ACT Fininvest Ltd. vs Mr. Ravi Sethia, Resolution Professional of Morarjee Textiles Limited & Ors.

Per: Coram

The present Application is filed by Mr. Ravi Sethia, ("Applicant/Resolution Professional") of Morarjee Textiles Limited ("Corporate Debtor") under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 ("Code") for seeking approval of the Resolution Plan dated 02.01.2025 r/w addendum dated 05.02.2025 and clarification dated 31.03.2025 (collectively referred to as "Resolution Plan"), submitted by Shrinivas Spintex Industries Private Limited ("Successful Resolution Applicant/SRA") and for passing order/appropriate direction that this Tribunal may deem fit in the present matter. The Resolution Plan

has been approved by 75.61% in the 22nd CoC meeting held on 04.02.2025 and adjourned to 05.02.2025.

The Corporate Debtor is a Public Limited Company under the Companies Act, 1956 incorporated on 09.10.2013 bearing CIN L52322MH1995PLC090643. Its registered office is at 242, Floor-G-1, New Mahalaxmi Silk Mill, Harishchandra L Nagoankar Marg, Mathuradas Mills Compound, Lower Parel, Mumbai, Maharashtra-400013.

The Corporate Insolvency Resolution Process (“CIRP”) of the Corporate Debtor commenced upon admission of CP (IB) / 1318 (MB) 2022 filed under Section 7 of the Code by this Tribunal on 09.02.2024, wherein Mr. Ravi Sethia was appointed as the Interim Resolution Professional (“IRP”).

Pursuant thereto, the Applicant issued the public announcement in prescribed ‘Form A’ on 12.02.2024, in Financial Express (English & All India Edition) and Loksatta (Marathi & Maharashtra Edition) inviting claims from creditors. The Applicant, after verifying the claims of creditors received by him, constituted the Committee of Creditors (“CoC”) of the Corporate Debtor in accordance with Section 21 of the Code.

The first meeting of the Committee of Creditors (“CoC”) was convened on 13.03.2024. The CoC in its third meeting held on 15.05.2024 resolved to appoint the applicant as the Resolution Professional of the CD.

In furtherance of the CIRP, the Applicant published Form-G inviting Expressions of Interest on 01.05.2024 and subsequently published an amended Form-G on 23.05.2024 in Financial Express (English & All India Edition) and Loksatta (Marathi & Mumbai, Pune, Nashik & Nagpur Edition). Thereafter, the final list of Prospective Resolution Applicants (“PRAs”) was issued on 02.07.2024, comprising 33 PRAs. The Information Memorandum, Evaluation Matrix, and Request for Resolution Plan (“RFRP”) were issued to the PRAs on 02.07.2024. The

last date for submission of Resolution Plans was initially fixed as 19.07.2024 as per the amended Form-G. Upon multiple requests for extension of time received from the PRAs, and having regard to the level of interest demonstrated, the CoC resolved to extend the last date for submission of Resolution Plans to 27.08.2024.

Three PRAs, namely: (i) Dev Land & Housing Pvt. Ltd. ("DLH"); (ii) Nirmal Ujjwal Credit Co-operative Society Ltd. ("NUCCSL"); and (iii) Shriniwas Spintex Pvt. Ltd. ("SSPL"), submitted their respective Resolution Plans along with an Earnest Money Deposit ("EMD") of Rs. 5,00,00,000/- (Rupees Five Crores Only) each.

The said plans were opened and deliberated upon in the 7th CoC Meeting held on 29.08.2024. After detailed discussion on the commercial aspects of the Resolution Plans, the CoC granted time until 11.11.2024 for submission of revised plans. Within the said period, SSPL and NUCCSL duly submitted their revised Resolution Plans; DLH, however, communicated that its original offer be treated as its final offer and that it would not be submitting any revised plan. The revised plans were opened, discussed at length, and considered in the 13th CoC Meeting held on 12.11.2024.

