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IA/1212/CHE/2022 is an Application which is moved by the Resolution Professional of the Corporate Debtor viz. Saalim Shoes Private Limited under Section 30(6) & 31 (1) of the Insolvency and Bankruptcy Code, 2016 (in short 'IBC, 2016') seeking approval of the Resolution Plan submitted by the successful Resolution Applicant's viz. Mr. Aejaz Ahmed Tarkathi, Mr. A. Mohammed Saalim, Mr. A. Mohammed Aslam, Mr. A. Mohamed Ashfaque.

Before adverting to the facts of the case, it is pertinent to point out that the Applicant Corporate Debtor is an MSME having UDHAYAM Registration no: UDYAM-TN-30-0001589.

In an Application filed by an Operational Creditor under Section 9 of IBC, 2016 in IBA/1104/2019, the Corporate Insolvency Resolution Process of the Corporate Debtor was initiated by this Tribunal in order dated 22.09.2020 and the Applicant herein was appointed as the Interim Resolution Professional (In brevity 'IRP'). Later, in the COC meeting held on 19.10.2020 the IRP was confirmed as the Resolution Professional (In brevity the 'RP') of the Corporate Debtor.

Pursuant to the order dated 22.09.2020, public announcement for the commencement of insolvency has been made in Trinity Mirror (English) and Makkal Kural (Tamil Ed.) on 28.09.2020.

The COC was constituted on 14.10.2020 and the 1st COC meeting was held on 19.10.2020 and discussions were conducted with regard to appointment of Registered Valuers. The final value of claims admitted is Rs. 188,14,44,568/- (Rupees One Hundred and Eighty Eight Crore Fourteen Lakhs Forty Four Thousand Five Hundred and Sixty Eight).

The EOI was invited through publication of Form- G on 01.02.2021. Since the COC was not satisfied with the responses another EOI was issued on 22.06.2021. In reply to the same, the RP has received only one EOI, who is the erstwhile promoter of the Corporate Debtor.

The Successful Resolution Applicant presented the Plan in the 10th COC meeting dated 16.10.2021. The major CoC member viz. Indian Overseas Bank requested for revision of the plan with regard to timelines and settlement to other creditors.

After discussions and deliberations, the SRA carried out the modifications to the resolution plan and it was placed for voting in the 16th COC meeting dated 19.03.2022 and the Resolution plan was unanimously approved by the COC with 100% voting share.

Subsequently a meeting was held on 28.03.2022 to correct certain grammatical mistakes in the resolution plan. After carrying out the same, the said Resolution Plan was again placed for voting before the CoC and it was unanimously voted in favour of accepting the Resolution Plan.

The Registered valuers were appointed with the consensus of COC and in accordance to the IBC, 2016 and the fair value of the Corporate Debtor was determined to be Rs.77 Crore (Rupees Seventy-Seven Crore) and Liquidation value was determined as Rs. 59 Crore (Rupees Fifty-Nine Crore).

The SRA, who is the erstwhile promoter and the Resolution Applicant has submitted his Affidavit in accordance with Section 30(1) of IBC, 2016 confirming his eligibility to submit a Resolution Plan under Section 29A of IBC, 2016.

Under the said circumstances, the present Application has been filed by the RP seeking approval of the Resolution Plan which was approved by the CoC with 100% majority.

It is stated that the Resolution Plan envisages a total repayment of Rs.170 Crores to all the Creditors (both Financial Creditor and Operational Creditor) over a period of 10 years and the Resolution Plan includes a statement under Regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interest of all the stakeholders in compliance with the Code and the Regulations.

It is stated that the SRA has proposes to pay an upfront amount of Rs.22 Crores within 90 days from the date of approval of NCLT and also bringing in working capital of Rs.15 Crores by fresh infusion over a phased manner.

In the Case of Secured Financial Creditor i.e. Indian Overseas Bank, the Settlement/Restructuring of debt of 98.13% (Rs. 90 Cr out of admitted claim amount of Rs.91.79)) by RA is proposed as follows:

iii) Rs. 1.00 Cr will be brought in by the RA within 180 days from the date of approval of the Resolution Plan by AA.

iv) Rs. 5.81 Cr will be brought in by the RA within 365 days from the date of approval of the Resolution Plan by AA

In the Case of Tata Motor Finance Limited, who is secured by the vehicles of the CD, the Settlement /Restructuring of debt of 98.13% in line with the IOB (Rs.3,58,174 to both financial creditors) is proposed by RA will be paid well within 90 days from the date of approval of the Resolution Plan by AA.

