31st July, 2025 Approval of Resolution Plan - Omkar Speciality Chemicals Limited [IA Nos. 2717/MB/2024, 2908/MB/2024 & (Plan) No.12/2024 in CP (IB) No.1738/2017] (1.04 MB)
IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-II
IA Nos. 2717/MB/2024, 2908/MB/2024 & (Plan) No.12/2024 IN CP (IB) No.1738/2017
[Under Sections 60 (5), 30(6) & 31 of the Insolvency and Bankruptcy Code, 2016 read with Regulation 39(4) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 & Rule 11 of the NCLT Rules, 2016] IA No. 2717/MB/2024 Axis Bank Limited
)
7th Floor, Axis House,
)
C-2 Wadia International Centre, Pandurang
)
Budhkar Marg, Worli, Mumbai – 400025.
)
...Applicant
VS.
- Mr. Ajit Kumar
) Resolution Professional of
) M/s. Omkar Specialty Chemicals Ltd.
) 1A, Sanskrit Apartment
)
GH – 22, Sector 56, Gurgaon,
)
Haryana – 122011.
) …Respondent No. 1
- M/s. Kshitij Polyline Limited
) Successful Resolution Applicant
) 8, Sona Udyog, Parsi Panchayat Road
) Andheri East, Mumbai – 400069.
) …Respondent No. 2
IA 2908/MB/2024 NKGSB Co-operative Bank Ltd.
) 361, V.P. Road, Girgaum, ) Grant Road (East), Mumbai – 400004.
)
...Applicant
VS.
- Mr. Ajit Kumar
) Resolution Professional of
) M/s. Omkar Specialty Chemicals Ltd.
)
) …Respondent No. 1
- Bank of Baroda Ltd.
) Through its Authorized Representative
)
Zonal Stressed Asset Recovery Branch,
Meher Chamber, Ground Floor,
) Ballard Estate, Mumbai – 400001.
) …Respondent No. 2
- Axis Bank Limited
)
) …Respondent No. 3
- M/s. Kshitij Polyline Limited
) Successful Resolution Applicant
)
) …Respondent No. 4
IA Nos.2717/MB/2024, 2908/MB/2024 & (Plan) No.12/2024
Page 2 of 47
IA (Plan) No. 12/MB/2024
Mr. Ajit Kumar
) Resolution Professional of
) M/s. Omkar Specialty Chemicals Ltd.
)
) …Applicant
IN THE MATTER OF
CP (IB) No. 1738/MB/2017
M/s. Ela Enterprise
14A, Karmyog Myureshwar CHS Near Police Station, Shivagi Chowk Kulgaon Badlapur East Thane Maharashtra 421503 …Operational Creditor
Vs. Omkar Speciality Chemicals Limited
…Corporate Debtor
B-34, MIDC, Badlapur (East)
Thane, Maharashtra – 421503
CORAM:
HON’BLE SHRI ASHISH KALIA, MEMBER (JUDICIAL)
HON’BLE SHRI SANJIV DUTT, MEMBER (TECHNICAL)
Appearances: Hybrid
For Applicant in IA 12/2024 : Adv. Shyam Kapadia
For Applicant in IA 2908/2024 : Adv. Sagar Wagale
For Applicant in IA 2717/2024 : Adv. Nausher Kohli
For Respondent No.2 in
IA 2717/2024 : Adv. Viraj Parikh
For Respondent No.1/RP IN
IA 2717/2024, IA 2908/2024 : Adv. Shyam Kapadia
Pronounced on: 00.07.2025
Page 3 of 47
ORDER [PER: Coram]
BACKGROUND
1.1
Omkar Speciality Chemicals Limited (hereinafter referred to as “the Corporate
Debtor”) is a company incorporated under the Companies Act, 1956 on
24.02.2005. The Corporate Debtor has been engaged in the business of
manufacture of speciality chemicals with manufacturing units in MIDC, Badlapur
and Lote Parshuram Industrial Area, Chiplun, Maharashtra.
1.2
M/s. Ela Enterprises (hereinafter referred to as “the Operational Creditor”) filed
an application under Section 9 of the Insolvency and Bankruptcy Code, 2016
(hereinafter referred to as “the Code”) to initiate the Corporate Insolvency
Resolution Process (hereinafter referred to as “CIRP”) in respect of the
Corporate Debtor. The Corporate Debtor was admitted into CIRP vide order of
this Tribunal dated 05.12.2022 and Mr. Arun Ramchandra Gaikwad was
appointed as the Interim Resolution Professional (“IRP”) of the Corporate Debtor.
1.3
Pursuant to the initiation of CIRP, the IRP made a public announcement in Form
A on 22.12.2022, inviting claims from all the creditors of the Corporate Debtor.
Consequently, the IRP received and collated the claims and constituted the
Committee of Creditors (hereinafter referred to as “ the CoC”). The finalized list
of members of the CoC with their respective voting shares as on the date of filing
the Plan application is as under : -
Sr. No. Financial Creditors
Admitted Claims
Voting
Share
1.
Bank of Baroda Ltd.
290,05,81,881.00
82.96%
2.
Axis Bank Ltd.
17,60,54,359.00
5.04%
3.
NKGSB Co-operative Bank Ltd.
41,98,42,132.94
12.00%
Total
349,64,78,372.94
100%
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1.4
In the 2nd CoC Meeting held on 06.02.2023, the IRP was replaced by Mr. Ajit
Kumar as the Resolution Professional (hereinafter referred to as “the RP”) of the
Corporate Debtor. In the 3rd CoC Meeting held on 17.04.2023, the RP apprised
the CoC that the public announcement dated 15.02.2023 in Form-G was
published without the CoC’s approval of the Evaluation Matrix and Request For
Resolution Plan (“RFRP”), on account of which the Expression of Interest (“EoI”)
received pursuant to the Form-G published on 15.02.2023 would have to be
rejected. The Earnest Money Deposit (“EMD”) received from the earlier
participants shall be refunded. After the CoC’s approval, the RP submitted the
Information Memorandum of the Corporate Debtor on 24.04.2023 and re-
published the Form-G for a fresh public announcement on 27.04.2023 wherein
the last date for receipt of EoIs was 13.05.2023.
1.5
The RP received 12 EoIs and as per Regulation 36A(10) of the CIRP
Regulations, the RP published a provisional list of Prospective Resolution
Applicants (hereinafter referred to as “PRAs”) on 23.05.2023 which consisted of
10 PRAs. After addressing the objections as per Regulation 36A(11) of the CIRP
Regulations, 2 more PRAs were added to the list of PRAs. As per Regulation
36B(1) of the CIRP Regulations, the Information Memorandum, RFRP and
Evaluation Matrix were issued to the PRAs and the last date for the submission
of resolution plans was set for 27.06.2023 which was further extended until
12.07.2023. The RP received the Resolution Plans from following resolution
applicants on 12.07.2023: (i) Delicare Lifesciences Pvt. Ltd.; (ii) Kshitij Polyline
Ltd.; (iii) Vyapak Enterprises and (iv) Siddharth Carbochem Products Ltd.
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1.6 After taking due approval from the CoC, the RP appointed the firm PRT & Associates to submit a due diligence report on all the resolution applicants with regard to their eligibility as per Section 29A of the Code. The due diligence report was submitted on 14.09.2023. 1.7 In the 7th CoC Meeting held on 18.09.2023, all the eligible resolution plans were placed before the CoC and discussed in detail. Since the CoC was not satisfied with the commercial offers, they requested the resolution applicants to improve the resolution plans in terms of value. 1.8 Kantikars Advisory LLP appointed by the CoC on 25.08.2023 to trace the immovable properties of the Corporate Debtor submitted a report on 25.09.2023, identifying certain assets of the Corporate Debtor which were not disclosed by the Suspended Board of Directors. Consequently, the RP updated the Information Memorandum of the Corporate Debtor on 20.10.2023 and included the newly identified assets of the Corporate Debtor. While the RP received 3 revised resolution plans on 25.10.2023, one resolution applicant withdrew from the resolution process vide email dated 30.10.2023. 1.9 In the 8th CoC Meeting held on 03.11.2023, the revised resolution plans were taken up for discussion. Although the three resolution applicants expressed their willingness to proceed with the challenge mechanism, the CoC was unwilling to proceed with the same owing to the significant disparity between the proposed resolution amounts payable under the resolution plans submitted by the Highest Bidder 1 (HB1) and Highest Bidder 2 (HB2). Post meeting, the RP received an email from Bank of Baroda, wherein it was requested that the voting on resolution
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plan may be deferred since the distribution among the secured lenders was not
decided. Resultantly, the voting on the resolution plans was deferred.
1.10 In the 9th CoC Meeting held on 13.12.2023, the CoC with 83% of majority
resolved that the proceeds of the resolution plan shall be distributed in proportion
to the value of the security interest vested with the respective CoC Member.