NUCCSL suo motu submitted a further revised Resolution Plan on 30.11.2024. In accordance with Clause 1.6.2 of the RFRP, the CoC unanimously resolved to seek improved Resolution Plans from the other two PRAs and granted time until 02.01.2025 for submission thereof.

The Applicant, vide email dated 10.02.2025, communicated the disqualification of DLH and NUCCSL on the basis of the eligibility criteria under Section 29A of the Code. NUCCSL challenged its disqualification before this Tribunal; however, the said petition was dismissed. The dismissal was upheld by the Hon'ble NCLAT, and the

appeal preferred before the Hon'ble Supreme Court was subsequently dismissed as withdrawn.

In view of the foregoing, only one Resolution Plan, out of the three Resolution Plans submitted, was found to be in conformity with the provisions of the Code and the CIRP Regulations.

In the (22^{\text{nd}}) CoC Meeting of the Corporate Debtor held on 04.02.2025, adjourned to 05.02.2025, the Applicant apprised the CoC that the compliant Resolution Plan would be put to vote. The said Resolution Plan was approved with a voting share of (75.61%) of the CoC, with the voting window remaining open from 06.02.2025 to 29.03.2025.

Consequent to the approval of the Resolution Plan by the CoC, the Applicant issued a Letter of Intent dated 09.04.2025 ("LoI") in favour of the Successful Resolution Applicant ("SRA"). The SRA accepted the LoI on 09.04.2025 in accordance with the RFRP, and furnished a Performance Security of Rs. 20,00,00,000/- (Rupees Twenty Crores Only) on 15.04.2025.

In view of the approval of the Resolution Plan by the CoC, the Applicant has filed the present Interlocutory Application seeking approval of the Resolution Plan submitted by Shriniwas Spintex Private Limited under the provisions of the Insolvency and Bankruptcy Code, 2016.

ACT Finvest Ltd., an unsecured financial creditor of the Corporate Debtor and a member of the CoC, holding (16.79%) voting rights, filed IA (IBC) No. 2316/2025. The Applicant alleges that the majority of the CoC has failed to adequately consider the interests of unsecured financial creditors in approving the Resolution Plan.

In support thereof, the Applicant submits that Section 30(2)(b) of the Code mandates that dissenting financial creditors must receive no less than the

amount payable to them under liquidation in terms of Section 53(1) of the Code. In the present case, against an admitted claim of approximately Rs. 128.46 Crores, the unsecured financial creditors have been collectively allocated a mere Rs. 39 Lakhs (approximately 0.07% of their admitted claims), which the Applicant contends falls far short of the liquidation value entitlement. The Applicant further submits that the Resolution Plan allocates approximately Rs. 130 Crores to secured creditors while providing only Rs. 39 Lakhs to unsecured financial creditors, which is grossly disproportionate and inequitable, and that the Plan fails to demonstrate, with adequate reasoning, that the interests of all stakeholders have been duly considered and balanced.

The 180-day CIRP period expired on 07.08.2024. The Applicant filed IA (IBC) 4540/2024 seeking a 90-day extension, which was allowed by this Tribunal vide order dated 03.10.2024, extending the CIRP period upto 05.11.2024. IA (IBC) 5993/2024 was thereafter filed seeking a further 60-day extension, which was allowed vide order dated 01.01.2025, extending the CIRP period upto 03.01.2025. IA (IBC) 898/2025 was subsequently filed seeking a 30-day extension, which was allowed vide order dated 09.02.2025, extending the CIRP period upto 02.02.2025. A 4th extension of 30 days was granted vide order dated 19.03.2025, extending the CIRP period upto 04.03.2025, and a 5th extension of 27 days was granted vide order dated 21.04.2025, extending the period upto 31.03.2025. By way of the 6th extension, this Tribunal vide order dated 29.05.2025 excluded the period from 12.03.2025 to 08.04.2025 (27 days) from the CIRP period, thereby extending the last date of CIRP upto 28.04.2025. The present Application has been filed on 19.04.2025, which

falls within the subsisting CIRP period, and accordingly, the Application is within the period of limitation.