In the Case of Sundaram Finance Limited, who is secured by the vehicles of the CD, the Settlement /Restructuring of debt of 98.13% in line with the IOB (Rs.3,58,174 to both financial creditors) is proposed by RA will be paid well within 90 days from the date of approval of the Resolution Plan by AA.

Workmen are proposed to be paid by RA a sum of Rs.21 lacs (which is 24 months due) within a period of 90 days from the date of approval of the resolution plan by the Hon'ble NCLT. The RA proposes to pay another Rs.225 lacs to the workmen in a phased manner over 24 quarterly payment (including moratorium of first 4 quarters from the date of AA order).

Employees are proposed to be paid by RA a sum of Rs.84 lacs (which is 12 months due) within a period of 90 days from the date of approval of the resolution plan by the Hon'ble NCLT. The RA proposes to pay another Rs.115 lacs to the employee in a phased manner over 24 quarterly payment(including moratorium of first 4 quarters from the date of AA order).

According to the provisions of Section 30(2) (b) of the IBC, 2016 read with Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016, the Resolution Plan should necessarily provide for the liquidation value due to the operational creditors which should be paid in priority to any financial creditor and should be paid before the expiry of Ninety days after the approval of the Resolution Plan by the NCLT. The RA proposes to pay to the OC-suppliers/vendors Rs.21 Cr (25%) out of Rs.84 Cr of admitted claim in the following terms and the liquidation value of the operational creditors is Zero.

ii) Balance of Rs.20 Cr (23.81 % of the claim admitted) shall be repaid in 24 quarterly instalments with interest of 5% per annum with an initial moratorium period of 6 quarters from the payment date of Rs. 1.0 Cr. During the moratorium period, the interest @ 5% per annum will be capitalized till commencement of Repayment Schedule after moratorium period.

The RA proposes to pay to the EPF Dept., a sum of Rs. 2.40 Cr against the admitted claim amount of Rs. 4.74 Cr (which includes interest, penalties and damages). The RA seeks for waiver of interest, penalties and damages of the claim from the AA.

The RA proposes to pay to the ESIC Dues a sum of Rs. 83 Lakhs against the admitted claim amount of Rs. 2.50 Cr (which includes interest, penalties and damages). The RA seeks for waiver of interest, penalties and damages for ESI Dues from the AA.

There is a claim of Rs. 39 Lacs as admitted but the RA seeks waiver of interest, penalties and demand, if any from the Sales Tax against "Form C" from the AA.

No payment due to the TANGEDCO since the caution deposit held with the TANGEDCO is more than the claim amount. The claim amount or Rs.18 lacs, as admitted.

The gist of the Resolution Plan and the proposed payment to be made to each of the stakeholders is as under:

- • The Proposed resolution plan is in conformity with Section 30(2) of the Code and regulation 38 of the CIRP Regulations. The Resolution plan includes the Mandatory contents of the Code.

The Shareholding patter of the Corporate Debtor after the Approval of the Resolution Plan is as follows;

On approval of the Resolution Plan by the adjudicating authority, a management / monitoring committee shall be formed to supervise successful implementation of the resolution plan, comprised of two representatives, one from the financial creditor and another one representative from the resolution applicant. The chairman of the committee shall be the Resolution Professional.

It is directed that the Monitoring Committee shall be in force, till the implementation of the Resolution Plan. The Resolution Applicant shall bear the expenses to be paid to the Chairman of the Monitoring Committee, till its implementation.

The Resolution Applicant proposes to pay an upfront amount of Rs.21,60,62,686/- as per the timeline provided in the financial plan of Resolution Plan and the same will be infused by the Resolution Applicants from the own sources / borrowing fund from friends and relative by way of share capital in the form of Shares, loans, etc.

In addition to the above, the Resolution Applicant shall infuse funds for working capital by fresh infusion of equity / quasi equity if further required. In case of any sale of obsolete stock / assets, fixed assets not in working conditions shall be utilized by the Resolution Applicant for making payments for the financial plan as provided.