Meanwhile, the RP apprised the CoC that a claim had been received from the
Income Tax Department in Form B for an amount of Rs.75,61,04,475/- and the
same had been verified and categorized as per Regulation 13(1B) of CIRP
Regulations. Consequently, the Information Memorandum was updated on
20.12.2023 to include this claim. Based on the legal opinion and the approval of
the CoC, the resolution applicants were allowed to submit their revised resolution
plans latest by 27.12.2023.
1.11 In the 10th CoC Meeting held on 30.12.2023, Kshitij Polyline Limited expressed
a commitment to furnish an addendum to its resolution plan by the end of the
day. Accordingly, the CoC decided to put all three resolution plans along with
their addendums for voting.
1.12 The voting on resolution plans resumed on 09.02.2024 and concluded on
16.02.2024. The CoC with 83% majority approved the resolution plan dated
27.12.2023 along with its addendum dated 30.12.2023 submitted by the
resolution applicant, Kshitij Polyline Limited (hereinafter referred to as
“Successful Resolution Applicant/SRA”).
1.13 Mr. Ajit Kumar, RP of the Corporate Debtor filed the Plan IA No.12/2024 seeking
approval of this Tribunal for the Resolution Plan submitted by the Successful
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Resolution Applicant i.e., M/s. Kshitij Polyline Limited as per the provisions of
Section 30(5) of the Code.
1.14 Meanwhile, Axis Bank Limited and NKSGB Co-operative Bank Ltd. (both
members of the CoC) filed IA No.2717/2024 and I.A. No.2908/2024 respectively
objecting to the manner of distribution of resolution plan amount and the repeated
modifications to the Resolution Plan made by the Successful Resolution
Applicant. Both the objection IAs are being dealt with in detail in the forthcoming
paragraphs.
I.A. No. 2717/2024
AVERMENTS MADE BY THE APPLICANT
2.1 This IA has been filed by Axis Bank Limited (hereinafter referred to as the “Applicant”) as per the provisions laid down under Section 60(5) of the Code read with Rule 11 the NCLT Rules objecting to the Resolution Plan and praying that the Plan may be returned to the CoC for reconsideration by treating the Applicant herein as a Secured Financial Creditor of the Corporate Debtor and thereby distributing the Resolution Plan amount based on the voting share held by the respective Financial Creditors/members of the CoC. 2.2 The sequence of events from the filing of application under Section 9 of the Code to the submission of Resolution Plan presented by the SRA for approval of this Tribunal has been narrated in paras 1.2 to 1.13 above. This IA is primarily concerned with two issues, namely, re-classification of the Applicant from secured Financial Creditor to Unsecured Financial Creditor and the consequent distribution of proposed Resolution Plan amount based on the security interest held by the
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individual creditors rather than the voting share of the respective Financial
Creditors.
2.3 The Applicant has drawn attention to the “proposed payments to creditors” as per
Annexure-B of the Plan (Page 67 of the Plan) which brings out the distribution of
the Resolution Plan amount to the Financial Creditors, prior to the Addendum, as
under :-
Name of the
Creditor
Amount Claimed
(Rs.)
Amount
of
Claim Admitted
(Rs.)
Payments
proposed
(Rs.)
Bank of Baroda,
Fort Branch
290,05,81,881.00
290,05,81,881.00
18,07,64,000
Axis Bank Ltd.
17,60,54,359.00
17,60,54,359.00
1,09,72,000
NKGSB Co-
operative Bank
Ltd.
41,98,42,132.94
41,98,42,132.94
2,61,64,000
2.4 In the 10th CoC Meeting held on 30.12.2023, the revised resolution plans were discussed in detail among the CoC members. Kshitij Polyline Limited, one of the PRAs expressed their commitment to furnish an addendum to its Resolution Plan by the end of the same day. Kshitij Polyline Limited submitted its addendum dated 30.12.2023 to the Plan. The Addendum to the Plan set aside the above distribution pattern and set out that the distribution of the Resolution Plan amount would be decided by the CoC by considering key factors like aggregate amount of admitted claims, the distinct characteristics of the loans provided and the security interests held by individual creditors. The aforementioned portion of the Addendum discriminates between the same class of creditors i.e. Secured Financial Creditors which is contrary to the settled law.
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2.5 As per the Addendum, the Applicant herein and NKGSB Bank were treated as
Unsecured Financial Creditors and the distribution pattern of the proposed
settlement amount was revised in the following manner:-
Name of the
Creditor
Amount Claimed
(Rs.)
Amount
of
Claim Admitted
(Rs.)
Payments
proposed
(Rs.)
Bank of Baroda
Ltd.
290,05,81,881.00
290,05,81,881.00
21,19,41,000
Axis Bank Ltd.
17,60,54,359
17,60,54,359
17,61,000
NKGSB Co-
operative Bank
Ltd.
41,98,42,133
41,98,42,133
41,98,000
The reason why Bank of Baroda received comparatively a large share of the
proceeds was that it held first charge on the majority of assets of the Corporate
Debtor.
2.6 The voting on the Resolution Plans commenced on 09.02.2024 and concluded on
16.02.2024. The CoC with 82.96% majority approved the Plan and its Addendum
submitted by Kshitij Polyline Limited, wherein Bank of Baroda holding voting share
of 82.96% voted in favour of the Resolution Plan and the Addendum thereto.
However, the Applicant holding 5.04% voting share and NKGSB Bank with a 14%
share voted against the Plan and the Addendum since the distribution pattern of
proceeds outlined in the Plan unfairly prejudiced their rights and the admitted
claims.
2.7 The Applicant has placed on record the following facts to demonstrate its position
as a Secured Financial Creditor: -
a. In 2015, the Corporate Debtor sought financial support from the
Applicant in terms of approval and disbursement of a Vendor Financing
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Facility/Purchase Invoice Discounting Facility with the understanding
that the Corporate Debtor would inform identified customers/dealers
about their arrangement with the Applicant. On the basis of the requests
of the Corporate Debtor, the Applicant agreed to extend following credit
facilities to the Corporate Debtor as outlined in the Sanction Letter dated
13.11.2015:-
Sr. No.
Nature of Facilities
Limit
(Rs. Crores)
1.
Vendor Financing Facility/Purchase Invoice
Discounting Facility
25
2.
Sales Invoice Discounting Facility of
Domestic Receivables
15
b. The Corporate Debtor approached the Applicant on 20.11.2015 seeking
certain modification in the terms of the Sanction Letter dated 13.11.2015
which was allowed vide letter dated 07.12.2015. In lieu of the credit
facilities being granted, sanctioned and disbursed to the Corporate
Debtor, multiple facility and security documents were executed in favour
of the Applicant such as Demand Promissory Notes, D.P.Note Delivery
Cum
Waiver
Letter,
Factoring
Agreement
dated
15.12.2015,
Management and Collection Agreement, Invoice Financing Agreement,
two Undertakings dated 15.12.2015, Deed of Guarantee dated
15.12.2015 executed by its two Directors and Deed of Hypothecation of
current assets (stock and book debts) dated 15.12.2015.
c. Under the Deed of Hypothecation dated 15.12.2015, the Applicant
created a security on the current assets of the Corporate Debtor on pari
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passu basis. The charge was registered by the Applicant on the Ministry
of Corporate Affairs (MCA) portal.
2.8 The reclassification of the Applicant’s claim from secured to unsecured financial
creditor, without any justification, violates Section 53 of the Code which lays down
payment priority during liquidation. The Applicant’s claim as ‘secured financial
creditor’ was admitted by the IRP and RP and, therefore, its treatment as an
‘unsecured’ creditor is neither supported by evidence nor legal reasoning. The
Applicant submits that the provision which treats the Applicant as an ‘unsecured’
creditor is contrary to the provisions of the Code. It is also submitted that the Plan
fails to offer any explanation for such change indicating significant irregularity in
the Plan since it defeats the rights of the Applicant as a ‘secured creditor’
2.9 As per the Addendum, the distribution of the settlement amount would be decided
by the CoC which granted Bank of Baroda holding majority voting share of 82.96%
the ability to unilaterally determine the distribution amount. The Plan read with the
Addendum does not secure the interest of the similarly situated financial creditors.
The commercial wisdom of the CoC was replaced with the brute majority exercised
by Bank of Baroda having 82.96% voting share to seek a revision of the Plan in
the form of an Addendum giving the CoC the power to decide the distribution
pattern of the settlement amount with the sole objective of appropriating the
majority proceeds of the Plan to itself. The Plan along with the Addendum and the
ongoing CIRP of the Corporate Debtor does not align with the objects of the Code.
