civil Appeal No. 8129 of 2019, which clearly laid down that all claims which have not been dealt in the Resolution Plan does not survive after the approval of Resolution Plan. 6. Insofar as statutory waivers and concessions, Adjudicating Authority has rightly observed that SRA to file appropriate necessary application before the necessary Forum/Authority in order to avail the relief and the concession. 7. The Resolution Plan having been approved it is always open for the Applicant to make an appropriate application before the Statutory Authority for grant of such relief as permissible after approval of the Resolution Plan. 8. It goes without saying that all past liabilities which are not dealt with in the Resolution Plan stand extinguished by view of the Judgment of the Hon’ble Supreme Court in `Ghanshyam Mishra & Sons Private Limited’ (Supra) which is a well settled law.” In sum and substance, the SRA/CD would be entitled to no other relief/concession/waiver from this Adjudicating Authority except those available to it, as per the provisions of Section 31(1) and 32A of IBC, 2016. The SRA is, however, at liberty to approach the relevant authorities, who would consider these claims as per the provisions of the relevant law, in an expeditious manner. 27. It is apposite to mention that despite notices being served twice, the ex- Directors failed to appear before this Bench and have been proceeded ex-parte. 28. In the sequel to the above, we are inclined to approve the Resolution Plan as approved/recommended by the CoC as placed by the Applicant

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before this Adjudicating Authority. We, therefore, allow the present Application and approve the COC-approved Resolution Plan as placed before us by the Applicant/RP with the following directions: - (i) The approved Resolution Plan shall become effective from the date of passing of this Order and shall be implemented strictly as per the term of the plan and implementation schedule given in the Plan;
(ii) All claims which have not been dealt with in the Resolution Plan do not survive after the approval of the Resolution Plan. (iii) The SRA/CD would be entitled to no other reliefs/ concessions/waivers except those are available/permissible to it as per the provisions of Section 31(1) and 32A of IBC, 2016. The SRA is at liberty to approach the relevant authorities who would consider these claims as per the provisions of the relevant law in an expeditious manner. (iv) The Monitoring Committee as provided in the Resolution Plan shall be set up by the Applicant/RP within 07 days of passing of this Order, which in turn, shall take all necessary steps for time bound implementation of the Resolution Plan as per approval.
(v) The order of the moratorium in respect to the corporate debtor passed by this Adjudicating Authority under Section 14 of the IBC, 2016 shall cease to have effect from the date of passing of this Order; and
(vi) The Resolution Professional shall forward all the records relating to the conduct of the CIRP and the Resolution Plan to the IBBI for its record and database. 29. The Court Officer and Resolution Professional (RP) shall forthwith make available/send a copy of this Order to the CoC and the Successful Resolution Applicant (SRA) for immediate necessary compliance.
30. A copy of this order shall also be sent by the Court Officer and Applicant to the IBBI for their record.

               Sd/-     




 Sd/- 

(SUBRATA KUMAR DASH) (ASHOK KUMAR BHARDWAJ)

MEMBER (T)

MEMBER (J)