01st April, 2025 Approval of Resolution Plan - J P Engineers Private Limited [I.A. No. 16/2024 in C.P.(IB) – 1048/ND/2019] (2.7 MB)
IA. No. 16/2024 in CP (IB)-1048/(ND)/2019 Worldwide Metals Private Ltd. vs. J.P. Engineers Private Ltd.
Page 1 of 64
IN THE NATIONAL COMPANY LAW TRIBUNAL
NEW DELHI, SPECIAL BENCH (COURT-II)
I.A. No. 16/2024
IN
C.P.(IB) – 1048/ND/2019
IN THE MATTER OF: Worldwide Metals Private Limited … Petitioner/ Financial Creditor
Versus
J.P. Engineers Private Limited … Respondent/
Corporate Debtor
AND IN THE MATTER OF IA. NO. 16/2024:
Vivek Raheja
Resolution Professional,
J.P. Engineers Private Limited,
JD-2C, 2nd Floor, Pitampura
New Delhi - 110034 … Applicant/RP
Versus
Jatinder Pal Singh Hanjra,
Through AR – Mr. Ajay Nagpal,
A-104, Shivalik, Near Sumita Hospital,
Sector-35, Gautam Budda Nagar,
Uttar Pradesh – 201301 … Proforma Respondent No. 1
Union Bank of India Limited,
Through Mr. Prashant Kumar Sahoo,
Dy. General Manager SAMV Delhi Branch,
M-93, Connaught Place,
New Delhi – 110001 201301 … Proforma Respondent No. 2
Axis Bank Limited,
Through Mr. Raj Kumar,
Senior Manager 6-3-879/B, 1st Floor,
G. Pullareddy Building, Greenlands Begumpet,
Hyderabad – 500016 … Proforma Respondent No. 3
Page 2 of 64
ICICI Bank Limited,
Through Mr. Balram Kumar,
Manager, NBCC Place,
Bhishm Pitamah Marg, Pragati Vihar,
New Delhi – 110 003 … Proforma Respondent No. 4
Yes Bank Limited, 5A/15, Tilak Nagar, Near Subhash Nagar Metro Station, New Delhi – 110018 … Proforma Respondent No. 5
Mohinder Jain, Director (power suspended), J.P. Engineers Private Limited, K-4/20, K4 Block, Model Town – II, New Delhi – 110009 … Proforma Respondent No. 6
Adiish Jain,
Director (power suspended),
J.P. Engineers Private Limited,
K-4/20, K4 Block, Model Town – II
New Delhi – 110009 … Proforma Respondent No. 7
UNDER SECTION: 30(6) r/w 31 of IBC, 2016
Order delivered on: 18.03.2025
CORAM:
SH. ASHOK KUMAR BHARDWAJ, HON’BLE MEMBER (J)
SH. ANIL RAJ CHELLAN, HON’BLE MEMBER (T)
PRESENT:
For the RP
: Adv. K.D. Sharma
For the SRA
: Sr. Adv. Vaibhav Gaggar, Adv. Aditya
Shukla, Adv. Kanishka Pandey
Page 3 of 64
PER: SH. ASHOK KUMAR BHARDWAJ, MEMBER (J) ORDER I.A. No. 16/2024: The present application has been preferred Mr. Vivek Raheja, Resolution Professional qua J.P. Engineers Private Limited (hereinafter, referred to as the ‘Applicant/RP’) under Section 30(6) of IBC, 2016, seeking the following reliefs:
A. “Allow the present Interlocutory Application. B. Pass an order under Section 30(1) of the Code for approval of the Resolution Plan, submitted by Mr. Jatinder Pal Singh Hanjra 23rd August 2023, that is fully complying with the requirements of Section 30(2) of the Code and regulations made thereunder and that was approved (via voting by electronic means) by the CoC on 16th March 2024 in accordance with provisions of Section 30(4) of the Code. C. Allow the reliefs and concessions as prayed for by the Resolution Applicant in Chapter VII on page nos. 46 to 54 of the Resolution Plan. D. Pass such other order(s) it may deem fit and proper in special/peculiar circumstances of the instant case.” 2. Stating succinctly, the CP(IB) No. 1048/ND/2019 was filed by Worldwide Metals Private Limited (hereinafter, referred to as the “Operational Creditor”) seeking initiation of CIRP qua J.P. Engineers Private Limited (hereinafter, referred to as the “Corporate Debtor”) in terms of the provision of Section 9 of IBC, 2016. The Corporate Debtor was admitted to CIRP in terms of order dated 26.02.2020 passed by this Tribunal and Mr. Sumit Bansal was appointed as IRP. The Corporate Debtor is currently represented through Mr. Vivek Raheja, i.e. the Applicant herein,
Page 4 of 64
who was appointed as RP in the 4th CoC meeting and the appointment was confirmed by this Adjudicating Authority in terms of order dated 27.01.2021. 3. As per the provisions of Section 15 of the Code r/w Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the IRP issued a Public Announcement in Form-A on 29.02.2020. 4. Subsequently, on receipt of claims in response to aforementioned Public Announcement, the Committee of Creditors (CoC) was constituted in terms of Section 21 of the Code. The details of the members of the CoC, their respective admitted claims along with voting share, as given in the application, reads thus: -
Page 5 of 64
The Applicant/ RP has got the assets of the Corporate Debtor valued in terms of Regulation 27 of the CIRP Regulations, 2016 by the two Registered Valuers, namely “Crest Valuation” and “G. Tech”. A copy of all valuation reports undertaken by the aforementioned registered valuers has been enclosed as Annexure No. A15 of the application. The summary of the valuation as provided at page 246 of the application reads thus: -
The Applicant/ RP has submitted in the application that the Form G was published on 06.11.2021 in two newspapers, namely Financial Express (English) and Jansatta (Vernacular), for inviting Expression of Interest (EoI) in terms of Regulation 36A of CIRP Regulations, 2016, and pursuant to such publication, three resolution plans were received from the prospective resolution applicants, viz. Mr. Pankaj Sarogi and Ms. Ranjana Sarogi (in consortium), Mr. Anuj Goyal, and Mr. Vicky Gupta. It is further submitted that in the 20th meeting of the CoC, the Committee of Creditors in its
Page 6 of 64
commercial wisdom had rejected all the three resolution plans received from
aforesaid PRAs.
7.
It is further submitted in the application that after rejection of the
aforementioned resolution plans, the Committee of Creditors in its 21st
meeting had resolved to liquidate the CD and consequently, the Applicant/
RP had preferred an application I.A. 3199/2022 for liquidation of the
Corporate Debtor, before this Adjudicating Authority. However, in the 25th
meeting of the CoC, it was resolved that the application for liquidation be
withdrawn.
8.
The Applicant/ RP has submitted that an application viz. IA-
228/2023 was filed by one, Mr. Jatindra P. Hanjra, before this Adjudicating
Authority, with the prayer to allow him to submit a resolution plan qua the
CIRP of the Corporate Debtor. It is further submitted that the
aforementioned I.A. was allowed in terms of order dated 16.01.2023, which
reads thus: -
“[…] The prayer in the IA- 228/2023 is for permission to place
the proposal before the CoC. We are conscious that that the
object of the IBC, 2016 is to rescue the CD in distress. Thus, the
plea put forth by the Applicant in the IA deserve to be accepted.
In the wake, the IA is allowed and the RP is directed to place
the proposal put forth by the Applicant in IA-228/2023 before
the CoC for its consideration within one week.”
9.
It is stated in the captioned application that the 23rd meeting and 24th
meeting of the CoC was held on 12.05.2023 and 09.06.2023 respectively
wherein the aforesaid resolution plan submitted by Mr. Jatinder Pal Singh
Page 7 of 64
Hanjra was deliberated over. It is further stated that in the 23rd meeting of
the CoC, it was resolved that an extension of the CIRP period be sought
from this Adjudicating Authority to pursue the aforementioned resolution
plan. Consequently, IA- 3016/2023 was filed by the Applicant/ RP with the
prayer to extend the CIRP period by 60 days. This Adjudicating Authority
allowed IA- 3016/2023 in terms of order dated 30.11.2023 with a direction
that fresh Form – G be issued by the RP. Relevant excerpt of the order reads
thus: -
“Given the stand taken by Mr. Sumesh Dhawan Ld. Counsel for
the RP and the RP present in person, and in due
regard/deference to the order dated 25.04.2023 passed by
Hon’ble NCLAT (ibid), the period of CIRP is extended by 60
days, to enable the RP to invite a fresh expression of interest
(EOI) through wider publication of Form-G and complete the
process within the extended period. It is, however, made clear
that Mr. Jatinder pal Singh Hanjra would be at liberty to
participate in the fresh EOI process along with others, if any.
It is made clear that since the application was admitted nearly
800 days ago, no further request for extension of the CIRP
would be entertained and in the event of non-culmination of the
process within the extended period, an appropriate order in
accordance with law would be passed.”