2.10 In its Written Submissions, the Applicant has made further averments. It is stated
that the Applicant’s claim of Rs.17,60,54,359/- was duly admitted by the
Resolution Professional as a Secured Financial Creditor. The secured status of
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the Applicant was affirmed and accepted by this Tribunal vide its order dated 08.10.2024 passed in I.A. No.3 of 2024 filed by Bank of Baroda seeking classification of the Applicant and NKGSB Bank as unsecured financial creditors. 2.11 In the 8th CoC Meeting held on 03.11.2023, Bank of Baroda deferred voting on the revised plans, citing ambiguity in the distribution of proceeds among financial creditors. Subsequently, Bank of Baroda, via email requested the RP to include an agenda item in the 9th CoC Meeting to determine whether distribution should be based on security interest or voting share. This agenda was introduced by the Bank of Baroda with a mala fide intent. 2.12 In the 9th CoC Meeting held on 13.12.2023, Bank of Baroda approved a resolution to distribute proceeds based on ‘security interest’ despite the Applicant and NKGSB Bank voting in favour of a voting share-based distribution. 2.13 On 27.12.2023, Respondent No. 2 submitted a revised Resolution Plan based on the updated Information Memorandum dated 20.12.2023 pursuant to the admission of new claims. The revised Resolution Plan proposed equitable treatment with all three financial creditors i.e., Bank of Baroda, Axis Bank and NKGSB Bank, receiving a recovery of 6.23% of their admitted claims. 2.14 On 30.12.2023, the Successful Resolution Applicant submitted an Addendum to the Resolution Plan, leaving the distribution of the resolution proceeds among the secured financial creditors to the discretion of the CoC. The Addendum did not provide any calculation or specific amount that would be received by the secured financial creditors, if distribution was done based on security interest. For ease of reference, the calculation of the amount to be distributed to each of the three
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creditors based on security interest has been reproduced in tabular form as
under:-
Name of
Creditor
Admitted Claim
(Rs.)
Payments
proposed (Rs.)
% of Recovery
Bank of Baroda
2,90,05,81,881/-
21,52,63,410/-
(98.79%)
7.42%
Axis Bank
17,60,54,359/-
8,71,600/-
(0.40%)
0.50%
NKGSB Bank
41,98,42,133/-
17,64,990/-
(0.81%)
0.42%
Total
3,49,64,78,373/-
21,79,00,000/-
8.34%
2.15 Despite dissent from the Applicant and NKGSB Bank, the CoC, dominated by Bank of Baroda, approved the revised Resolution Plan and the Addendum between 09.02.2024 and 16.02.2024. The above tabular data presents a scenario where one secured financial creditor receives 93.03% of the total proceeds and 98.79% of the proceeds proposed for secured financial creditors while being the only CoC member approving the resolution plan which is not a reflection of fair commercial wisdom, but is, in fact, a blatant abuse of power. 2.16 The distribution mechanism adopted under the revised Resolution Plan and its Addendum violate the fundamental principles of fairness and equitable treatment of similarly situated creditors under the Code. The Hon’ble Supreme Court in India Resurgence ARC Pvt. Ltd. Vs. Amit Metaliks Ltd. [(2021) 19 SCC 672] has unequivocally held that similarly situated creditors must receive fair and equitable treatment and that the business decision taken in exercise of the commercial wisdom of CoC does not call for interference unless creditors belonging to a class being similarly situated are denied fair and equitable treatment. In the present case, the Applicant and Bank of Baroda, both are secured financial creditors. The disproportionate allocation of 98.79% of the proceeds to Bank of Baroda while
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relegating the Applicant and NKGSB Bank to negligible shares contravenes the
principle of equitable treatment to similarly situated creditors.
2.17 The Applicant relies on the judgment of Hon’ble Supreme Court in Committee of
Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta & Ors. [(2020) 8
SCC 53] wherein it was emphasized that the CoC must ensure that the Resolution
Plan balances the interests of all the stakeholders. Reliance is also placed on the
judgment of Hon’ble NCLAT in Bank of Maharashtra VS. Videocon Industries
Ltd. [2022 SCC OnLine NCLAT 6] wherein it was held that the CoC may
reconsider its decision, if fairness is compromised and the Resolution Plan may
be remitted for reconsideration. The Applicant submits that Bank of Baroda’s
actions, including manipulating the CoC’s voting process and attempting to
reclassify the Applicant as an unsecured creditor, reflect a blatant disregard for
this mandate and the skewed distribution under the Addendum warrants such
reconsideration by the CoC to ensure compliance with the objectives of the Code.
3.
AFFIDAVIT-IN-REPLY BY RP/ RESPONDENT No.1
3.1 In the 4th CoC Meeting held on 05.06.2023, the RP informed the CoC that the
Applicant was categorized as a secured creditor on the basis of its charge
registered with Ministry of Corporate Affairs website, but the RP did not receive
any NOC granted by Bank of Baroda in favour of the Applicant to mortgage/create
charge on the properties/assets of the Corporate Debtor which were already
mortgaged to Bank of Baroda. The RP and CoC sought legal opinion on the status
of claim of the Applicant. As per the legal opinion received on 11.08.2023, the
decision of the RP was affirmed in classifying the Applicant as ‘Secured Creditor’.
It was opined that the RP shall follow Regulation 21 of the Liquidation Process
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Regulations while ascertaining the existence of security interest held by the
Creditor and that the RP had no adjudicatory powers to determine the validity of
creation of charge.
3.2 Bank of Baroda, holding 82.96% share in CoC, being aggrieved by the legal
opinion filed an I.A. No.3 of 2024 to reclassify the claim of Applicant as unsecured
creditor on account of its failure to obtain NOC. However, the status of the
Applicant as a Secured Financial Creditor was upheld vide order of this Tribunal
dated 08.10.2024 passed in I.A. No.3 of 2024.
3.3 In the 7th CoC Meeting held on 18.09.2023, all the eligible resolution plans were
presented before the CoC in detail. Since the CoC was not satisfied with the
commercial offers, they requested the resolution applicants to improve the
resolution plans in terms of value. The Revised Resolution Plans received from
the PRAs were then taken up for discussion in the 8th CoC Meeting held on
03.11.2023. Post-meeting, Bank of Baroda addressed an email wherein it was
requested that voting on Resolution Plans shall be deferred, since the distribution
among the secured lenders was yet to be decided. Consequently, the voting on
the Resolution Plans was deferred.
3.4 In the 9th CoC Meeting held on 13.12.2023, the CoC with 82.96% of majority
resolved that the proceeds of the Resolution Plan shall be distributed in proportion
to the value of the security interest vested with the respective members of the
CoC.
3.5 In the 10th CoC Meeting held on 30.12.2023, the revised Resolution Plans were
discussed in detail. The CoC requested Kshitij Polyline Limited to provide an
Addendum to the Resolution Plan regarding allocation of proceeds among
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secured financial creditors. An Addendum dated 30.12.2023 was received by the
CoC on the same day. All the Resolution Plans were put to vote and the voting
concluded on 16.02.2024. The CoC approved with 83% majority the Resolution
Plan dated 27.12.2023 along with its Addendum dated 30.12.2023 submitted by
Kshitij Polyline Limited which emerged as the Successful Resolution
Applicant/SRA.
3.6 The Applicant consciously chose to dissent to the approval of the Resolution Plan.
Irrespective of whether the distribution is valid or not, if the Applicant being
dissenting creditor is being paid more than liquidation of its security in terms of
Section 30(2) of the Code read with Regulation 38 of CIRP Regulations, then the
Applicant cannot maintain any grievance. As per the distribution pattern approved
by the CoC, if the amount proposed under the Resolution Plan is distributed to the
Applicant in proportion to value of its security, the Applicant is likely to get higher
than the Liquidation Value of its security. In India Resurgence ARC Pvt. Ltd. Vs.
Amit Metalliks Ltd., [(2021) SCC OnLine SC 409], the Hon’ble Supreme Court
clarified that a dissenting financial creditor is entitled only to liquidation value and
once this statutory minimum is met, it cannot have a legal grievance. The Applicant
in the present case having been paid more than the liquidation value of its security
interest, has no legitimate basis to assail the CoC-approved distribution
mechanism. The RP/Respondent No.1 has cited a few more judicial precedents
in support of its contentions both in the affidavit-in-reply and its written
submissions.
3.7 As per Section 30(4) of the Code (post-amendment of 2019), the CoC is
empowered to approve a resolution plan after considering the feasibility, viability
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and manner of distribution, taking into account the priority and the value of security interests. The ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the CoC, as held by the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta [(2019) SCC OnLine SC 1478]. The Coc enjoys full freedom to pay secured creditors amounts based upon the value of their security. Once the CoC exercises its commercial wisdom in accordance with law, the same cannot be interfered with. NCLT is not endowed with the jurisdiction to analyse or evaluate the commercial decision of the CoC which is made non-justiceable, as held in K. Sashidhar Vs. Indian Overseas Bank [(2019) 12 SCC 150]. Fair and equitable treatment does not mean equal payment to all. The CoC may approve differential treatment based on the value and nature of the security. 3.8 The distribution mechanism was approved in the 9th CoC Meeting held on 13.12.2023 with a majority of 82.96%. However, the Applicant failed to challenge the decision of the CoC at the relevant time. Therefore, any belated challenge to the Resolution Plan which merely adopts the distribution mechanism approved by the CoC is unsustainable. 3.9 The Code does not provide any distinction between a single-member and multi- member CoC. Regardless of the composition of CoC, the Code places the CoC in control of the insolvency resolution process. As regards approval of resolution plan, the Code provides for 66% vote share and once this threshold is met, the decision of the CoC, irrespective of whether it is a single-member or multi- member, becomes sacrosanct and binding on all stakeholders. Hence, the
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dominant position of Bank of Baroda in the CoC does not invalidate its commercial
decisions.