The Applicant has submitted the details of various compliances as envisaged within the provisions of IBC, 2016 and CIRP Regulations, which requires a Resolution Plan to adhere to, which is reproduced hereunder:

MANDATORY CONTENTS OF THE RESOLUTION PLAN IN TERMS OF REGULATION 38 OF THE CIRP REGULATIONS:-

The successful Resolution Applicant has submitted a Certificate of Eligibility under Section 29A of IBC, 2016 to submit a Resolution Plan under the provisions of IBC, 2016 and the same is filed as Additional Documents vide Diary No. 2180 dated 30.05.2023.

indirect taxes, including but not limited to, the Central Excise Act, 1944, the Finance Act, 1994 (Service Tax), the Customs Act, 1952, the Central Sales Tax Act, 1956, the Goods and Services Tax Act, 2017 and any other indirect tax laws, including taxes, duty, penalties, interest, fines, cess, charges, unpaid TDS/TCS (to the extent applicable), whether admitted or not, due or Contingent, whether part of the above mentioned contingent liability schedule dues or not, whether claimed by the tax authorities or not, asserted or unasserted, crystallized, known or unknown, secured or unsecured, disputed or undisputed, present or future, in relation to any period prior to the Completion Date, shall stand extinguished and the Corporate Debtor will not be liable to pay any amount against such demand. Upon approval of this Resolution Plan by the NCLT, all outstanding litigations / demands, assessments / appellate or other proceeding, including but not limited to any audits, investigations, search and seizure, pending in case of the Corporate Debtor in relation to the period prior to the date of NCLT order and pending on that date, shall be considered deleted and shall not be proceedings under the provisions of any of the indirect tax laws should be initiated on the Corporate Debtor in relation to the period prior to acquisition of control by the Resolution Applicant and any consequential demand shall be considered non-existing and as not payable by the Corporate Debtor, any proceedings which were kept in abeyance in view of Insolvency process or otherwise shall not be revived post the order of NCLT. the clean slate principles envisaged under IBC, 2016

In so far as the dues of the Statutory authorities are concerned, it is seen that the RP has admitted the claim of the 'EPFO' to the tune of Rs.4.73 Crores. As against the said admitted claim amount, the Resolution Applicant intends to pay only a sum of Rs.2.40 Crore. It is stated that as per the books of the Corporate Debtor, only an amount of Rs.2.40 Crores is payable to the EPFO. 14.2. The Resolution Applicant has prayed for waiver of interest, penalties and damages imposed by the PF Department. 14.3. At this juncture, it is significant to refer to the Judgment of the Hon'ble NCLAT in the matter of Jet Aircraft Maintenance Engineers Welfare Association -Vs- Ashish Chhawchharia Resolution Professional of Jet Airways (India) Ltd. and Others; 2022 SCC OnLine NCLAT 418 wherein it has been held that non-payment of the dues of the Employees Provident Fund Organization in full would amount to breach of the provision of Section 30(2)(e) of IBC, 2016. Further, by relying upon the Judgment of the Hon'ble Supreme Court in the matter of Maharashtra State Cooperative Bank Limited -Vs- Assistant Provident Fund Commissioner; (2009) 10 SCC 123, it has been held by the Hon'ble NCLAT that any amount due from the employer appearing in sub-section (2) of Section 11 also covers the amount determined under Sections 7A, 7Q, 14B and 15(2) and there cannot be any quarrel to the preposition as laid down by the Hon'ble Supreme Court in the above case. Also, by placing reliance upon Section 36(4)(a)(iii) of IBC, 2016 it was held that Provident Fund dues are not subject to distribution under Section 53(1) of IBC, 2016.

In so far as the present case is concerned, it is seen that the RP has admitted the claim of the EPFO to the tune of Rs.4.73 Crore. As per the Resolution Plan, the Resolution Applicant proposes to pay only a sum of Rs.2.40 Crore to the EPFO. If the dues of the EPFO are not paid in full it goes against the dictum laid by the Hon'ble NCLAT in the matter of Jet Aircraft Maintenance Engineers Welfare Association (supra) and as such it is in violation of Section 30(2)(e) of IBC, 2016.