10.
The Applicant/ RP has further submitted that Mr. Jatinder Pal Singh
Hanjra, being aggrieved by the aforementioned order dated 30.11.2023,
filed an appeal before the Hon’ble NCLAT bearing Company Appeal (AT) (Ins)
No. 1611 of 2023. As submitted in the application, the question of law raised
before the Hon’ble NCLAT was whether the Adjudicating Authority was
Page 8 of 64
justified in passing the impugned order directing fresh issue of Form G in the facts of the present case when the CoC had already decided against this course of action. Said company appeal was partly allowed by the Hon’ble NCLAT in terms of judgment dated 16.02.2024 which reads thus: - “19. Given the facts and circumstances of the present case as narrated above, we find that despite lapse of four years, no resolution had fructified so far. In spite of issue of Form G on five occasions, no viable resolution plans had cropped up compelling the CoC to recommend liquidation of the Corporate Debtor. However, on an application filed by the Appellant seeking consideration of their Resolution Plan, the Adjudicating Authority taking note that the object of the IBC is to rescue the Corporate Debtor in distress allowed the consideration of the Resolution Plan of the Appellant on 16.01.2023. The subsequent decision of the Adjudicating Authority on 08.02.2023 to recall its order of 16.01.2023 was set aside by this Tribunal. This Tribunal on 25.04.2023 taking note of the fact that Resolution Plan of the Appellant was already submitted and the majority member of the CoC holding 86% share had expressed its no objection to consider the same, allowed consideration of the Resolution Plan of the Appellant. 20. Thereafter, we notice that the CoC in its 23rd and 26th meetings took up consideration of the Resolution Plan of the Appellant. While doing so, it took note of the fact that during consideration of the IA for extension of time, an oral query had been made by the Adjudicating Authority as to whether the CoC is inclined to consider only the resolution plan of the Appellant. The CoC duly considered this aspect and came to the conclusion that despite 5 times Form-G having been issued, which did not bear any results, issue of any further round of Form-G would
Page 9 of 64
only add to delays and turn the CIRP clock back which would not be good for the health of the Corporate Debtor. It also noted that there were no express directions as such from the Adjudicating Authority for issue of fresh Form-G. The CoC therefore consciously decided not to re-open the process by adducing detailed reasons which have already been captured in Para 16 above. […] 23. The CoC in its deliberations had also noted that the erstwhile resolution applicants had requested for consideration of their plans. We also notice that the CoC undertook an exercise to compare the resolution plans submitted by erstwhile applicants with that submitted by the Appellant and concluded that the plan value of the Appellant was distinctly better than the others. Clearly therefore all aspects of the plan including the plan value of the Appellant and other potential Resolution Applicants were in the knowledge of the CoC which on having been deliberated at length testifies the exercise of commercial wisdom by the CoC. This also shows that the CoC was well aware that the objective of IBC to ensure maximisation of the value of assets does not get defeated. As far as the plan value which was offered by the Appellant and the plan value which had been offered by other resolution applicants, evaluation of the same falls within the domain of commercial wisdom of CoC. 24. Such opinion expressed by the CoC after due deliberations in the meetings through voting is the collective business decision and constitutes an expression of the CoC’s commercial wisdom. And it is here that primacy of the commercial wisdom of the CoC comes into play. The Adjudicating Authority cannot foist its own wisdom upon the CoC. The supremacy of
Page 10 of 64
commercial wisdom of the CoC has been reaffirmed time and again by the Hon’ble Supreme Court. 26. Ultimately it is the commercial wisdom of the CoC which operates to approve what is to be the best resolution plan. The Adjudicating Authority with the limited powers of judicial review available to it cannot substitute its views with the commercial wisdom of the CoC. In view of the above, we hold that the Adjudicating Authority has committed an error in directing the issuance of fresh Form-G while allowing the extension of the CIRP by 60 days when the CoC had deliberated at length on this issue and had decided against the option of having other potential resolution applicants from joining the fray. 27. In view of the foregoing discussion and conclusions, we set aside that part of the impugned order wherein the Adjudicating Authority has directed the RP to invite fresh expression of interest through wider publication of Form-G. We however affirm that part of the impugned order wherein the period of CIRP has been extended by 60 days. We further direct the RP to place the resolution plan of the Appellant before the CoC for consideration and voting and complete the CIRP within the extended period. The appeal is allowed with the aforesaid observations. With this, I.A. No. 171 of 2024 also stands disposed of on the above terms. No order as to costs.” 11. In the application, the RP has submitted that pursuant to the aforementioned judgment of Hon’ble NCLAT, he convened the 28th meeting of the CoC on 19.02.2024 wherein the resolution plan submitted by Mr. Jatinder Pal Singh Hanjra was put to vote. It is further submitted that in accordance with Section 30(4) of the Code r/w Regulation 39(3A) of the CIRP
Page 11 of 64
Regulations, 2016, said plan was approved by the financial creditors having 97.56% debt proportion (vote share) in the total (financial) debt size of the corporate debtor and financial creditors having a debt proportion of 2.44% in the total (financial) debt size of the corporate debtor had abstained from voting. A copy of the minutes of the 28th CoC meeting along with the e-voting result-sheet has been enclosed as Annexure 13 (Colly) to the application. The relevant excerpt of the same reads thus: -
Page 12 of 64
The Applicant/ RP has submitted that after approval of the plan submitted by Mr. Jatinder Pal Singh Hanjra (hereinafter, referred to as the “Successful Resolution Applicant”), a letter of intent dated 17.03.2023 was issued to the SRA whereby the SRA was requested to deposit an amount of Rs. 2,22,20,000/- as performance security. The relevant excerpt of the letter of intent issued to the SRA, enclosed as Annexure 14 of the application, reads thus: -
Page 13 of 64
Page 14 of 64
It has been further submitted that the SRA duly gave Performance Security through RTGS mode in compliance of the aforementioned Letter of Intent. Relevant excerpt of the application recording said fact reads thus: -
Page 15 of 64
The Resolution Plan submitted by the SRA, which stands approved by the CoC, has been enclosed as Annexure 16 (Colly.) to the application. 15. The compliance certificate in prescribed Form- H, in terms of Regulation 39(4) of the CIRP Regulations, 2016, has been filed by RP and enclosed as Annexure 18 (Colly.) to the application. 16. The Applicant/ RP has submitted in the Form- H that the Resolution Plan includes a statement under Regulation 38(1A) of CIRP Regulations, 2016 as to how it has dealt with the interests of all stakeholders in compliance of the Code and the Regulations made thereunder. The relevant excerpt of Form- H reads thus: - “6. The Resolution Plan includes a statement under regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interests of all stakeholders in compliance with the Code and regulations made thereunder. 7. The amounts provided for the stakeholders under the Resolution Plan is as under:
Page 16 of 64
Page 17 of 64
As can be seen from the above table, the secured financial creditors shall be paid a sum of Rs. 1,900 Lakhs against the admitted claim of about Rs. 13,466.90 Lakhs/-. The plan provides that the unsecured creditors shall be paid a sum of Rs. 25 Lakhs against the admitted claim of Rs. 2,007.12 Lakhs. The table reflects that no claims had been received from employees/ workmen. With respect to government/ statutory dues, a claim amounting to Rs. 102.30 Lakhs was filed but the same was not admitted by the RP, and thus no payment is proposed for this category under the plan. With regard to operational creditors (other than employees/ workmen and government/ statutory dues), against the admitted claim of Rs. 3586.36 Lakhs, the plan provides a payment of Rs. 25 Lakhs. Thus, against the admitted claim of Rs. 19,060.38 Lakhs, an amount of Rs. 1,950 Lakhs has been proposed to be paid under the plan as per the breakup given in the table reproduced above. 18. The compliance of the Resolution Plan with the provision of Section 30(2) of the Code, the relevant excerpt of Form- H reads thus: -
Page 18 of 64
Page 19 of 64
Page 20 of 64
Page 21 of 64
Page 22 of 64
Page 23 of 64
As regards the capital restructuring of the CD, the clause (3) OF
Chapter V of the Resolution Plan provides that on approval of the plan by
the Adjudicating Authority, all the existing shares shall be transferred to
investor at lumpsum value of Rs 28,254. In addition, new equity of Rs 100
Lakhs shall be issued. Clause (4) further provides the new shareholding
structure. The relevant excerpt of the resolution plan reads thus: -
“3. CAPITAL RESTRUCTURING/ PAYMENT TO EXISTING
SHAREHOLDERS
3.1 Section 30 and 31 of IBC read with Regulation 37 of the
CIRP Regulations provide that a Resolution Plan may provide
for the measures required for implementing the Resolution Plan,
including the substantial acquisition of shares of the corporate
debtor.