3.10 It is submitted that the Applicant had raised allegations concerning the actions of
Bank of Baroda without impleading it as a party. This renders the Application
fatally defective for mis-joinder of necessary parties.
4.
AFFIDAVIT-IN-REPLY BY RESPONDENT No.2/KSHITIJ POLYLINE LTD.
4.1 Ms. Vineeta Jain, Director of Kshitij Polyline Ltd./SRA, duly authorised to file Reply
on behalf of Respondent No.2 through Board Resolution dated 18.12.2024, has
made the following submissions: -
4.2 Details of the security interest held by each CoC Member was provided to the SRA
in the Information Memorandum. Bank of Baroda had an exclusive first charge
over a sizeable chunk of the assets of the Corporate Debtor against its term loan,
whereas the Applicant, Axis Bank had pari-passu charge over the stock-in-trade
and pledge over certain shares held by the Corporate Debtor.
4.3 In the 9th CoC Meeting held on 13.12.2023, the item ‘Approval of method of
disbursement of funds in case resolution plan is approved.’ was put to vote before
the CoC on whether the disbursement should be according to the liquidation value
of security interest held by respective member of the CoC or according to vote
share towards which the CoC voted with 82.96% share.
4.4 Pursuant to admission of new claims, the Information Memorandum was revised
on 20.12.2023. Thereafter, the Resolution Applicants were informed to revise their
resolution plans. Respondent No.2 submitted a revised resolution plan dated
27.12.2023 in which Section VII of the Plan dealt with treatment of secured
financial creditors. Annexure B at Page No.67 of the Resolution Plan provided the
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distribution amongst the secured financial creditors on the basis of the quantum of their admitted claims. 4.5 In the 10th CoC Meeting held on 30.12.2023, the CoC insisted upon certain changes and granted time to incorporate the changes to which the SRA adhered and submitted an Addendum to the Resolution Plan. As per the Addendum to the Plan, the distribution of the proposed settlement amount among Secured Financial Creditors shall be determined by the CoC. This assessment will consider key factors including the aggregate amount of admitted claims, the distinct characteristics of the loans provided and the security interest held by individual creditors. 4.6 In the 9th CoC Meeting held on 13.12.2023, 82.96% of the CoC voted in favour of the distribution between secured financial creditors in accordance with liquidation value of security interest. This distribution of proceeds amongst secured financial creditors was not challenged by the Applicant at the relevant time. 4.7 The Applicant being a dissenting financial creditor did not vote in favour of the Resolution Plan. It is a settled law that the only ground on which a dissenting financial creditor can challenge the Resolution Plan is that it is not receiving its entitlement as per Section 30(2) of the Code, which is not the case of the Applicant. 4.8 It is a settled law that no creditor can object to the approval of the Resolution Plan on the ground that it deserves more value although there is no legal grievance in that regard. The issue of whether value provided for in a resolution plan is sufficient and the manner in which it ought to be distributed fall exclusively and squarely in the domain of the commercial wisdom of the CoC.
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4.9 Lastly, it is submitted that the SRA and the Resolution Plan do not take sides in
the inter se disputes between members of the CoC. The Resolution Plan provides
for both eventualities whether the Applicant is categorized as a secured financial
creditor or as an unsecured financial creditor.
5.
ANALYSIS AND FINDINGS
5.1 We have gone through the pleadings and records and heard the Ld. Counsel
appearing on behalf of the parties at length. By way of this IA 2717/2024, the
Applicant has challenged the Resolution Plan dated 27.12.2023 along with its
Addendum dated 30.12.2023 presented by the Successful Resolution Applicant
i.e., M/s. Kshitij Polyline Limited. The Applicant has prayed that the Plan should
be returned to the CoC for reconsideration of status of the Applicant as a ‘secured
financial creditor’ and for ordering the distribution of the settlement amount to the
Applicant based on the voting share rather than the security interest held by it. The
main issues raised in the present case are whether the Applicant is to be treated
as a secured financial creditor under the Code and whether the manner of
distribution under the Resolution Plan approved by the CoC by requisite majority
under Section 30(4) of the Code can be interfered with at the behest of the
applicant who is one of the dissatisfied/dissenting Creditors.
5.2 As per Section 3(30) of the Code, a ‘secured creditor’ means a creditor in favour
of whom security interest is created. As per Section 3 (31) of the Code, “security
interest” means right, title or interest or a claim to property, created in favour of, or
provided for a secured creditor by a transaction which secures payment or
performance of an obligation includes mortgage, charge, hypothecation,
assignment and encumbrance or any other agreement or arrangement securing
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payment or performance of any obligation of any person, provided that security
interest shall not include a performance guarantee.
5.3 It is observed from the record that the security interest was created by the
Corporate Debtor primarily in favour of the Bank of Baroda who was having
82.96% voting share on the basis of the security interest so created. It is an
undisputed fact that Bank of Baroda held the first charge on the majority of
Corporate Debtor’s assets. Such charge was duly registered on the MCA portal.
However, it is pertinent to note that the other two dissatisfied creditors viz. the
Applicant and the NKGSB Co-operative Bank Limited have also got created
security interest in their favour subsequently but without obtaining consent of the
Bank of Baroda. The charge of the Applicant Bank in this IA cannot be considered
at par with that of the Bank of Baroda, which holds a secured charge over a large
chunk of assets of the Corporate Debtor. The charge created in favour of the
Applicant herein cannot be regarded as being pari-passu in rank i.e., entitling it to
an equal share in the distribution of the sale proceeds from the secured assets.
5.4 Knowing fully well that the first charge over the securities or assets of the
Corporate Debtor was already registered in favour of the Bank of Baroda, the
Applicant Bank has taken risk while extending the credit facilities to the Corporate
Debtor. This was a conscious commercial decision on the part of the Applicant
Bank. Therefore, it cannot now claim to be at par with the Bank of Baroda, which
had extended credit facilities against unencumbered securities without taking any
risk. This is a settled position of law that two unequals cannot be treated as equals
before a court of law. The Applicant does not fall within the class of secured
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creditors. So its claim to be treated at par with the Bank of Baroda has no legal
standing.
5.5 A plain reading of the judgment of Hon’ble Apex Court in Amit Metalliks (supra),
as relied upon by the Applicant, clearly establishes that there must be “fairness of
distribution among similarly situated creditors.” The emphasis is laid on “similarly
situated creditors”. As discussed above, the Applicant Bank is not in the category
of similarly situated creditor vis-a-vis Bank of Baroda for want of unencumbered
security interest. As it does not hold any unencumbered security interest in its
favour, it cannot be regarded as holding a pari passu charge in comparison to the
Bank of Baroda, which holds an unencumbered charge over the assets. The
Applicant thus belongs to a distinct category and, therefore, cannot be treated as
part of the same class of Secured Creditors as Bank of Baroda.
5.6 Further, it is observed from the record that the Applicant, being member of the
Committee of Creditors, has not given its consent to the Resolution Plan. In other
words, the Applicant has been a dissenting creditor and, accordingly, it is only
entitled to the liquidation value of its security interest in terms of Section 30(2) of
the Code. A dissenting creditor cannot seek a higher amount to be paid to it than
what is prescribed under the Code. The law is now settled that a dissenting
Financial Creditor is entitled only to liquidation value and once this statutory
minimum is met, it cannot have a legitimate grievance. It is also well settled that
fair and equitable treatment does not mean equal payment to all and that the CoC
may approve differential treatment based on the value and nature of the security.
Similarly, it has been held that if an “equity for all” approach recognizing the rights
of different classes of creditors as part of an insolvency resolution process is
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adopted, secured financial creditors will, in many cases, be incentivised to vote for
liquidation rather than resolution, as they would have better rights if the corporate
debtor was to be liquidated rather than a resolution plan being approved. This
would defeat the entire objective of the Code which is to first ensure that resolution
of distressed assets takes place and only if the same is not possible should
liquidation follow [K. Sashidhar (supra)].
5.7 It is now firmly established that commercial wisdom of CoC cannot be the subject
matter of judicial review, unless similarly situated creditors are denied fair and
equitable treatment. Full freedom and discretion have been given to the
Committee of Creditors to so classify creditors and to pay secured creditors
amounts which can be based upon the value of their security, which they would
otherwise be able to realise outside the process of the Code, thereby stymying the
corporate resolution process itself [CoC of Essar Steal India Ltd. (supra)].