It is submitted that the Resolution Amount shall be brought in by the Resolution Applicant through Inter-corporate Deposits, Unsecured Loans from friends and relatives, internal accruals, sale of immovable properties of directors and shareholders of applicant, obtaining Loan against properties by directors and shareholders of applicant and other Financial Institutions.

The Resolution Plan further provides for the constitution of a Implementation and Monitoring Committee to oversee and supervise the implementation of the Plan. The said Committee shall comprise the Applicant (Resolution Professional), one representative of the Resolution Applicant, and one nominee of the Secured Financial Creditor. The

management and control of the Corporate Debtor shall, upon approval of the Plan, vest in the Monitoring Committee, which shall monitor and facilitate the implementation of the approved Plan. Upon completion of the implementation and final payment of the last tranche, the Monitoring Committee shall stand dissolved, and the management of the Corporate Debtor shall be formally handed over to the Resolution Applicant.

In compliance of Section 30(2) of IBC, 2016, the Resolution Professional has examined the Resolution plan of the Successful Resolution Applicant and confirms that this Resolution Plan:

In compliance of Regulation 38 of CIRP Regulations, the Resolution Professional confirms that the Resolution plan provides that -

The Resolution Professional has submitted Form-H under Regulation 39(4) of the CIRP Regulations to certify that the Resolution Plan as

approved by the CoC meets all the requirements of the IBC and its Regulations. The Resolution Applicant has submitted an affidavit pursuant to section 30(1) of the Code confirming its eligibility under section 29A of the Code to submit resolution plan. The contents of the said affidavit are in order. The relevant parts of the Form H are reproduced below:

The details and documents related to the successful resolution applicant are as under:

The details of CIRP, and resolution plan are as under:

Details of implementation of resolution plan:

The list of financial creditors of the CD being members of the CoC and distribution of voting share among them is as under:

7A. Realisable amount:

7B. Details of Realisable amount:

On perusal of the Resolution Plan, we find that the Resolution Plan provides for the following:

The RP has complied with the requirement of the Code in terms of Section 30(2)(a) to 30(2)(f) and Regulations 38(1), 38(1)(a), 38(2)(a), 38(2)(b), 38(2)(c) & 38(3) of the CIRP Regulations.

The RP has filed Compliance Certificate in Form-H along with the Resolution Plan. On perusal, the same is found to be in order. The Resolution Plan has been approved by the CoC by majority of 75.61%.

With respect to IA (I.B.C.) 2316/2025, it is noted that the applicant is alleging discrimination on the ground that unsecured financial creditors, though falling with the class of financial creditors, are not proposed to be paid in parity with the secured financial creditors, and are being paid miniscule of what is proposed to be paid to the secured financial creditors, who also falls within the class of financial creditors, as the applicant along with other unsecured financial creditors do. It is noted that the average liquidation value of the corporate debtor was determined by the Registered valuers engaged by the applicant as Rs. 140.48 crores and its average fair value was Rs. 229.29 crores. The admitted claims of the secured financial creditors amount to Rs. 625.03 crores, and the admitted claims of the unsecured financial creditors amounts to Rs. 157.66 crores. It is evident from these facts that the average liquidation value of corporate debtor is less than the amount of admitted claims of secured financial creditors. In terms of section 53 of IBC, the CIRP costs and the amounts due to secured financial creditors are to be paid in priority over the unsecured financial creditors, hence the liquidation value qua unsecured financial creditors is NIL.

It is trite that the secured financial creditors and unsecured financial creditors, though falling with the same class, constitute a separate sub-class within the class of financial creditors, and the differentiation between the sub-classes of a class in respect of amounts proposed to be paid is permissible, provided the persons falling the sub-class are treated similarly and are paid a value equivalent to the liquidation value, which shall be available for settlement of claims falling under each of sub-class. Accordingly, we do not find any merit in the prayer of the applicant in IA (IBC) 2316 of 2025.