Therefore,
to
enable
ownership,
control
and
management of the Corporate Debtor by Resolution Applicant,
it is proposed that after the approval of the Resolution Plan, all
the existing shares shall be transferred to investor at lumpsum
value of Rs 28,254. In addition new equity of Rs 100 Lacs shall
Page 24 of 64
be issued. The Resolution Applicant proposes to infuse a sum
of INR 100 Lakhs towards subscription of 10 Lacs equity shares
at face value of INR 10 each.
i. As shares may be acquired by a Foreign Citizen thus the
approval as required under FEMA and regulations thereof shall
deemed to be complied with and no valuation for the transfer of
the shares from resident to non-resident shall be additionally
required. The value of Shares as being paid by RA shall be
taken as legal and final valuation wrt all rules & regulations
and
the
FEMA
requirements
with
respect
to
the
pricing/valuation of shares for such transfer shall be deemed
to be complied.
4. NEW SHAREHOLDERS POST RESTRUCTURING
The following shall be new shareholders of the Corporate
Debtor post restructuring:
Jatinder Pal Singh Hanjra
99.9%
Nominee(s)* of Jatinder Pal Singh
Hanjra
0.01%
Nominee(s) & Director(s) to be appointed by nomination of Mr.
Jatinder Pal Singh Hanjra shall all comply with requirements
under sec 29A.”
20.
As per Section 30(1) of the Code, a resolution applicant needs to
submit, along with the resolution plan, an affidavit stating that he is eligible
under Section 29A of the Code to the RP. In this respect, the affidavit under
Section 29A of the Code has been submitted by the SRA and is enclosed as
Annexure 17 (Colly.) of the application. In the affidavit, the SRA has
declared that it is not disqualified from submitting the resolution plan in
Page 25 of 64
terms of the aforesaid provision. Moreover, the Applicant/ RP has also enclosed a “29A Check Report for Mr. Jatinder Pal Singh Hanjra (RA)” dated 20.08.2023 as issued by India C&L Law Offices as Annexure 17 (Colly.) to the application. The concluding part of the Report states that the SRA seems to be compliant of Section 29A of the Code. Relevant excerpt of the same reads thus: -
The Applicant/ RP has also submitted an affidavit dated 19.02.2024 stating
the SRA complies with the provision of Section 29A of the Code. The relevant
excerpt of the affidavit reads thus: -
“[…] Further, based on the affidavit received from the Resolution
Applicant in respect of Section 29A of the Code, 2016 and due
diligence report submitted by the independent consultant (i.e.,
India C&L Law Office) regarding the fact that the Resolution
Applicant complies with the provisions of Section 29A of the
Insolvency and Bankruptcy Code, 2016, the undersigned
hereby confirm that the Resolution Applicant is compliant with
the provisions of Section 29A of the Insolvency and Bankruptcy
Code, 2016.”
21.
As per Regulation 37 of CIRP Regulations, 2016, a Resolution Plan
shall provide for the measures, as may be necessary, for insolvency
Page 26 of 64
resolution of Corporate Debtor for maximisation of the value of CD’s assets.
Regulation 37 reads thus: -
“37. Resolution Plan.
A resolution plan shall provide for the measures, as may be
necessary, for insolvency resolution of the corporate debtor for
maximization of value of its assets, including but not limited to
the following: -
(a) transfer of all or part of the assets of the corporate debtor to
one or more persons;
(b) sale of all or part of the assets whether subject to any
security interest or not;
(ba) restructuring of the corporate debtor, by way of merger,
amalgamation and demerger;
(c) the substantial acquisition of shares of the corporate debtor,
or the merger or consolidation of the corporate debtor with one
or more persons;
(ca)cancellation or delisting of any shares of the corporate
debtor, if applicable;
(d) satisfaction or modification of any security interest;
(e) curing or waiving of any breach of the terms of any debt due
from the corporate debtor;
(f) reduction in the amount payable to the creditors;
(g) extension of a maturity date or a change in interest rate or
other terms of a debt due from the corporate debtor;
(h) amendment of the constitutional documents of the corporate
debtor;
Page 27 of 64
(i) issuance of securities of the corporate debtor, for cash,
property, securities, or in exchange for claims or interests, or
other appropriate purpose;
(j) change in portfolio of goods or services produced or rendered
by the corporate debtor;
(k) change in technology used by the corporate debtor; and
(l) obtaining necessary approvals from the Central and State
Governments and other authorities;
(m) sale of one or more assets of corporate debtor to one or more
successful resolution applicants submitting resolution plans for
such assets; and manner of dealing with remaining assets.”
22.
With respect to clauses (a), (b) and (ba) of Regulation 37 (ibid), the
plan proposed no action. With respect to clauses (c) and (ca) of said
Regulation, the Applicant/ RP has stated that clause 3 of the plan deals
with the said provision. Clause 3 of the plan reads thus: -
“3. CAPEX/WORKING CAPITAL INDUCTION ALONG WITH
SOURCES OF FINANCE
Initially INR 100 Lakhs will be induced as new Capital in the
Corporate Debtor. On approval of the plan by the Adjudicating
Authority the existing share capital shall stand transferred in
favour of RA and its nominee(s) upon a nominal amount of Rs
28254/- (.0001 % of the face value of the shares held) and the
Applicant along with people nominated by him shall become
new shareholders. RA shall bring further funds ie Rs 650 Lacs
as
Unsecured
loan/quasi
equity
or
through
other
modes/instruments as may be permissible under the
Applicable Laws. The additional amounts shall be raised from
a financial institution against assignment of debt/securities etc.
Page 28 of 64
Resolution Plan envisages External Commercial Borrowing to
the tune of Rs 2120 Lacs in compliance to the FEMA rules
applicable on the date of the NCLT approval. The RA undertakes
that the terms and conditions of ECB shall adhere to the FEMA
rules and regulations for the same. If any amounts are raised
from the Indian Financial System ie NBFC/ARC/Realizations,
etc., then that drawdown amount shall be reduced from the
ECB so raised. Working Capital margin of Rs 150 Lacs to be
brought within the plan period however the remaining amount
of Rs 350 Lacs will be realized through sale of inoperational
assets subsequently.”
23.
With respect to clause (d) of Regulation 37 (ibid), the Applicant/ RP
has submitted that clauses 1.2.1(ii), 1.2.4(iii)(b), 1.2.5(iii)(c) of Chapter IV
and clause 5(x) of Chapter VII of the plan deals with the same. Relevant
excerpt of said clauses read thus: -
“CHAPTER IV
1.2.1. CIRP Cost
[…]
(ii) In case any security interest is created overall or any
assets /cash flows of the Corporate Debtor to secure the
interim financing, if any, availed by the Corporate Debtor
during the CIRP, shall forthwith, upon receipt of payment
of the CIRP Costs in full (including the amount payable
against interim finance) be released and shall stand
discharged.
[…]
1.2.4. Unsecured Operational Creditors
Page 29 of 64
(iii) Effect of settlement of unsecured operational debts […] b. Pursuant to the payments proposed to the operational creditors, under this Resolution Plan, any and all legal proceedings pertaining to period prior to the Insolvency Commencement Date initiated before any forum by or on behalf of the operational creditors, to enforce its claims against the Corporate Debtor or enforce or invoke any security interest over the assets of the Company, shall immediately, irrevocably and unconditionally stand withdrawn, abated, settled and/or extinguished. 1.2.5 Workmen/ Employees […] (iii) Effect of settlement of the Workmen and employees’ dues c. Upon making payment towards Workmen and Employee Dues, any and all legal proceedings pertaining to period prior to the Insolvency Commencement Date initiated before any forum by or on behalf of any workmen and employee, to enforce any claims against the Corporate Debtor or enforce or invoke any security interest over the assets of the Corporate Debtor, shall immediately, irrevocably and unconditionally stand withdrawn, abated/settled/or extinguished. […] CHAPTER VII
Page 30 of 64
(x) On making payment as per Resolution Plan, encumbrances,
security interest, liens, and/or attachments created over the
assets of the Corporate Debtor or over the securities of the
Corporate Debtor, whether by contract or by applicable law,
shall stand conditionally and irrevocably released and
reversed, without the requirement of any further deed or action
on part of the Resolution Applicant or the Corporate Debtor.”
24.
With respect to clauses (e), (g), (h), (i), (j) and (k) of Regulation 37(ibid),
the Applicant/ RP has submitted that no action is proposed under the plan.
With respect to clause (f) i.e. reduction in the amount payable to the
creditors, the Applicant/ RP has submitted that Chapter IV of the plan deals
with the same. A summary of the payment to be made to the creditors is
mentioned in the table reproduced above under para 16 of this order.
Further, with respect to clause (l) of Regulation 37 (ibid) i.e. “obtaining
necessary approvals from the Central and State Governments and other
authorities”, the Applicant/ RP has submitted that the same has been dealt
with in “Chapter VII- Reliefs and Concessions” of the plan. We have dealt
with reliefs and concession sought by the SRA in the later part of this order.