5.8 In view of the above discussion and after considering the contentions, perusing
the pleadings and submissions and appreciating the applicable legal position, we
are of the opinion that the present Interlocutory Application No.2717 of 2024 filed
by the Applicant lacks merit. Section 30(4) of the Code explicitly permits CoC to
consider both the “priority” and the “value of security interest” when approving a
resolution plan. Therefore, the decision of the CoC in the present case to allocate
the Plan proceeds proportionately to the value of security interest is consistent
with the Code and judicial precedents and the said decision of the CoC being in
accordance with the provision of Section 30(4) of the Code cannot be interfered
with by this Adjudicating Authority. Accordingly, the objection raised by the
Applicant /dissatisfied financial creditor is not legally sustainable and, hence, the
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same stands rejected. Hence, IA 2717/2024 filed by the Applicant/Axis Bank
Limited is dismissed.
I.A. No.2908/2024
AVERMENTS OF THE APPLICANT
6.1 This I.A. No.2908/2024 has been filed by NKGSB Co-operative Bank Ltd. (hereinafter referred to as the “Applicant”), as per the provisions laid down under Section 60(5) of the Code read with Rule 11 of the NCLT Rules, 2016 praying for a declaration that in terms of Regulation 39(1A)(a) of the CIRP Regulations, the SRA/Respondent No.4 could not have modified the Resolution Plan and for cancelling or annulling the modifications so made to the proposed Resolution Plan. 6.2 The Applicant is a multi-state co-operative society registered under the provisions of the Multi-State Co-operative Societies Act, 2002 and the Reserve Bank of India for providing banking services to its customers. 6.3 The Corporate Debtor i.e., Omkar Speciality Chemicals Limited earlier banking with Citi Bank, approached the Applicant in the year 2017, to take over the Cash Credit Facilities from Citi Bank. The Applicant vide Sanction Letter dated 03.05.2017 agreed to takeover Cash Credit Facilities from Citi Bank and sanctioned a Cash Credit facility of Rs.25,00,00,000/- (Rupees Twenty-Five Crore Only) to the Corporate Debtor for the purpose of Working Capital. The said facilities were secured by way of hypothecation of stock and Book Debts; registered mortgage of Non–Agricultural land bearing Survey No.9, Hissa No.2 at Kharwai owned by Mr. Pravin Herlekar and Mrs. Anjali Herlekar; pledge of Fixed Deposit of Rs.300.00 Lacs and Personal Guarantees of Mr. Pravin Shivdas Herlekar, Mrs. Anjali Pravin Herlekar and Mr. Rishikesh Pravin Herlekar.
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6.4 Pursuant to the initiation of CIRP against the Corporate Debtor and admission of
the Applicant’s claim as a ‘secured financial creditor’, Form-G was published and
Expressions of Interest were invited. Upon publication of Form-G, Resolution
Plans were received among others from Respondent Nos.4 viz. Kshitij Polyline
Limited. Pursuant to submission of the proposed resolution plan submitted by the
Respondent No.4, it was permitted to be modified on several occasions which was
completely contrary to mandate of the Code.
6.5 The repeated modifications not only resulted in delay in conducting the CIRP and
the revision of the offers made under the proposed resolution plan but also had
the effect of prejudicing the Applicant. A brief chronology of events pertaining to
the proposed Resolution Plan submitted by Respondent No.4 is furnished as
under: -
(a) In terms of Form G published by the RP, the Prospective Resolution
Applicants/PRAs were required to submit their Expression of Interest/
EoI on or before 13.05.2023. Subsequently, along with other PRAs,
Respondent No.4 submitted its proposed Resolution Plan. The
Resolution Plans were formally unsealed and opened by the respective
resolution applicants in the 5th CoC Meeting held on 18.07.2023.
(b) During the 7th CoC Meeting held on 18.09.2023, the members were of
the view that the existing commercial offer under the Resolution Plans
were not satisfactory, requiring improvement. The PRAs were instructed
to come up with the maximum value that they could offer as per their
respective Resolution Plans. Pursuant to the CoC’s directive, the
Resolution Plan was allowed to be modified once. Respondent No.4
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submitted its Resolution Plan in terms of the directives of the CoC titled
“Binding Resolution Plan” dated 25.10.2023.
(c) The Information Memorandum was revised and updated on several
occasions. Pursuant to a clarification received from Bank of Baroda
(hereinafter referred to as “Respondent No.2”) and a member of
CoC with regard to property at C-43, Lote-Parshuram Industrial
Estate at Village Awashi, Taluka Khed District Ratnagiri; the
Information Memorandum was further updated to exclude the said
property which promoted a second round of revision in the
Resolution Plans and proposed Resolution Plans including the plan
submitted by Respondent No.4 again on 25.10.2023 on the basis of
the revised and updated Information Memorandum although the
RFRP did not postulate any modifications to the RFRP. At this
stage,
the
CoC
questioned
the
permissibility
of
modifications/revisions to the Resolution Plan in view of the
mandate contained in the Code. On the basis of the concerns raised
by the CoC, RP sought legal opinion regarding the permissibility of
PRAs to modify the resolution plan more than once. The legal
opinion placed before the 9th CoC Meeting was that resolution
applicants could be allowed to revise their plans after approval of
CoC.
(d) The Applicant did not approve the resolution permitting the proposed
resolution applicants to modify their respective resolution plans beyond
the mandate of the Code since, the RFRP did not postulate such
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modification. On 27.12.2023, Respondent No.4 furnished a further
modified plan along with an Addendum to incorporate the outcome of the
deliberations held during the course of the 9th CoC Meeting wherein the
agenda relating to manner of distribution of proceeds under the
Resolution Plan was put to vote. The Resolution Plan was modified
pursuant to the framed Agenda item.
6.6 The RFRP did not permit modifications to the Resolution Plan and in view thereof,
Respondent No.4 could not have been permitted to amend and/or modify the
Resolution Plan in any event. The Applicant submitted that amongst other things,
Regulation 39(1A) (a) of the CIRP expressly forbids modification of the Resolution
Plan more than once. Modification of Resolution Plan (even once) is subject to the
RFRP permitting modifications to the Resolution Plan in the first place which in the
present case, it did not. In such an eventuality, the correct course of action would
have been to publish a fresh Form G which course of action was never adopted
by the RP. The above-mentioned provision was brought in force to ensure that the
CIRP of the Corporate Debtor is not delayed. In the present case, Respondent
No.4 was permitted to modify the Resolution Plan on several occasions leading to
delay in the CIRP and causing grave prejudice to the Applicant.
6.7 If the intent of Respondent No.4 was to provide a better offer under the Resolution
Plan by modifying the Resolution Plan, Respondent No.4 should have utilized the
challenge mechanism under Regulation 39(1A)(b) to which a recourse was
admittedly never made.
6.8 The Applicant is aggrieved by the factum and nature of modification of the
Resolution Plan and the delay in CIRP. The Applicants were permitted to modify
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the Resolution Plan based on the updated IM, the modifications had the effect of prejudicing the Applicant as a beneficiary under the proposed Resolution Plan. The Resolution Plan first received by the Applicant was prepared based on the Applicant being a Secured Financial Creditor and was entitled to receive monies as thereunder. The agenda relating to the manner of distribution of proceeds was placed for CoC for their approval at the 8th CoC Meeting, but the said agenda was deferred. 6.9 As on the date of receipt of the Resolution Plan, no claims of unsecured financial creditors had been submitted. Therefore, the Resolution Plan could not have made a provision for unsecured financial creditors. However, in the 4th modification of the Resolution Plan, a contingent provision for unsecured financial creditors was made. In this event, the Applicant was reclassified as an Unsecured Financial Creditor even after having proved the existence of security interest in its favour. It is pertinent to note that as on the date of this Application, IA No.03 of 2024 in CP(IB) No.1738/MB/2017 in relation to the aforesaid issues was pending consideration of this Bench.
7 AFFIDAVIT-IN-REPLY BY RP/ RESPONDENT No.1
7.1 At the 4th CoC Meeting held on 05.06.2023, the Resolution Professional informed the CoC members that the Applicant was categorized as Secured Financial Creditor based on their charges registered with MCA. Since the Resolution Professional did not receive any NOC granted by Bank of Baroda/Respondent No.2 in favour of the Applicant to mortgage/create charge on the properties/assets of the Corporate Debtor which were already mortgaged to Respondent No.2, the
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RP and the CoC decided to seek legal opinion on the status of claim of the
Applicant.
7.2 As per the legal opinion, the Applicant continued to be classified as a Secured
Creditor. Since Respondent No.2 was aggrieved by this classification, it filed I.A.