It is noteworthy that the CoC of the Corporate Debtor approved the Resolution Plan submitted by the Successful Resolution Applicant u/s 30(4) of the Code. The Resolution Professional also submits confirmation of Resolution Plan with the Code and CIRP Regulation. Therefore, it is noted that keeping in view the object of the Code, and the judgement of the Hon'ble Supreme Court in the case of K. Sashidhar (supra), wherein it has been held that once the CoC has approved a Resolution Plan by the requisite voting share, it becomes imperative for the Resolution Professional, in terms of Section 30(6) of the Code, to submit the same to the Adjudicating Authority. The Adjudicating Authority is thereupon required to satisfy itself that the Resolution Plan, as approved by the CoC, complies with the requirements of Section 30(2) of the Code.

In Section 'X' of the Resolution Plan, the SRA has sought the waivers/ reliefs/concessions. The stated effect of the Resolution Plan and reliefs & concessions as prayed for shall be available in accordance with the principle laid down by Hon'ble Supreme Court in case of Ghanshyam Mishra and Sons Private Limited v/s.

Edelweiss Asset Reconstruction Company Limited {(2021) 13 S.C.R 737} & Municipal Corporation of Greater Mumbai vs. Abhilash Lal and Ors. (2019) ibclaw.in 480 NCLAT. Further, it is clarified and ordered that -

a. Any increase in the authorized capital shall be subject to payment of prescribed fee, if any applicable, and filing of prescribed forms with the Registrar of Companies.

b. The Income Tax Department shall be at liberty to examine the tax implications arising from the proposals contained in the plan, in terms of Section 2(24), Section 28 and Section 56 of the Income Tax Act, 1961 read with GAAR provisions thereunder.

c. The Applicant shall file necessary forms and pay prescribed fees, if any, in terms of provisions of the Companies Act, 2013 in relation to reduction in capital and issuance of fresh capital, however, the Registrar of Companies shall waive the additional fees, if any, payable on such filing.

d. The SRA may approach prescribed authorities for waiver/reduction in fees, charges, stamp duty, and registration fees, if any arising from actions contemplated under the Resolution Plan and such request shall be subject to the relevant law/statute and adherence to the procedure prescribed thereunder.

e. The SRA may file appropriate application, if required, for renewal of all Business Permits, rights, entitlements, benefits, subsidies and privileges whether under applicable Law, contract, lease or license granted in favour of the Corporate Applicant or to which the Corporate Applicant is entitled to or accustomed to, which have expired on the Effective Date, and follow the dues procedure prescribed for the purpose upon payment of prescribed fees. The contract with third parties shall be subject

to consent of such parties. It is clarified that continuance of approvals shall not be refused on account of extinguishment of any dues under Code and extension or renewal thereof shall not be denied on account of past insolvency of the Corporate Applicant. No action shall lie against the Corporate Applicant for any non-compliances arising prior to the date of approval of Resolution Plan, however, such non-compliances shall be cured, if necessitated to keep the approval in force, after acquisition by the Corporate Applicant within period stipulated in the Resolution Plan.

f. The secured and unsecured Financial Creditors shall upgrade the Account of the Corporate Debtor with Banks/Financial Institutions under the CIBIL Mechanism to “Standard Category” from NPA on the Completion Date, to the extent CIBIL Mechanism system allows. The Financial Creditors shall release all the charges on all assets of the Corporate Debtor (wherever registered) after the receipt of entire resolution amount.

g. No orders levying any tax, demand of interest/fine or penalty from the Corporate Applicant in relation to period up to approval of the Resolution Plan shall be passed by any authority and such demand, if created, shall not be enforceable as having extinguished in terms of approved Resolution Plan.

h. The carry forward of losses and unabsorbed depreciation shall be available in accordance with the provisions of Income Tax Act, and the Income Tax Department shall be at liberty to examine the same.

imposed for non-compliances till the date of approval of this Plan or such further period as is permitted in terms of this Order.