25.
Regulation 38 of CIRP Regulations, 2016 provides for mandatory
contents of the resolution plan. The said regulation reads thus: -
“38. Mandatory contents of the resolution plan.
(1) The amount payable under a resolution plan –
(a)to the operational creditors shall be paid in priority
over financial creditors; and
(b) to the financial creditors, who have a right to vote
under sub-section (2) of section 21 and did not vote in
Page 31 of 64
favour of the resolution plan, shall be paid in priority over
financial creditors who voted in favour of the plan.
(1A) A resolution plan shall include a statement as to how it has
dealt with the interests of all stakeholders, including financial
creditors and operational creditors, of the corporate debtor.
(1B) A resolution plan shall include a statement giving details if
the resolution applicant or any of its related parties has failed
to implement or contributed to the failure of implementation of
any other resolution plan approved by the Adjudicating
Authority at any time in the past.
(2) A resolution plan shall provide:
(a) the term of the plan and its implementation schedule;
(b) the management and control of the business of the
corporate debtor during its term; and
(c) adequate means for supervising its implementation.
(d) provides for the manner in which proceedings in
respect of avoidance transactions, if any, under Chapter
III or fraudulent or wrongful trading under Chapter VI of
Part II of the Code, will be pursued after the approval of
the resolution plan and the manner in which the
proceeds, if any, from such proceedings shall be
distributed:
Provided that this clause shall not apply to any
resolution plan that has been submitted to the
Adjudicating Authority under sub-section (6) of section 30
on or before the date of commencement of the Insolvency
and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) (Second Amendment)
Regulations, 2022.
Page 32 of 64
(3) A resolution plan shall demonstrate that –
(a) it addresses the cause of default;
(b) it is feasible and viable;
(c) it has provisions for its effective implementation;
(d) it has provisions for approvals required and the
timeline for the same; and
(e) the resolution applicant has the capability to
implement the resolution plan.
(4) (a) The committee shall consider setting up a monitoring
committee for monitoring and supervising the implementation of
the resolution plan.
(b) The monitoring committee may consist of the resolution
professional or any other insolvency professional, or any other
person, including representatives of the committee and
representatives of resolution applicant(s), as its members:
Provided that where the resolution professional is
proposed to be part of the monitoring committee, the monthly
fee payable to him shall not exceed the monthly fee received by
him during the corporate insolvency resolution process.
(c) The monitoring committee shall submit quarterly reports to
the
Adjudicating
Authority
regarding
the
status
of
implementation of resolution plan.”
26.
With respect to compliance of Regulation 38(1) (ibid), it is seen at page
29 of the plan (page 423 of the application) that the operational creditors
shall be paid in priority to the payments to financial creditors. Further, at
page of the plan (page 421) of the application, it is stated that the financial
Page 33 of 64
creditors who do not vote in favour of the plan shall be paid in priority over
the assenting financial creditors. Relevant excerpt of the plan reads thus: -
“The unsecured financial creditors shall be paid INR 25 Lakhs
in proportion of their debt as an upfront payment within 89
days from the date of approval of Resolution Plan by the
Adjudicating Authority or signing of Definitive agreement
whichever is later. The financial creditors who do not vote in
favour of the Resolution Plan shall be paid an amount which
shall not be less than the amount payable in accordance with
sub section (1) of section 53 in the event of liquidation of
Corporate Debtor. Further, the dissenting financial creditors
shall be paid in priority over the assenting financial creditors in
accordance with Section 30(2)(b) of the IBC and Regulation 38
of IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations 2016.
[…]
The operational creditors shall be paid their amounts ahead of
the payments to financial creditors.”
27.
The compliance of Regulation 38(1A), regarding whether the plan
includes a statement as to how it has dealt with the interests of all
stakeholders, has been affirmed by the Applicant/ RP and the same has
been recorded in para 16 (supra) of this order.
28.
Regarding the compliance of Regulation 38(1B) (ibid), the SRA has
given the following statement in Chapter II of the plan: -
“The Resolution Applicant declares that neither it nor any of its
related parties have failed to implement or contributed to the
Page 34 of 64
failure of implementation of any other resolution plan approved
by the Adjudicating Authority at any time in the past.”
29.
Regarding source of funds, the SRA at clause (4) of Chapter IV of the
Resolution Plan has stated that it will infuse an amount of Rs. 750 Lakhs
from his own bank balance/ assets, whereas a further amount of Rs. 1470
Lakhs will be infused through funds/ loans from financial institutions.
Relevant excerpt of the plan reads thus: -
“2. SOURCE OF FINANCE
INR 750 Lacs
By the Applicant from his own bank
balance/ assets
INR 1470 Lacs
To
be
tied
up
with
Financial
Institution/ Bank/ NBFC/ ARC etc.
However a soft loan has already been
committed by a HNI Friend with
available bank balance to meet any
eventuality to meet the shortfall.
Comfort Letter attached.
3. CAPEX/WORKING CAPITAL INDUCTION ALONG WITH
SOURCES OF FINANCE
Initially INR 100 Lakhs will be induced as new Capital in the
Corporate Debtor. On approval of the plan by the Adjudicating
Authority the existing share capital shall stand transferred in
favour of RA and its nominee(s) upon a nominal amount of Rs
28254/- (.0001 % of the face value of the shares held) and the
Applicant along with people nominated by him shall become
new shareholders. RA shall bring further funds ie Rs 650 Lacs
as
Unsecured
loan/quasi
equity
or
through
other
modes/instruments as may be permissible under the
Applicable Laws. The additional amounts shall be raised from
Page 35 of 64
a financial institution against assignment of debt/securities etc.
Resolution Plan envisages External Commercial Borrowing to
the tune of Rs 2120 Lacs in compliance to the FEMA rules
applicable on the date of the NCLT approval. The RA undertakes
that the terms and conditions of ECB shall adhere to the FEMA
rules and regulations for the same. If any amounts are raised
from the Indian Financial System ie NBFC/ARC/Realizations,
etc., then that drawdown amount shall be reduced from the
ECB so raised.
Working Capital margin of Rs 150 Lacs to be brought within the
plan period however the remaining amount of Rs 350 Lacs will
be realized through sale of inoperational assets subsequently.”
30.
Regulation 38(1B) of CIRP Regulations, 2016 provides that a
Resolution Plan shall include a statement giving details as to whether the
SRA or any of its related parties have failed to implement or contributed to
the failure of implementation of any other resolution plan approved by the
Adjudicating Authority at any time in the past. In this regard, a declaration
has been given by the SRA in clause 9.10 of the plan, which reads thus: -
“9.10 Statement of Failure of Implementation of any
Resolution Plan
The Resolution Applicant undertakes that neither the Resolution
Applicant nor any of its related parties has failed to implement
or contributed to the failure of the implementation of any
resolution plan approved by the Adjudicating Authority at any
time in the past.”
31.
Regulation 38(2)(a) of CIRP Regulations, 2016 states that the plan
should provide for the term of the plan and its implementation schedule. In
Page 36 of 64
this respect, reference may be made to clause (1) and (2) of Chapter VI,
which reads thus: -
“1. Term
Term of the Resolution Plan is 90days from the NCLT Approval
Date or signing of Definitive agreement whichever is later within
which all payments to the creditors as contemplated under this
Resolution Plan shall be made.
2. Implementation Schedule
The Resolution Plan shall be implemented as per the following
schedule:
As per Regulation 38(2)(b) (ibid), the Resolution Plan should provide for the management and control of the business of the Corporate Debtor
Page 37 of 64
during its term. In this regard, it is apt to refer to clause (4) of Chapter VI
of the plan, which reads thus: -
“MANAGEMENT OF CORPORATE DEBTOR POST APPROVAL
OF THE RESOLUTION PLAN
4.1 On the NCLT Approval Date, all the existing directors of the
Corporate Debtor shall be deemed to have demitted office and
shall stand removed as the directors of the Corporate Debtor.
Upon payment of 25% of the plan value in the CIRP account, the
Resolution Applicant shall appoint at least 2(two) directors as
the Board of Directors of Corporate Debtor (“Reconstituted
Board”) and accordingly, the business of Corporate Debtor shall
be carried on by the Reconstituted Board. It is submitted that
all members of the Reconstituted Board shall be eligible under
Section 29A of the IBC.
4.2. Any change in the members of the Corporate Debtor shall
not affect the validity and enforceability of any agreement, sale
deed, MoU, contract etc. executed by the Corporate Debtor with
various parties, authorities, companies etc. save and except the
provisions
and
scope
of
alterations/
modifications/
terminations/
amendments
as
also
such
reliefs
and
concessions provided to the Resolution Applicant and the
Corporate Debtor under this Resolution Plan. However, the
resolution applicant shall have the right to modify/terminate
any agreement, sale deed, MoU, contract etc. at its sole
discretion Further any liabilities arising out of such agreement,
sale deed, MoU, contract etc. shall be dealt in accordance with
Section 53 of the IBC.