No.3 of 2024 seeking reclassification of Applicant on account of failure to obtain
NOC from Respondent No.2. Meanwhile, the RP published Form G on 27.04.2023
for the receipt of Expression of Interest (EoIs) on or before 13.05.2023. The RP
received 12 EoIs in response to the Form G which eventually culminated into
submission of 4 Resolution Plans being submitted by Prospective Resolution
Applicants/PRAs.
7.3 After the eligible resolution plans were presented before the CoC in the 7th Meeting
held on 18.09.2023, the CoC was not satisfied with the commercial offers. They
requested the resolution applicants to improve the resolution plans in terms of
value. The revised Resolution Plans were taken up for discussion in the 8th CoC
Meeting held on 03.11.2023. Post meeting, Respondent No.2 requested the CoC
to defer the voting on resolution plans and, consequently, the voting on the
resolution plans was deferred.
7.4 A clarification was received from Respondent No.2 that Parshuram Industrial
Estate at Village Awashi, Taluka Khed, District Ratnagiri, Maharashtra which was
earlier included in the Information Memorandum as a contingent asset may not be
a property of Corporate Debtor. The need arose to update the Information
Memorandum and exclude the said property from the said Information
Memorandum. Further, a claim of Income Tax Department was also
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recommended by the CoC to be included in the list of creditors. The RP sought a
legal opinion as to whether resolution applicants were allowed to revise their
resolution plans on account of changes made in the Information Memorandum.
Based on the legal opinion received by the RP and the approval of the CoC in 9th
CoC Meeting dated 13.12.2023, the Resolution Applicants were allowed to revise
their resolution plans and accordingly submit their revised plans.
7.5 In the 10th CoC Meeting, the CoC required the Successful Resolution Applicant to
provide an Addendum to the resolution plan regarding allocation of proceeds
among secured financial creditors. The Addendum was received on the same day
and all the Resolution Plans were put to vote. The voting on Resolution Plans
concluded on 16.02.2024 and the CoC with 83% majority approved the Resolution
Plan dated 27.12.2023 along with its Addendum dated 30.12.2023 submitted by
Respondent No.4/Successful Resolution Applicant/SRA i.e., Kshitij Polyline
Limited.
7.6 Consequently, the present application was filed by the Applicant being aggrieved
by the CoC and the RP allowing the Resolution Applicants to make changes in the
Resolution Plan. Bank of Baroda filed IA No.3 of 2024 before this Tribunal seeking
reclassification of the Applicant and Axis Bank’s claims as unsecured creditors.
The Tribunal vide order dated 08.10.2024 upheld the classification of the said
claims as secured financial debts.
7.7 The modifications in the Resolution Plans were carried out on request and with
the approval of the CoC. The need for modifications in the Resolution Plans were
necessitated at the instance of the CoC and on account of changes made in the
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Information
Memorandum.
It
has
been
held
under
various
judicial
pronouncements that Regulation 39(1A) does not create any fetter on the powers
of the CoC to discuss, deliberate and take further steps of negotiations with the
Resolution Applicants and allow modifications in the Resolution Plans more than
once. The said Regulation cannot overpower the commercial wisdom of the CoC
and stipulations contained in RFRP which allow modifications in the Resolution
Plans.
7.8 As per the legal opinion, Regulation 39(1A) of CIRP Regulation does not create
an embargo to revise the resolution plan more than once, if the CoC requires it to
be done so. This legal opinion was placed before the CoC in its 9th Meeting dated
13.12.2023 pursuant to which the CoC approved the modification in the Resolution
Plan.
7.9 The CoC in the 9th CoC Meeting held on 13.12.2023 discussed the manner of
distribution of proceeds of the Resolution Plan, wherein 83% of majority resolved
that the proceeds of the Resolution Plan shall be in proportion to the value of the
security interest vested with the respective member of the CoC.
8.
ANALYSIS AND FINDINGS IN IA No.2908/2024
8.1 We have perused the pleadings and the documents on record and heard the Ld.
Counsel for the parties. The sole issue for consideration in this IA is whether in
view of Regulation 39(1A)(a) of the CIRP Regulations, the SRA/Respondent No.4
could have been permitted to modify the proposed Resolution Plan on occasions
more than once. In this regard, we find that the contention of the Applicant that
Regulation 39(1A)(a) of the CIRP Regulations prohibits modification of the
resolution plan more than once is misplaced and contrary to the established legal
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position. The Hon’ble NCLAT in Jindal Stainless Ltd. Vs. Mrs. Shailendra
Ajmera, RP of Mittal Corp Ltd. & Ors. [Company Appeal (AT) (Ins) No. 1058 of
2022] has held that the Committee of Creditors retains the power to negotiate and
allow multiple modifications to the resolution plans as part of its commercial
wisdom. Further, in Vistra ITCL (India) Ltd. Vs. Torrent Investments Pvt. Ltd.
& Ors [Company Appeal (AT) (Ins) Nos.132,133 & 134 of 2023], the Hon’ble
NCLAT has clarified that Regulation 39(1A)(a) does not prohibit the Committee of
Creditors from negotiating with resolution applicants or asking resolution
applicants to further increase the Plan value. It is also pertinent to note that in its
recent judgment in Sagar Stone Industries Vs. Sajjan Kumar Dokania and Ors.
[CA (AT)(Ins) Nos.524 and 525 of 2025], the Hon’ble NCLAT has categorically
held that Regulation 39(1A) does not bind the CoC which has unfettered right to
ask for revision of plan or negotiate with all resolution applicants once or more. It
is further held that the provision for holding challenge mechanism is an enabling
mechanism for the CoC for value maximisation and not holding the challenge
mechanism cannot be a ground on which approval of plan can be questioned.
8.2 In the present case, it is noticed that the CoC permitted two modifications and an
addendum to the Resolution Plan, each justified and duly approved by majority
vote. The first modification (18.09.2023, 7th CoC Meeting) was prompted by the
CoC’s dissatisfaction with the commercial value offered and was done to increase
the financial offer. Clause 9.5 of the RFRP, while stating that a resolution plan is
ordinarily irrevocable, expressly permits modification if allowed by the RP/CoC or
in response to clarifications. Thus, it does not impose an absolute bar on
modification of proposed resolution plans. In any case, the proposal to allow
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multiple modifications was duly voted on and approved by the CoC. It is noticed
from the record that the second revision was necessitated by material changes in
the Information Memorandum, specifically, the removal of a non-owned asset,
inclusion of a new Income Tax claim and distribution of Resolution Plan proceeds
in proportion to value of the security interest vested with respective members of
CoC and that such revision was allowed pursuant to legal advice and formal
approval in the 9th CoC Meeting (13.12.2023). Further, the CoC in its 10th meeting
directed the SRA to provide an addendum regarding manner of allocation of
proceeds among Secured Financial Creditors.
8.3 Thus, we find that these modifications were not unauthorized but arose from
genuine procedural and commercial necessities and were well within the ambit of
Regulation 39(1A)(b) and binding CoC authority. It is also noticed from the record
that when the revised resolution plans were discussed in the 8th CoC meeting held
on 03.11.2023, the three resolution applicants had conveyed their willingness to
proceed with the challenge mechanism. However, the CoC in its wisdom decided
not to proceed with the same due to the vast difference between the proposed
resolution amounts payable under the resolution plans furnished by the top two
highest bidders. Further, it is found that all modifications to the Resolution Plan
were carried out prior to the final approval of the Plan. Accordingly, we are of the
considered view that the prayer of the Applicant to annul the modifications in the
Resolution Plan allowed by the CoC on occasions more than once in terms of
Regulation 39(1A)(a) of the CIRP Regulations is legally untenable and deserves
only to be rejected.
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8.4 In view of above discussions and the settled legal position on the issue, we find that IA 2908/2024 filed by NKGSB Co-operative Bank Limited is devoid of merit and the same is accordingly dismissed.
IA (Plan) No. 12/MB/2024
9.1 This Interlocutory Application (I.A.) (I.B.C) (Plan) No.12/2024 has been filed by Mr. Ajit Kumar, (hereinafter referred to as “the Applicant/Resolution Professional”), on behalf of the Committee of Creditors (hereinafter referred to as the “CoC”) of Omkar Speciality Chemicals Limited (hereinafter referred to as the “Corporate Debtor”), seeking approval of the Resolution Plan as per the provisions laid down under Section 30 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the “CIRP Regulations”) and Rule 11 of the NCLT Rules, 2016. 9.2 The Resolution Plan, submitted by Kshitij Polyline Limited, the Successful Resolution Applicant (hereinafter referred to as the “SRA”), was duly approved by the CoC with 83% voting share. 9.3 BRIEF BACKGROUND OF CORPORATE DEBTOR :- The Corporate Debtor was originally incorporated as a proprietorship concern under the name M/s. Omkar Chemicals in the year 1983. On 24.02.2005, it changed to a Private Ltd. Company known as “Omkar Specialty Chemicals Private Limited”. With its continuous growth, the company established itself as a Public Limited Company on 18.03.2010 with the name "Omkar Specialty Chemicals Limited". The company
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has its registered adress at Mahalsa Narayani, Ganesh Chowk Manjarli, Badlapur
(W), Thane, Maharashtra - 421503.