Hence, under the said circumstances, since the RP has admitted the claim of EPFO to the tune of Rs.4.73 Crores, in terms of the dictum laid down by the Hon'ble NCLAT in the matter of Jet Aircraft Maintenance Engineers Welfare Association (supra), the Resolution Applicant shall pay the entire admitted claim of the EPFO to the tune of Rs.4.73 Crores. The said amount payable to the EPFO, shall be from the Resolution Plan amount of Rs.170 Crores. The remaining amount shall be distributed to the stakeholders in accordance with Section 53 of IBC, 2016.

It is seen from Form – H that the Liquidation value of the Corporate Debtor is arrived at Rs.59 Crore and the corresponding Fair value is arrived at Rs.77 Crore. The Resolution Plan is for an amount of Rs.170 Crores.

Further, it is seen from Form – H, that the RP has NOT filed any Applications under Section 43, 45, 49 and 66 of IBC, 2016 in the present matter.

In so far as the approval of the Resolution Plan is concerned, this Authority is convinced on the decision of the Committee of Creditors, following the much-celebrated Judgment of the Supreme Court in the matter of K. Sashidhar – Vs– Indian Overseas Bank (2019) 12 SCC 150, wherein in para 19 and 62 it is held as follows;

Further, the Hon’ble Supreme Court of India in the matter of Committee of Creditors of Essar Steels –Vs– Satish Kumar Gupta & Ors. in Civil Appeal No. 8766 – 67 of 2019 at para 42 has held as follows;

Further the Supreme Court in the matter of K. Sashidhar v. Indian Overseas Bank and Ors. (2019) 12 SCC 150 has lucidly delineated the scope and interference of the Adjudicating Authority in the process of approval of the Resolution Plan and held as follows;

Also, the Supreme Court of India in the matter of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Ors. (2020) 8 SCC 531 after referring to the decision in K. Sashidhar (supra) has held as follows;

The Supreme Court in its recent decision in Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Ltd. & Ors. in Civil Appeal no. 3395 of 2020 dated 24.03.2021 has held as follows;

Thus, from the catena of judgments rendered by the Supreme Court on the scope of approval of the Resolution Plan, it is amply made clear that only limited judicial review is available for the Adjudicating Authority under Section 30(2) and Section 31 of IBC, 2016 and this Adjudicating Authority cannot venture into the commercial aspects of the decisions taken by the Committee of Creditors.

On hearing the submissions made by the Ld. Counsel for the Resolution Professional, and perusing the record, we find that the Resolution Plan has been approved with 100% voting share. As per the CoC, the plan meets the requirement of being viable and feasible for the revival of the Corporate Debtor. By and large, all the compliances have been done by the RP and the Resolution Applicant for making the plan effective after approval by this Bench. On perusal of the documents on record, we are also satisfied that the Resolution Plan is in accordance with sections 30 and 31 of the IBC and also complies with regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016,

As far as the question of granting time to comply with the statutory obligations/seeking sanctions from governmental authorities is concerned, the Resolution Applicant is directed to do the same within one year as prescribed under section 31(4) of the Code.

In case of non-compliance with this order or withdrawal of the Resolution Plan by the Successful Resolution Applicant, the Monitoring Committee shall forfeit the Performance Security furnished by the Resolution Applicant in the form of Performance Bank Guarantees.

The Resolution Plan in question is hereby Approved by this Adjudicating Authority, subject to the observations made in this order. The Resolution Plan shall form part of this Order. The Resolution Plan is binding on the Corporate Debtor and other stakeholders. 15.13. The Resolution Applicant is directed to make payment of the entire Resolution Plan amount within the time period stipulated under the Resolution Plan, failing which the entire amount paid by the Resolution Applicant (including the Performance Bank Guarantee) as on the said date would stand automatically forfeited, without any recourse to this Tribunal. 15.14. Certified copy of this Order be issued on demand to the concerned parties, upon due compliance. 15.15. Liberty is hereby granted for moving any Application if required in connection with the implementation of this Resolution Plan. 15.16. A copy of this Order is to be submitted to the concerned Office of the Registrar of Companies.

IA(IBC)/1212/CHE/2022 shall stand disposed of accordingly.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Learned Counsel for information and for taking necessary steps. Files be consigned to the record.