4.3. Without prejudice to the other provisions of this Resolution
Plan, the Resolution Applicant may, if required and from time to
time, seek necessary directions/ orders from the Hon'ble
Page 38 of 64
Adjudicating Authority for seeking assistance of the local
administration in implementation of the terms of this Resolution
Plan, including without limitation in connection with actions to
be undertaken or filing to be made with the RoC, Regional
Director, Reserve Bank of India and/or other statutory and
regulatory
authorities
in
connection
with
the
matters
contemplated in this Resolution Plan or other incidental/
ancillary matters.”
33.
As per Regulation 38(2)(c) (ibid), the plan should also provide for
adequate means for supervising its implementation. Furthermore, as per
Regulation 38(4) (ibid), the CoC may consider the requirement of a
Monitoring Committee for the implementation of the plan. In this regard, it
is relevant to refer to clause 3 of Chapter VI of the plan, which reads thus:
“3. SUPERVISION BY MONITORING COMMITTEE
3.1. The Secured Financial Creditor shall constitute the
Monitoring Committee, which may comprise of one nominee of
the Secured Financial Creditor and one Nominee of the
Resolution
Applicant
besides
Resolution
Professional
("Monitoring Committee"). The Monitoring Committee shall
monitor the implementation of the Resolution Plan after the
NCLT approval date and until the Implementation Date.
3.2. During the period from the NCLT Approval Date and till the
Implementation Date (hereinafter referred to as the “Monitoring
Period”), the advisors/legal advisors to the Monitoring
Committee shall receive such fee that the Monitoring Committee
may, at their discretion, decide as deemed fit. All fees payable
to the advisors of the Monitoring Committee (including any legal
costs) till the Implementation Date shall be borne and paid out
of the internal accruals/cash flow of the Corporate Debtor. If the
Page 39 of 64
internal accruals/cash flows are insufficient to meet the above
referred expenses, to the extent approved by the Monitoring
Committee, then the same shall be borne by the Resolution
Applicant.
The recovery of Asset(s) as listed in the Balance sheet as on
31st March 2020 shall remain with Corporate Debtor as part of
the Resolution Plan.
3.3. From the NCLT Approval Date and till formation of
Monitoring Committee, Resolution Professional shall supervise
the implementation of Plan.
3.4. The Monitoring Committee, so appointed, shall have inter
alia the following responsibilities:
(a) Monitoring the implementation of this Resolution Plan,
during the Term of the Resolution Plan;
(b) Obtaining all original documents, and also all other
agreements,
deeds,
contracts,
correspondences,
communications,
letters
or
any
other
document,
pertaining to any division of the Corporate Debtor as are
in the possession of the Corporate Debtor/ Resolution
Professional or pertaining to the Corporate Debtor as a
whole, transferred by the erstwhile members of the
Boards of Directors of the Corporate Debtor and/ or by
the existing promoters or the Resolution Professional in a
peaceful and unconditional manner
(c) Providing regular updates to the secured financial
creditor, until the secured financial creditor receives the
amounts payable to them pursuant to this Resolution
Plan;
Page 40 of 64
(d) Ensuring that all assets of the Corporate Debtor
remain vested in the Corporate Debtor, on an as is basis,
free from all encumbrances and/or without any
encroachments (including but not limited to occupancy or
possession by the erstwhile director/s or promoter/s or
their men/agents/servants) at the end of the term of the
Resolution Plan in which the whole payment has been
effected successfully according to the terms of the
Resolution Plan.. The Monitoring Committee shall be
entitled to make an application to the Hon’ble
Adjudicating Authority directing local law enforcement
authorities and local district administration authorities to
maintain law. The newly constituted Board of Directors
of the Corporate Debtor would be allowed to function as
per the limits imposed by the Monitoring Committee. Upon
entire Resolution Plan amount payable as CIRP costs,
Payable to unsecured Financial creditors, Payable to
Operational Creditors and Payable to Secured Financial
Creditors are fully deposited to them then the Board shall
be fully functional independently.
(e) Accordingly, COC has decided that Monitoring
Committee shall manage the operations of the Corporate
Debtor till the appointment of the new directors as
nominated by the Resolution Applicant and thereafter
until the Resolution Plan is fully implemented the
operations of the Corporate Debtor shall be managed by
the Board of Directors under the supervision of the
Monitoring Committee. However, RA shall be permitted to
introduce & appoint Directors upon payment of 25% of the
plan value in the CIRP account. This 25% shall be
inclusive of 10% of amount paid towards performance
security, EMD & Bid Bond as per RFRP. Till the time
Page 41 of 64
entire control is not handed over on full payment of plan value RA through its Board may be allowed to make payments upto a certain amount say upto Rs l lakh without approval of Monitoring Committee. Review of the limits may be approved by Monitoring Committee over the period to expedite the Implementation.” 34. As per Regulation 38(2)(d) of the CIRP Regulations, 2016, a resolution plan shall provide the manner in which the proceedings with respect to avoidance transactions and fraudulent/ wrongful trading is to be pursued and the manner in which the proceeds, if any, from such proceedings shall be distributed. In this respect, it is apposite to refer to clause 1.2.2.(f) in Chapter IV of the plan, which reads thus: - “Any recoveries by the Corporate Debtor/Resolution Applicant from the erstwhile promoters/directors or other entities against avoidance transactions (PUFE transactions under IBC, 2016) shall be vested with Secured financial creditors (SFC). Post approval of the Resolution Plan by the Hon'ble NCL T, the pending applications, if any, shall be pursued by the Corporate Debtor. The expenses for pursuing/follow up of the pending Applications after the NCLT Approval date shall be borne by the Secured Financial Creditor though pursued by Corporate Debtor. The amount so recovered shall be paid to secured financial creditor after adjusting the expenses incurred for recovery of the same.” Furthermore, the Applicant/ RP in Form – H, has provided the following details with respect to the pending proceedings regarding PUFE transactions: -
Page 42 of 64
“20. Whether separate applications for Sections 43, 45, 66
related Sections in the Code as applicable have been filed
regarding PUFE Transactions?
• Preferential Transactions under Section 43 of Code- I.A.
No. 3899/2020 (pending for adjudication)
• Fraudulent Transactions under Section 66 of Code- I.A.
No. 1486/2023 (pending for adjudication)
• Fraudulent Transactions under Section 66 of Code- I.A.
No. 3029/2022 (pending for adjudication)”
35.
As per the requirement of Regulation 38(3)(a) of CIRP Regulations,
2016, a plan shall demonstrate that it addresses the cause of default by the
Corporate Debtor. In this respect, it is relevant to refer to clause (8) of
Chapter III of the resolution plan, which reads thus: -
“8. CAUSE OF DEFAULT
What we understand from perusal of the documents provided
to us is that the promoters of the Corporate Debtor made wrong
policy decisions. It seems that the Corporate Debtor was mainly
funded through debts. Further, of course, the metal industry
saw a slump at the relevant time. The expertise of the Applicant
as mentioned aforesaid will address the cause of default.”
36.
Further, with regard to Regulation 38(3)(b) (ibid) which provides for
feasibility and viability of the plan, the Applicant/ RP has submitted that
the compliance of the said provision can be seen from Chapter II and IV of
the plan. Relevant excerpt of the same reads thus: -
Page 43 of 64
Page 44 of 64
Page 45 of 64
As can be seen from clause (1) of Chapter II of the Resolution Plan,
the SRA has stated that the plan is not in contravention of any law. Relevant
excerpt of the same reads thus: -
“Resolution Applicant / associates have taken utmost care and
diligence while preparing the Resolution Plan and thus hereby
confirms that Resolution Plan is not in contravention of
provisions of the Applicable Laws for the time being in force.”
38.
It is pertinent to note that in chapter 10 of the Resolution Plan, the
SRA has sought a number of reliefs and concessions from this Tribunal.
Chapter 10 of the plan reads thus: -
“CHAPTER VII - RELIEFS AND CONCESSIONS
The Resolution Applicant prays that the Hon'ble Adjudicating
Authority grant the following reliefs, concessions and
dispensations as may be required for implementation of the
transactions contemplated under this Resolution Plan in
accordance with its terms and conditions to the Resolution
Applicant:
a) On receipt of the payment of their entire dues as per this
Resolution Plan, the secured Creditors shall release their
charge over the assets of all kinds, i.e., current assets as
well as fixed assets/tangible assets as well as intangible
assets
of
Corporate
Debtor
and
corporate
guarantees/indemnities issued by the Corporate Debtor
for other persons shall also be released and no amount
of any nature shall be payable either by the Resolution
Applicant or by the Corporate Debtor alongwith No Dues
Certificate will be issued in favour of CD/RA by the
Financial creditors individually as well.
b) Upon complete implementation of the Resolution Plan, to
withdraw any suits/ petitions/ applications filed against
Corporate Debtor by the Creditors and any person or
authority or entity whatsoever pending in any court of
law and till such time, suits/ petitions/ applications be
kept in abeyance from the NCLT Approval Date.