j. ROC shall update the records and reflect the Corporate Applicant as 'Active' upon filing of pending returns/forms after payment of normal fees (not additional fee). In case such filing is not permitted by the e-filing portal, the ROC shall accept such forms/returns in physical format and manage to upload the same by back-end. The Corporate Applicant shall be exempted from using the words "and reduced".

k. The Compliances under the applicable law for all the statutory appointments by the Corporate Applicant shall be completed within 12 months, whereafter, the necessary consequence under respective law may follow.

l. The Resolution Applicant, the Corporate Debtor and the assets of the Corporate Debtor forming part of Resolution plan shall have immunity, privileges and protection as is available in the form and manner stated in Section 32A of the Insolvency and Bankruptcy Code, 2016.

m. Continuation of term of leasehold rights awarded by Maharashtra Industrial Development Corporation ("MIDC") on land situated at Plot G1 -G2, Butibori Industrial Estate, Nagpur, Maharashtra vide agreement dated 23 November 1995 and dared 11 March 1996 for two plots - Plot no. G1 (49.75 acres) & Plot no G2 (39.53 acres). Total area of land being 89.28 acres -MIDC shall allow the corporate debtor under new management to continue existing lease agreement till its expiry by taking on record the names of new shareholders and directors of the Corporate Debtor, wherein such continuation of lease shall not be subject to payment of any additional approvals fee, charges,

fines, penalties etc. on account of change/modification of the shareholding and directorship of the corporate debtor or otherwise. Any pending dues/fines/penalties/fees towards supply of water to the Corporate Debtor shall be waived off entirely and the water connection shall resume on the NCLT approval date. All applicable/ statutory dues/ charges/ tees/ fines and penalties till the completion date of Resolution Plan payable to MIDC shall be waived entirely.

n. MSEDCL shall reconnect/restore the electricity connection as per agreement no. 430019004052 for operation of the units without payment of any penalties for non-payment of charges prior to date of payment of entire resolution amount.

o. The relief, concession or waiver contemplated in the approved Resolution Plan under any of its section shall be available to the Corporate Debtor only and such relief, concession or waiver shall not extend to its subsidiaries, joint-ventures or associates/affiliates, who have not been subjected to resolution in the present CIRP process of Corporate Debtor. However, it is clarified that no claim or action shall lie against the Corporate Debtor in relation to any financial or any kind of obligation of subsidiaries, joint-ventures or associates/affiliates, whether past or arising in future.

p. It is clarified that any relief, concession or waiver, not specifically dealt with in Paras (a) to (o) above, or not permissible in terms of decision in case of Ghanshyam Mishra (supra) and Abhilash Lal (Supra) or specific provisions of the Code read with the Regulations, shall be deemed to be denied or rejected.

In K Sashidhar v. Indian Overseas Bank & Others (in Civil Appeal No.10673/2018 decided on 05.02.2019) the Hon'ble Apex Court held that if the CoC had approved the Resolution Plan by requisite percent of voting share, then as per Section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2) of the Code. The Hon'ble Apex Court further observed that the role of the NCLT is 'no more and no less'. The Hon'ble Apex Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 of the Code and is limited to scrutiny of the Resolution Plan "as approved" by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the Adjudicating Authority can reject the Resolution Plan is in reference to matters specified in Section 30(2) of the Code when the Resolution Plan does not conform to the stated requirements.

The jurisdiction and authority of this Tribunal in such matters is, as held by the Hon'ble Supreme Court, 'no more, no less', circumscribed by Section 31 of the Code and limited to a scrutiny of the Resolution Plan as approved by the CoC.

In view of the discussions and the law thus settled, the instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37, 38 and 38 (1A) of the CIRP Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. The same deserves to be approved. Hence, ordered.

The Resolution Plan is hereby approved. It shall become effective from this date and shall form part of this order with the following directions:

Accordingly, I.A. No. 2316 of 2025 is dismissed.