9.4 The Company is mainly engaged in the manufacture and sale of Specialty
Chemicals and intermediates for Chemical and Allied Industries, more specifically,
Specialty Chemicals and Pharma Intermediates. It is associated with leading
organizations in India and abroad and has expanded the existing product range
and develop its new molecules as per the specific requirements of its valued
customers.
9.5 As stated in paragraph 1.2 above, the Corporate Debtor was admitted to CIRP
vide order of this Tribunal dated 05.12.2022. The chronology of events up to the
submission of the Resolution Plan for approval before this Tribunal has already
been narrated in paragraphs 1.3 to 1.13 above. During the CIRP period, the
Applicant appointed registered valuers to determine the Fair value and Liquidation
value of the assets of the Corporate Debtor. The summary of the valuation of
assets of the Corporate Debtor is given below:-
Asset Type
Average Fair Value
(Rs. Crores)
Average Liquidation Value
(Rs. Crores)
Land & Building
12.66
9.83
Plant & Machinery
0.71
0.38
Financial Assets
7.95
2.94
Grand Total
21.36
13.15
9.6 BRIEF BACKGROUND OF SRA:- The SRA, i.e., Kshitij Polyline Limited, is a public limited company incorporated in 2008 under the Companies Act, 1956 the shares of which are listed on the NSE. The SRA is engaged in manufacturing and distribution of various products such as smart identity cards, binding and
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lamination equipment and related material and accessories, along with stationery
products such as file, folder and diary, make-to-order ID card with ribbon,
notebooks with client logo and info, display materials for education, pharma,
FMCG, finance and insurance sectors. The SRA has developed and launched
more than 250 products and has a state-of-the-art manufacturing facility in Silvasa.
SRA’s Net Worth for F.Y. 2022-2023 was Rs.2,257.96 lakhs. Presently, the
company supplies domestically to over 28 states through distributors and
internationally to 10 countries such as Spain, Brazil, Tanzania, Qatar, Dubai,
Nepal, Sri Lanka, Bhutan, Kuwait, Kenya.
SALIENT FEATURES OF PLAN APPROVED BY CoC :-
9.7 Resolution plan provides for upfront payments to financial and operational
creditors and bringing external corporate debt and outside liabilities obtained by
the Corporate Debtor to sustainable level for repayment of the same on the terms
and conditions proposed in the Resolution Plan. In compliance with Section
30(2)(a) of the Code, 2016, the Resolution Plan under Section VII of Plan provides
for the payment of insolvency resolution process costs in the manner specified by
the IBBI with priority over all other debts of the Corporate Debtor. In further
compliance with Section 30(2)(b) of the Code, the Plan ensures that the
Operational Creditors will receive an amount not less than what they would be
entitled to in the event of liquidation. The distribution of such amounts is in
accordance with Section 53 of the Code.
9.8 The Plan also conforms to all other requirements as specified by the Board in
accordance with Section 30(2)(f) of the Code. It further complies with Regulation
38(1) of the CIRP Regulations by ensuring that operational creditors are paid in
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priority over financial creditors and dissenting financial creditors are paid in priority over those who voted in favour of the Plan. 9.9 In line with Regulation 38(1A), the Resolution Applicant has considered the interests of all stakeholders including financial creditors, operational creditors and statutory authorities of the Corporate Debtor to the extent possible. 9.10 In compliance with Regulation 38(3)(a) to 38(3)(e) of the CIRP Regulations, the Resolution Applicant has addressed the causes for default committed by the Corporate Debtor under Section III of the Resolution Plan and demonstrated that the Plan is feasible or viable as it provides the creditability of the SRA under Section VIII. 9.11 The SRA will adopt various financial and operational turnaround strategies to stabilize its operations so as to enable the Corporate Debtor to generate value for its stakeholders in the long term, given SRA’s rich technical experience. 9.12 Terms of this Resolution Plan shall in no way affect the validity and enforceability of the third-party security and guarantee (including corporate and personal guarantees), letters of comfort executed by persons in the promoter group or any other third-party as of the Insolvency Commencement Date ("Third Party Security/Guarantees") and that the Financial Creditors of the Corporate Debtor shall be entitled to take all steps and remedies and recourse available to them under Applicable Law for the recovery of the unrecovered financial debt admitted by the Resolution Professional from such guarantors/security providers under their respective Third Party Security/Guarantees (including letters of comfort). 10. AMOUNT PROPOSED TO BE INFUSED AND PAID UNDER THIS RESOLUTION PLAN AND TIMELINES
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10.1 The SRA shall infuse Rs.475 lakhs by way of equity capital and Rs.2190.00 lakhs by way of quasi-capital/ secured/ unsecured loans. Out of this, Resolution Plan provides Rs.2314.00 Lakhs towards payment of CIRP costs and admitted claims of creditors, in the order of priority under the Code, within period of 270 days from "effective date”. The remaining amount of Rs.351.00 lakhs is proposed to be utilised towards capex and working capital requirements. Further, the SRA proposes to provide capital infusion from liquid investments held with the group and/or by obtaining secured loan and/or unsecured loans from friends/associates/ relatives. 10.2 The summary of the payments to be made under the Plan as proposed by the SRA is as follows:- (Amount in Rs.Lakhs) Type of Creditor Amount Claimed Amount Admitted Amount proposed Insolvency Resolution Process Costs (IRPC)
100.0 Secured Financial Creditors 34,964.78 34,964.78 2176.00 Unsecured Financial Creditors 2,773.01 2,773.01 2.75 Employees & its Authorized Representative 123.62 123.62 6.19 Operational Creditors (Other than Workmen, Employee & Statutory Dues) 1,390.22 1279.43 6.40 Operational Creditors (Statutory Dues) 9,829.53 9,829.53 19.66 Total 41,503.74 41,392.96 2314.00
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- MANAGEMENT OF THE CORPORATE DEBTOR DURING THE IMPLEMENTATION OF THE PLAN AND SUPERVISION OF THE PLAN BY MONITORING AGENCY 11.1 The Key Management Team at Kishitij Polyline Ltd. shall appoint a highly experienced team and external advisors and market experts to run the operations of the Corporate Debtor. On the date of approval of the plan, the existing directors and board of directors shall vacate their offices and SRA shall appoint new directors as it deems fit. Further, the SRA shall obtain requisite statutory and regulatory approvals within the period of 1 year or such other extended period as may be prescribed by the regulatory authority and acceptable by the CoC and the Adjudicating Authority. 11.2 A Monitoring Committee (MC) may be formed comprising of a representative from Secured Financial Creditors (as decided by CoC), SRA, as well as any insolvency Professional (which could include existing Resolution Professional) / Consultant mutually agreed by representative of Secured Financial Creditors and SRA to supervise the implementation of the Plan (which shall be decided on or before the filing of the Plan to this Tribunal for approval) in terms of provisions of Section 30(2)(d) of the Code read with Regulations 38(2)(c) of CIRP Regulations. The appointment shall be at the mutually agreed terms with CoC Members and SRA for the period with effect from the Date of Approval of Resolution Plan by this Tribunal. 11.3 The scope of work of the Monitoring Committee / consultancy firm / Resolution Professional would be:
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a. Coordination amongst the stakeholders for smooth implementation of
Resolution Plan;
b. Monitoring
various
compliances
of
the
Resolution
Plan
during
implementation period; and
c. Providing specified information to stakeholders regarding implementation of
Resolution Plan.
11.4 Management Supervision shall vest with the MC up to the closing date as
envisaged in this Resolution Plan. The cost of the supervision, at actuals, will be
paid by the SRA. Such cost shall be over and above the financial contributions in
the Resolution Plan. The Cost of Supervision will be decided mutually by the SRA
and the MC.
12. PERFORMANCE GUARANTEE :- The SRA has provided a performance
security of Rs.2,32,00,000/- by way of RTGS an 29.02.2024 in compliance with
the provisions of the RFRP and Regulation 36B(4A) of the CIRP Regulations. A
copy of the bank statement evidencing the payment of the performance security
is annexed with the Application.
13. RELIEFS AND CONCESSIONS :- The Resolution Applicant has sought various
reliefs and concessions at Clause J of Section XIII of the Plan which are claimed
by the Applicant to be in line with the provisions of law for the time being in force.
14. The SRA has submitted an Affidavit affirming that it is eligible to submit the
Resolution Plan for the Corporate Debtor in terms of the provisions of Section
29A of the Code. Further, in compliance with the applicable provisions, the
Applicant has filed Form-H dated 25.02.2024, detailing the compliances under
the Proposed Resolution Plan and outlining the key developments in the CIRP.