Page 46 of 64
c) The Resolution Applicant will have the option to prepay
the dues of the financial creditors as committed under
this Resolution Plan, without any additional levies.
d) On receipt of the payment of their entire dues as per this
Resolution: Plan, the financial creditors will provide
following documents to the Corporate Debtor/ Resolution
Applicant:
i.
Original & copy of title documents available
with it for all properties on which creditors
have charge along with physical possession
in favour of RA;
ii.
No due certificate in the name of the
Corporate Debtor with clear word that
nothing is due form the Corporate Debtor;
iii.
Documents for vacation of charge to be filed
before RoC; and
iv.
iv. Documents for vacation of charge to be
filed by Banks before CERSAI.
e) After the implementation of Resolution Plan, all the
tangible assets and intangible assets and current assets
of Corporate Debtor except written off will solely remain
under the ownership and right of the Corporate Debtor
and no person will have right on these assets in future.
f) Liberty to change the name of the Corporate Debtor and
the approval of the State Government without any tax
implications.
g) Income Tax Authority to provide the following reliefs/
concessions:
i.
Exempting the Corporate Debtor from Section 79 of
the Income Tax Act, 1961 ("Income Tax Act");
ii.
Waive
all demands/ interest
and
penalty,
disallowances of any carry forward losses
including
unabsorbed
depreciation
charged
against the dues of the income tax authority till
NCLT Approval Date;
Page 47 of 64
iii.
Allowing the Corporate Debtor to carry forward its
unabsorbed depreciation, business losses/ capital
loss beyond statutory time limit of 8 (eight)
assessment years under Section 72 of Income Tax
Act and set off in subsequent years; in as much as
in calculation of the period of limitation of 8 (eight)
years under Section 72(3) of Income Tax Act for
carry forward of losses, the years during which the
net worth remained negative, be excluded;
iv.
No income tax will be attracted / payable on
account of capital gain arising out of the transfer of
shares to Resolution Applicant and/or other
persons as nominated by him;
v.
Income Tax Department shall allow all the losses/
write offs done by the corporate debtor and
wherein the income tax assessment is still
pending. The reason for this is that the Resolution
Applicant is not getting all these assets which have
been written off by the Corporate Debtor prior to
CIRP or which are not existent when the Resolution
Applicant shall take the possession and control of
Corporate Debtor;
vi.
To allow total loss brought forward (including
unabsorbed depreciation) to be reduced from the
book profit for the purposes of levy of minimum
alternate tax under Section 115JB of the Income
Tax Act;
vii.
Exemption from Section 41 of the Income Tax Act
with respect to any Income which may arises due
to write back of liabilities against the existing
Brought
Forward
Losses
and
unabsorbed
Depreciation pursuant to the Approval of the
Resolution Plan.
viii.
During CIRP period ITRs have been filed without
audited accounts, RA may be permitted to revise
the filed ITR and further permitted carry forward
the losses if any as quantified after audit of
accounts (even if Belated Return) as if filed on
original date for the purpose of claiming the Losses
Page 48 of 64
ix.
Carry forward of losses booked in the CIRP period
to be permitted though the ITR was filed
belated/not filed.
h) Respective authorities to consider the following:
ii. Waiver of all demands/ interest and penalty
charged against the dues of the sales tax/ value added
tax/ service tax/ goods and service tax till the NCL T
Approval Date;
iii.
Waiver
of
all
the
future/subsequent
demands/claims/suits etc. related to the past events
up to the approval of the Resolution Plan; iv. Waiver of
stamp duty implications and any other levies for
transfer of shares and other transactions contemplated
in the Resolution Plan;
iv Input GST recoverable etc of respective zone(s) as per
the audited accounts of 31/3 /2020 to be carried
forward and be made available for utilization into new
GST number to be allotted by respective zone(s).
v. Grant Required Approvals ie the approvals,
consents, no-objections, sanctions required to be
obtained
by
the
Resolution
Applicant(s)
under
Applicable laws.
vi. As shares may be acquired by a Foreign Citizen
thus the approval as required under FEMA and
regulations thereof shall deemed to be complied with
and no valuation for the transfer of the shares from
resident to.non-resident shall be additionally required.
The value of Shares as being paid by RA shall be taken
as legal and final valuation wrt all rules & regulations
and the FEMA requirements with respect to the
pricing/valuation of shares for such transfer shall be
deemed to be complied.
vii. External Commercial Borrowings eligibility as
required under FEMA rules and regulations shall be
deemed to be approved for raising the funds for
acquisition of stressed entity/asset.
Page 49 of 64
viii. RA/Corporate Debtor is entitled to appoint
statutory auditor , counsels, advocates, staff etc as
may be required for conducting the business as going
concern wef NCLT approval date.
i) On approval of the Resolution plan by the Hon’ble NCLT,
all the present or future litigations, proceedings of
whatever nature, including those relating to direct or
indirect taxation, or of any other nature, in respect of the
issues, claims, etc., (except the suits/proceedings
initiated by the creditors which shall be kept in abeyance
till the complete payment as per the Resolution Plan is
received), pertaining to the period prior to the date of
approval of the Resolution Plan qua the Corporate Debtor,
shall stand closed immediately and the Corporate
Debtor, Resolution Applicant, Financial Creditors or the
Resolution Professional shall not be liable for any civil,
criminal or any other consequence including penalty
arising therefrom. The suits etc kept in abeyance as filed
by the creditors etc shall be automatically closed upon
receipt of the amounts stated as payable in the
Resolution Plan.
j) Waiver of for any past liabilities, penalties and any form
of payment by way of late fees, damages etc. which
occurred or become due because of any non- compliance
related to Companies Act till the NCLT Approval Date.
k) All claims, rights of existing Promoter/ Promoter group
against the Corporate Debtor, unless covered in the
Resolution
Plan,
shall
stand
irrevocably
and
unconditionally extinguished and ineffective on approval
of Resolution Plan by NCLT.
l) Time period of 12 (twelve) months from the NCLT
Approval Date be made available to the Resolution
Applicant/Corporate Debtor to ensure compliance in
relation to non-compliance of Applicable laws by the
Corporate Debtor to any period up to NCLT Approval Date
without any additional fees, interest and penalty.
m) Subject to the provisions of Section 32A of the IBC, the
Resolution Applicant or the Corporate Debtor or any new
Person in management and control of the Corporate
Page 50 of 64
Debtor on and from the NCLT Approval Date, as the case
may be, shall not be held liable for any continuing non-
compliance (including for any interest and penalty) of the
Corporate Debtor Under any Applicable Law which non-
compliance had arisen prior to NCLT Approval Date.
n) The RoC to take on record upon approval of Resolution
Plan by the Hon'ble Adjudicating Authority, without
further compliances.
o) It is probable that certain business permits of the
Corporate Debtor have lapsed, expired, suspended,
cancelled, revoked or terminated or the corporate debtor
has non compliances in relation thereto. Accordingly, all
Governmental Authorities that have issued or granted
such business permits to provide reasonable time period
of atleast 12 (twelve) months after the NCL T Approval
Date in order for the Resolution Applicant to assess the
status of business permits and applicable laws without
initiating any action, proceeding in relation to non-
compliance, and to permit the Resolution Applicant to
continue to operate the business of the Corporate Debtor
as carried out prior to the NCLT Approval Date.
p) 100% extinguishment of unclaimed amount of all other
Central and State Government Authorities (Including
dues of Land Revenue Department (if any) up to NCLT
Approval Date.
q) Any unclaimed amounts (including the retirement
benefits, except provident funds and gratuity etc.), shall
also stand extinguished from the NCLT Approval Date.
r) Workmen/employees who have not lodged their claims
or if any amount has not been provided for in the
Resolution Plan, shall stand extinguished after the
approval of the Resolution Plan.
s) From the NCLT Approval Date, any onerous contract
entered into by the Corporate Debtor subsisting before
the approval of Resolution Plan shall stand terminated,
without any liability and obligation on part of the
Corporate Debtor/ Resolution Applicant.
Page 51 of 64
t) On the approval of the Resolution Plan by Hon'ble
Adjudicating Authority, the Resolution Applicant shall be
the sole beneficiary of any amount recovered by the
Resolution Applicant post acquisition, previously written
off by the Corporate Debtor. Further, the Resolution
Applicant shall have full right to recover/ proceed against
the party whose account is recoverable in the books of
Corporate Debtor as on the NCLT Approval Date and the
Resolution Applicant shall be the sole beneficiary of the
amount so recovered.
u) All liabilities which may arise due to issuance of
corporate guarantees, indemnities, etc. provided by the
Corporate Debtor (whether known or unknown) shall
stand extinguished and ineffective on the NCLT Approval
Date.
v) Other than persons receiving financial settlement under
the Resolution Plan, no payments or settlements (of any
kind) shall be made to any other person or entity in
respect of claims filed under the ORP and all claims
(including, for avoidance of doubt, any un-verified portion
of their claims, rejected) against the Corporate Debtor
shall stand irrevocably and unconditionally abated,
settled and extinguished in perpetuity on and with effect
from NCL T Approval Date.
w) Except the actions taken or the right to take such actions
against the guarantors by the Financial Creditors of the
Corporate Debtor, any invocation or appropriation or
enforcement action already taken in respect of any
security,
guarantee/indemnities
pledge,
charge,
encumbrance granted or created by the Corporate Debtor,
or in respect of any asset of the Corporate Debtor in
connection with any financial debt or any other debt or
obligation of the Corporate Debtor, at any time prior to the
NCLT Approval date shall stand automatically revoked
and cancelled and deemed null and void upon payment
of the entire resolution amount to the creditors and all
liabilities and obligations in relation to such security,
guarantees/indemnities, pledge, charge, encumbrance
granted or created by the Corporate Debtor, or in respect
of any asset of the Corporate Debtor shall be deemed to
Page 52 of 64
have been permanently extinguished with effect from the
date of such payment.
x) On
making
payment
as
per
Resolution
Plan,
encumbrances,
security
interest,
liens,
and/or
attachments created over the assets of the Corporate
Debtor or over the securities of the Corporate Debtor,
whether by contract or by applicable law, shall stand
conditionally and irrevocably released and reversed,
without the requirement of any further deed or action on
part of the Resolution Applicant or the Corporate Debtor.
y) Although Resolution Plan is prepared with utmost care
and due diligence in spite of that if in future any hidden
financial liability towards discharge of any legal
obligation, of any nature whether known or unknown,
defined or non-defined, admitted or non-admitted, arise
on Resolution Applicant, the Resolution Applicant must
be protected from such liability and· must be allowed to
approach Hon'ble Adjudicating Authority for reliefs, if
needed.
z) All the power of attorneys provided to any person by the
Corporate Debtor shall stand revoked/ ineffective/ null
and void, immediately on the NCLT Approval Date.
aa)
The Corporate Debtor and the Resolution Applicant
are responsible only for the liabilities specifically
mentioned and undertaken by it in the Resolution Plan.
To clarify, the Resolution Applicant shall not be
responsible for the liabilities not mentioned/ undertaken
in the Resolution Plan.
bb) Any amount except recorded in the books of account,
recoverable on account of any nature after the approval
of the Resolution Plan will solely be under the
right/control/ownership of the Resolution Applicant and
no one else will have any right on such receipts;
cc) Waiver of the dues of Creditors who have not filed claims;
dd)
It is prayed that the Corporate Debtor shall not be
denied any benefit under any Applicable Laws,
government schemes, policy, incentives including but not
limited to Income Tax Act, Goods and Service Tax Act,
Page 53 of 64
2017, etc: merely on account of unavailability of
supporting documents (including but not limited to
purchase invoices, shipping bill, bill of export, etc.) and
all stakeholders should cooperate with the Corporate
Debtor for claiming any such amount.
ee) All the dues/claims of the Customs Department, Director
General of Foreign Trade, any other Revenue or Tax
Authority for any amount, dues, incentives, export
incentives, duties, duty drawbacks, tax, revenue,
interest, penalties etc. crystallized or not crystallized,
liquidated or not liquidated, contingent or not contingent,
presently claimed or not. claimed, under litigation or not
under litigation from the Corporate Debtor shall be
deemed to be extinguished on the NCLT Approval Date.
ff) All the outstanding negotiable instruments issued by the
Corporate Debtor including but not limited to demand
promissory notes, post-dated cheques and letter of credit,
shall stand terminated and the Corporate Debtor's
liability under such instruments shall stand extinguished
without any further deed or action on part of the
Resolution Applicant or the Corporate Debtor or any other
Person. However, if any action is initiated against any
third party, then in no circumstances, such third party
can exercise any subrogation rights against the
Corporate Debtor.
gg) The guarantors that have provided guarantees for and
on behalf of the Corporate Debtor and in order to secure
the debt availed by the Corporate Debtor shall not be
entitled to exercise any subrogation rights in respect of
such guarantees.
hh)
Where any event upon happening or not happening
of which any contingent liability of the Corporate Debtor
arises, on or before the NCL T Approval Date so as to
crystallize such contingent liability as a liability or to give
a cause to any person to hold any claim or demand
against the Corporate Debtor in terms of such contingent
liability; shall stand settled, abated, extinguished and
satisfied, irrespective of whether any claim or demand
has been made in this regard or has come to the notice or
knowledge of the Corporate Debtor or the Resolution
Page 54 of 64
Applicant and the same shall not devolve upon the
Resolution Applicant or the Corporate Debtor in any
manner whatsoever.
ii) Subject to the rights available to the counter party, the
Resolution Applicant, post the NCLT Approval Date,
reserves the right to terminate or re-negotiate any and/or
all agreements deeds or contracts or other similar rights
or entitlements whatsoever entered into with any third
party by the Corporate Debtor, without any recourse to
the Corporate Debtor, by such third party, for any claim
of specific performance, damages or indemnity from the
Corporate Debtor and without any penalty, charges, fees,
fines or liabilities pursuant to such agreements, deeds or
contracts.
jj) Subject to and in accordance with RBI circular
DBR.No.BP.BC.45/21.04.048/2018-19 dated 07 June
2019, the financial creditors give their consent, effective
from the Implementation Date, for regularization and
asset classification of all accounts of the Corporate
Debtor as 'Standard' for the purposes of all Applicable
Laws, all ratings including credit rating, credit score or
internal reports of the lenders and accordingly, the
financial creditors shall take all necessary actions and
shall provide an intimation to the Corporate Debtor at the
earliest and in any case within 30 (thirty) Business Days
from the Implementation Date confirming the compliance
with the aforesaid.
kk) Subject to and in accordance with RBI circular
DBR.No.BP.BC.45/21.04.048/2018-19 dated 07 June
2019, the financial creditors hereby give their consent,
effective
from
the
NCLT
Approval
Date,
for
declassification of the Company under the lists of
defaulters /willful defaulters/fraud etc in the records of
the lenders after receiving the payment(s) stipulated in
the Resolution Plan. (
ll) Dealership of the erstwhile company to be restored as
may have been withdrawn by various entities to enable
the resumption of the Wholesale Trade.
Page 55 of 64
mm) The Corporate Debtor and all its facilities shall continue to receive supply of essential supplies, goods and services on an uninterrupted basis during Monitoring Period wef NCLT Approval Date, and shall not for any reason be shut down or restricted in its activities in any manner.”
It is pertinent to note that in Form- H, the Applicant/ RP has stated that the average fair value and average liquidation value of the CD is Rs. 21,95,35,600/- and Rs. 17,27,42,370/- respectively. Thus, we find that the value of the plan is more the fair value of the Corporate Debtor, assessed by the valuators appointed by the RP in terms of the provisions of Regulation 27 of CIRP Regulations, 2016 r/w Regulation 35 thereof. 40. Besides, we note that in terms of the judgment of Hon’ble Supreme Court in the case of Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta & Ors. [Civil Appeal No. 8766-67 of 2019], it is the subject matter of commercial wisdom of CoC to take decision regarding the amount of bid offered by SRA and the scope for this Tribunal to interfere on such issues is negligible. The above view was also reiterated by Hon’ble Supreme Court in Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited & Anr. (Civil Appeal No. 3224 of 2020) wherein the Hon’ble Court ruled that the scope of examination of the application for approval of Resolution Plan by this Tribunal is confined to the provisions of Section 30(2) of IBC, 2016. Para 153 of the Judgment reads thus: - “153. Regulation 38(3) mandates that a Resolution Plan be feasible, viable and implementable with specific timelines. A Resolution Plan whose implementation can be withdrawn at the
Page 56 of 64
behest of the successful Resolution Applicant, is inherently unviable, since open-ended clauses on modifications/withdrawal would mean that the Plan could fail at an undefined stage, be uncertain, including after approval by the Adjudicating Authority. It is inconsistent to postulate, on the one hand, that no withdrawal or modification is permitted after the approval by the Adjudicating Authority under Section 31, irrespective of the terms of the Resolution Plan; and on the other hand, to argue that the terms of the Resolution Plan relating to withdrawal or modification must be respected, in spite of the CoC’s approval, but prior to the approval by the Adjudicating Authority. The former position follows from the intent, object and purpose of the IBC and from Section 31, and the latter is disavowed by the IBC’s structure and objective. The IBC does not envisage a dichotomy in the binding character of the Resolution Plan in relation to a Resolution Applicant between the stage of approval by the CoC and the approval of the Adjudicating Authority. The binding nature of a Resolution Plan on a Resolution Applicant, who is the proponent of the Plan which has been accepted by the CoC cannot remain indeterminate at the discretion of the Resolution Applicant. The negotiations between the Resolution Applicant and the CoC are brought to an end after the CoC’s approval. The only conditionality that remains is the approval of the Adjudicating Authority, which has a limited jurisdiction to confirm or deny the legal validity of the Resolution Plan in terms of Section 30 (2) of the IBC. If the requirements of Section 30(2) are satisfied, the Adjudicating Authority shall confirm the Plan approved by the CoC under Section 31(1) of the IBC.”