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Accordingly, the Applicant submits that the Resolution Plan proposed by the SRA is in conformity with the requirements of Section 30 of the Code and the relevant provisions of the CIRP Regulations. As the Resolution Plan has been duly approved by the CoC with 83% voting share, the same is placed before this Bench for its approval. 15. ANALYSIS AND FINDINGS: - 15.1 We have heard the Ld. Counsel for the Applicant and perused the Plan and related documents submitted along with the I.A. 15.2 On perusal of the Resolution Plan, we notice that the Plan is in compliance with the provisions of Section 30 of the Code in that it provides for: a) priority of payment of CIRP cost to the payment of other debts of the Corporate Debtor as specified under Section 30(2)(a) of the Code; b) payment of debts of the Operational Creditors as specified under Section 30(2)(b) of the Code; c) the management of the affairs of the Corporate Debtor after approval of the Plan as specified under Section 30(2)(c) of the Code; and d) the implementation and supervision of the Plan as specified under Section 30(2)(d) of the Code. 15.3 Further, in compliance with Section 30(2)(b) read with Regulation 38(1)(b) of the CIRP Regulations, it is noted that Clause O under Section XIII of the Resolution Plan specifically provides for the treatment of financial creditors who did not vote in favour of the Plan. It also records that the unpaid CIRP costs of Rs.100 lakhs, includes regulatory fees payable under Regulation 31A of the CIRP Regulations, in priority over all other debts of the Corporate Debtor.
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15.4 It is observed that the SRA has submitted an affidavit affirming its eligibility under Section 29A of the Code to submit a Resolution Plan along with the requisite authorization and undertaking in compliance with Regulation 39(1)(c) of the CIRP Regulations. Further, the Applicant has placed on record a due diligence report issued by PRT & Associates (Companies Secretaries), which confirms the SRA’s eligibility under Section 29A of the Code. 15.5 In accordance with Section 25(2)(j) of the Code and based on the Transaction Audit Report dated 10.10.2023 of the Corporate Debtor, the Applicant has filed I.A. No.5035 of 2023 under Section 43 and I.A. No.486 of 2024 under Section 66 of the Code in relation to avoidance transactions. These applications are currently pending before this Tribunal. In this regard, we find that the Clause 8 of Section XII of the Resolution Plan stipulates that unless otherwise decided by the CoC in its sole discretion, the right to pursue all applications filed by the IRP or RP relating to avoidance transactions whether preferential, undervalued, extortionate credit transactions (under Sections 43 to 50 of the Code), or fraudulent and wrongful trading (under Section 66 of the Code) shall vest with the CoC. Any recoveries arising out of such applications shall be distributed to the financial creditors. The SRA shall, however, pursue avoidance applications concerning immovable properties/ contingent assets specified under Annexure F of the Resolution Plan and shall be entitled to any recoveries from such transactions. The SRA shall also bear a proportionate share of the cost incurred in recovering these assets. Recoveries from other transactions shall remain vested with the CoC, which shall also bear the associated costs.
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15.6 It is further observed that the Applicant filed I.A. No.455 of 2024 seeking exclusion
of the period from 26.09.2023 to 09.02.2024 from the CIRP timeline of the
Corporate Debtor and vide order dated 14.02.2024, this Tribunal extended the
CIRP period until 29.05.2024. Accordingly, the present application filed on
05.03.2024 has been submitted within the extended CIRP period.
15.7 It is seen that the Revised Resolution Plan was placed before the CoC at its 10th
meeting held on 30.12.2023. The voting commenced on 09.02.2024 and
concluded on 16.02.2024. The CoC, by a majority vote of 83%, approved the
Resolution Plan dated 27.12.2023 along with its addendum dated 30.12.2023, as
submitted by the SRA. The CoC, in doing so, has determined that the Resolution
Plan is viable and feasible for the revival of the Corporate Debtor. The Plan also
provides for a detailed implementation schedule, including specific timelines and
a framework for management and supervision.
15.8 The Applicant has duly complied with the requirements of Sections 30(2)(a) to
30(2)(f) of the Code as well as Regulations 38(1), 38(1)(a), 38(2)(a), 38(2)(b),
38(2)(c), 38(3), and 38(4) of the CIRP Regulations. A Compliance Certificate in
Form-H has also been submitted along with the Resolution Plan and upon
examination, has been found to be in order.
15.9 In K Sashidhar Vs. Indian Overseas Bank and Ors. (Civil Appeal No.
10673/2018), the Hon’ble Supreme Court held that if the committee of creditors
approves a resolution plan by the requisite percentage of voting share under
section 30(6), it is imperative for the resolution professional to submit the plan to
the Adjudicating Authority. The Adjudicating Authority is then required to satisfy
itself that the resolution plan, as approved by the CoC, meets the requirements
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specified in Section 30(2). The law is now settled that the role of the Adjudicating Authority is no more and no less than the above. The role of the Adjudicating Authority with respect to a resolution plan is limited to matters specified in Section 30(2) of the Code. Further, the Adjudicating Authority is not required to interfere with the commercial wisdom of the CoC. 15.10 As regards concessions, waivers, directions and specific orders as mentioned under Section XIII of the Plan, we make it categorically clear that no reliefs, concessions and dispensations that fall within the domain of other government department/authorities are granted hereto. The reliefs, concessions and dispensations that pertain to other governmental authorities/departments shall be dealt with by the respective competent authorities/fora/offices, Government (State or Central) with regard to respective reliefs, if any. 15.11 In light of the above, for the effective implementation of the Resolution Plan, the SRA shall obtain all necessary approvals, as required under any applicable law, within such period as may be prescribed. Further, in terms of the judgment of the Hon’ble Supreme Court in Ghanshyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited [Civil Appeal No. 8129 of 2019], we are of the opinion that, upon the approval of the Resolution Plan by this Tribunal, all claims not included in the Resolution Plan shall stand extinguished. No person shall be entitled to initiate or continue any proceedings in relation to claims that are not part of the approved Resolution Plan. 15.12 In view of the discussions above and the law as settled, we are of the considered view that the Resolution Plan meets the requirements set out under Section 30(2) of the Code and Regulations 37, 38, 38(1A) and 39(4) of the CIRP
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Regulations. We are satisfied that the Plan contains provisions for its effective implementation. Considering both the factual and legal aspects, we find that the present Application deserves to be allowed. ORDER The IA (I.B.C.) (Plan) No. 12 of 2024 in C.P.(IB) 1738 of 2017 is allowed and the Resolution Plan submitted by ‘M/s. Kshitij Polyline Limited’ is hereby approved in terms of Section 31(1) of the Code.
I. The Plan shall become effective from the date of this Order 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 the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues is owed, guarantors and other stakeholders involved in the Plan. However, the approval of the Resolution Plan shall not be construed as waiver of any statutory obligations/liabilities of the Corporate Debtor which shall be dealt with by appropriate Authorities in accordance with law. Any waiver sought in the Resolution shall be subject to approval of concerned Authorities. II. Accordingly, no person or authority will be entitled to initiate or continue any proceedings with respect to a claim prior to the approval of the Plan which is not part of the Plan. III. The Corporate Debtor shall not be prosecuted for any offence committed prior to the commencement of CIRP in terms of Section 32A of the IBC.
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IV. Further, all such claims which are not a part of the Plan shall stand extinguished and no person will be entitled to initiate or continue any proceedings with respect to a claim which is not a part of the Resolution Plan. V. The Monitoring Committee as proposed in the Plan shall be constituted to supervise and implement the Plan. VI. The Monitoring Committee shall file progress report regarding implementation of the Plan before this Tribunal from time to time, preferably every quarter. VII. The moratorium declared under Section 14 of the Code shall cease to have effect on and from the date of this Order. VIII. The Applicant/RP shall stand discharged from his duties with effect from the date of this Order. However, he shall perform his duties in terms of the Plan as approved by us. IX. The SRA shall have access to all the Corporate Debtor’s records, documents, assets and premises with effect from the date of this Order. X. The Applicant is further directed to hand over all records, documents and properties of the Corporate Debtor to the SRA to enable it to carry on the business of the Corporate Debtor. XI. Liberty is granted to the parties for moving any application, if required, in connection with implementation of this Plan. XII. The Applicant shall forward all records relating to the conduct of the CIRP and the Plan to the IBBI along with a copy of this Order for information and record.
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XIII. The Applicant shall forthwith send a certified copy of this Order to the CoC and the SRA respectively for necessary compliance. XIV. The Registry is directed to send electronic version of the Order to all the concerned parties including the IBBI for record. 16. In the result, IA Nos.2717/MB/2024 and 2908/MB/2024 are dismissed and I.A. (I.B.C) (Plan) No.12/MB/2024 in C.P. (IB) No.1738/MB/2017 is allowed and the Resolution Plan is hereby approved.
Sd/- Sd/-
SANJIV DUTT
ASHISH KALIA
MEMBER (TECHNICAL)
MEMBER (JUDICIAL)
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