As far as the issue of 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 are concerned, 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 cannot be subject to any condition, assumptions, relief/ concessions and/ or qualification. It also needs to be underlined that the
Page 57 of 64
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 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
Page 58 of 64
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)
In any case, in terms of the provisions of Sections 13 and 15 of the IBC 2016 read with Regulations 6, 6A, 7, 8, 8A, 9 and 9A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016, all the claimants such as Operational Creditors, Financial Creditors, Creditors in Class, Workmen and Employees and other Creditors can raise their claims before the IRP/RP. The claims are dealt with by IRP in terms of the provisions of Section 18(1)(b) of the IBC, 2016 and by RP in terms of the provisions of Section 25(1)(b) thereof read with Regulations 12A, 13 and 14 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Thereafter, the RP prepares an Information Memorandum in terms of the provisions of Regulation 36(2) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Memorandum contains inter alia a list of creditors containing the range of creditors, the amounts claimed by them, the amount of their claim admitted and the security interest if any in respect of such claims. As has been provided in Regulation 36(1) of the Regulations (ibid), the Information Memorandum is required to be submitted in electronic form to each member of CoC, on or before 95th day from the Insolvency commencement date. As has been provided in Regulation 36A of the Regulations the RP publish brief
Page 59 of 64
particulars of the invitation for Expression of Interest in Form G of Schedule I to the Regulations at the earliest i.e. not later than 60th day from the Insolvency commencement date, from interested and eligible Prospective Resolution Applicants to submit Resolution Plans. As can be seen from Regulation 36B of the Regulations, the RP shall issue Information Memorandum Evaluation Matrix (IMEM) and request for Resolution Plans, within 5 days of the date of issue of provisional list of eligible Prospective Resolution Applicants (required to be issued under Regulation 36A(10) of the Regulations). It is with reference to such Information Memorandum Evaluation Matrix that the RP issues 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 IMEM and RFRP is then examined by the Committee of Creditors. Nevertheless, it needs to satisfy the requirements of Regulation 37 and 38 of the extant Regulations. Once the plan is approved by the CoC, in terms of the provisions of Regulations 39 of the aforementioned Regulations, it virtually becomes a contract entered into between the CD represented through RP, SRA and the Creditors of the CD. On being approved by this Adjudicating Authority, by operation of Section 31(1) of the Code, the plan becomes binding on the Corporate Debtor and 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 enforced such as
Page 60 of 64
authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the Resolution Plan. Thus, Section 31(1) of IBC, 2016, takes care of most of the relief/concession/waiver solicited by the Resolution Applicant. 43. Besides, in terms of the provisions of Section 32A, for an offence committed prior to the commencement of the Corporate Insolvency Resolution Process, the liability of the CD ceases and the CD is not liable to be prosecuted from the date of approval of Resolution Plan by this Adjudicating Authority, if the Resolution Plan results in change of management or control of the CD to a person who was not promotor or in the management or control of the CD or a related party of such a person or a person with regard to whom the concerned Investigating Agency has reason to believe that he had abated or conspired for the commission of the offence and has submitted or filed a report or a complaint to the relevant statutory authority or Court. In such cases, where the prosecution is instituted against the CD, during CIRP, the CD stands discharged qua the same from the date of approval of the Resolution Plan. Nevertheless, every person who was a designated partner as defined in clause (j) of Section 2 of the Limited Liability Partnership Act, 2008, “an officer who is in default” as defined in Clause (60) of Section 2 of Companies Act, 2013 or was in any manner in charge of, or responsible to the CD for the conduct of his business or associated with the CD in any manner and was directly or indirectly involved in the commission of an offence as per the report submitted or complaint filed by Investigating Agency shall continue to be
Page 61 of 64
liable to be prosecuted and punished for such an offence committed by the
Corporate Debtor notwithstanding the Corporate Debtors’ liability ceases
after approval of the plan.
44.
In the wake of the provisions of Section 32A(2), no action is taken
against the property of the Corporate Debtor in relation to an offence
committed prior to the commencement of the Corporate Insolvency
Resolution Process of the CD, where such property is covered under
Resolution Plan approved by this Authority under Section 31, which result
in the change in the control of the CD to a person who was not a promotor
or in the management or control of the Corporate Debtor or related party of
such person or a person with regard to whom the Investigating Agency has
reason to believe that he had abated or conspired for commission of the
offence and has submitted or filed a report or complaint to the relevant
statutory authority or Court.
45.
The action against the property of the Corporate Debtor as referred to
in Section 32A of the Code includes the attachment, seizure, retention or
confiscation under such law as may be applicable to the Corporate Debtor.
One may also be not oblivious of the fact that in the backdrop of provisions
of Section 31(3)(a) of the IBC, 2016, the moratorium order passed by the
Adjudicating Authority under Section 14 ceases to have effect. In sum and
substance,
the
SRA/CD
would
be
entitled
to
no
other
relief/concession/waiver except those, which are available to it as per the
provisions of Section 31(1) and 32A of IBC, 2016.
Page 62 of 64
In any case, the SRA has also stated in the Resolution Plan that the
plan is unconditional. Relevant excerpt of the same reads thus: -
“In case of any change or modification to any of the reliefs,
concessions and dispensations as sought under this Chapter,
including where the Hon'ble Adjudicating Authority or any
Appellate Authority/ Courts decline to grant or reject or stay the
order of the Hon'ble Adjudicating Authority, the Resolution
Applicant shall be at the liberty for taking all such actions,
making applications and seeking approvals in order to obtain
these reliefs and concessions for effective implementation of the
Resolution Plan. However, the RA hereby declares that these
reliefs, concessions and dispensations as sought under this
Chapter
do
not
constitute
condition
precedent
for
implementation of the Resolution Plan and thus modification or
denial of any or more of them shall not impact the validity,
bindingness and the implementation of the Resolution Plan.”
(Emphasis Supplied)
It is further directed that the SRA shall implement the plan as per the
timelines indicated in the Resolution Plan.
48.
In the backdrop of aforementioned factual position, discussion,
analysis and findings, the IA-16/2024 filed by the Applicant/ RP for
approval of the Resolution Plan is allowed. The Plan submitted by the SRA,
certified by the RP by issuing a certificate in prescribed form viz. Form “H”,
is approved.
49.
As a sequel, we issue 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;
Page 63 of 64
ii.
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;
iii.
Following steps would be taken in terms of the resolution plan: -
SL. NO.
STEP TO BE TAKEN
TIMELINE
1.
Constitution of Monitoring
Committee
X+5 days
2.
Payment of unpaid CIRP Cost
X+89 days
3.
Payment to Operational Creditors
X+89 days
4.
Payment to Secured Financial
Creditors
X+90 days
5.
Payment to Unsecured Financial
Creditors
X+89 days
6.
Appointment of new directors in
the board of CD
X+89 days
7.
Infusion of 25 % the plan value
X+89 days
8.
Transfer of all existing shares and
issue of fresh shares
X+90 days
iv. It is clarified that “X” in the above table would imply the date of this order and not signing of Definitive agreement. 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; vi. The SRA shall act in terms of the provisions of Section 31(4) of IBC 2016;
Page 64 of 64
vii.
The Monitoring Committee shall file progress report regarding
implementation of the Plan before this Tribunal, every month;
viii.
The RP shall forward all the records relating to the conduct of the
CIRP and the Resolution Plan to the IBBI for its record and database;
ix.
The RP shall also forthwith send a copy of this order to the
participants and the Resolution Applicant. He would also send a
copy of this order to the ROC concerned within 15 days of this order;
x.
The RP shall intimate each claimant about the principle or formulae,
as the case may be, for payment of debts under the Plan;
50.
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.
51.
A copy of this order shall also be sent by the Court Officer and
Applicant to the IBBI and RoC for their record.
Sd/-
Sd/-
(ANIL RAJ CHELLAN)
(ASHOK KUMAR BHARDWAJ)
MEMBER (T)
MEMBER (J)
Verbatim extracted text (OCR/PDF). Older scans and tables may show extraction artifacts — verify against the original for anything you act on.
No analysis has been generated for this document yet.