Ajay Gupta, Resolution Professional Of Metistech Fabricators Private Limited vs Subhlaxmi Investment Advisory Pvt. Ltd.

This application is filed by Mr. Ajay Gupta, Resolution Professional (hereafter 'RP/Applicant') of M/s Metistech Fabricators Private Limited (hereinafter 'Corporate Debtor/CD') bringing on record the Resolution Plan approved by Committee of Creditors (hereinafter 'CoC') under Section 30(6) of the Insolvency Bankruptcy and Code, 2016 (hereinafter 'IBC/ the Code') read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 (hereinafter 'CIRP Regulations') seeking approval of resolution plan as approved by the CoC.

The insolvency application was filed by M/s Rourkela Steel Syndicate under Section 9 of the Code by Rourkela Steel Syndicate was admitted by this Hon'ble Tribunal vide order dated 01.11.2023 wherein the applicant was appointed as the Interim Resolution Professional (IRP) to carry out the CIRP process of the corporate debtor. The IRP was confirmed to continue as an RP by the CoC in its first CoC Meeting in accordance with section 22(3)(a) of the Code and the same was approved by the Tribunal.

After the admission the IRP in terms of the Section 13 and 15 of the Code read with Regulation 6 of the CIRP Regulations issued Public Notice in Form- A which was published in Raipur edition of Times of India (English) and Durg edition of Dabang Dunia (Hindi) on 03.11.2023 inviting the creditors of the corporate debtor to submit their claim by 15.11.2023.

Pursuant to the Public announcement the IRP received claims from two operational creditors namely M/s Rourkela Steel Syndicate for a sum of Rs 1,06,18,697/- and Shree Ram Machino Fabrik Pvt. Ltd. for a sum of Rs 25, 76,218.94/- on 15.11.2023, and the claims stood admitted by the Applicant on 21.11.2023

Upon perusal of the last available financial statement of the Corporate Debtor as on 31.03.2003, it was observed that the Corporate Debtor owes financial dues to IDBI Bank and thus, sent an intimation letter to IDBI Bank informing about initiation of CIRP against the corporate debtor vide email dated 16.11.2023 and also visited the concerned branch of IDBI Bank on 22.11.2023 intimating about the requirement for filing the claim before 23.11.2023 as 24.11.2023 was the last date for constitution of CoC. However, no claims were received from IDBI Bank and hence the RP continued with the process and finalised the list of Creditors in compliance of Section 21(1) of the Code and Regulation 13 & 14 of the CIRP Regulations filed the list along with a report of constitution of CoC before this Tribunal on 24.11.2023. But belatedly the applicant received claims from IDBI Bank on 30.11.2023 which stood admitted by the applicant provisionally on 13.12.2023, alongside other operational creditors namely M/s Friends Agency and M/s Excel Tube Corporation who filed their claims belatedly on 11.12.2023 and 16.12.2023 and the same stood admitted by the applicant on 13.12.2023 and 19.12.2023. Whereafter, the COC stood reconstituted with IDBI Bank as the sole financial creditor and an updated list of creditors was also filed before this Hon'ble Tribunal.

The CoC consisted of just one member:

It is submitted by the applicant that in pursuance of taking over control of the Corporate Debtor the applicant intimated the suspended directors on 02.11.2023 regarding the initiation of CIRP and sought all requisite information and documents from them. The applicant also visited Bhilai, Chhattisgarh on 22.11.2023 where the registered office of the CD is located to take custody of the CD's Assets but it was informed by the suspended directors that the premises of the Registered office is situated in the premise owned by one of the suspended director and IDBI bank has taken over possession of the same in pursuance of an order u/s 14 of the SARFAESI Act,2002. The factory of the CD which was operated from a rented premises situated at Khasra No. 51 ,Transport Nagar Main Road, Village Umda, Durg, Chhattisgarh-490026 and the operations were closed since August-2021 due to recurring loses and pursuant to such closure, most of the plant & machinery and inventory items were sold at the time of vacation(except few), which as on the date of commencement of CIRP were kept in open area at a factory premises situated at 17D, Light Industrial Area, Bhilai, Chhattisgarh, which is owned by one of the known person of the suspended directors namely Mr. Rinku Sharma proprietor of M/s Shree Steel Corporation. However, due to the absence of any list of such assets, the applicant could not take possession of the assets and further instructed the Suspended directors to prepare a list of the inventories so that the same can be taken into custody.

Upon getting no cooperation from the suspended directors, applications were filed u/s 19(2) through IA (IB) 15/CB/2024 on 02.01.2024 of the Code seeking cooperation from the suspended directors and the erstwhile statutory auditors and this Tribunal vide order dated 05.03.2024 ordered the suspended directors to provide complete cooperation as required by the applicant to take over custody of the CD

The Corporate Debtor did not have any Land and Building or Plant & Machinery and the assets of the Corporate Debtor comprised only of Securities and Financial Assets (SFA) including Inventory and to ascertain the value of the assets the CoC in its 1st meeting appointed 2 (Two) Registered Valuers of SFA category namely Mr. Gyaneshwar Sahai and Ms. Smita Gupta, who submitted the valuation reports on 25.04.2024 and 08.05.2024.

Upon perusal of the financial statement of the CD, it seemed that some of the transactions were of questionable nature and for which transaction audit is necessary and hence Chaudhary Pradip & Co. Chartered Accountants were appointed as Transaction Auditor to determine if any of the transactions fall within the ambit of Section 43,45,49,50 and 66.

The draft auditor report was submitted on 22.02.2024 seeking clarifications from the suspended board of directors and the same was shared with the Suspended Directors and the CoC. The suspended directors did not respond to the clarifications sought by applicant but IDBI bank provided certain clarifications and documents in respect to the same and based on those clarifications the auditor submitted its final report on 15.04.2024. Based on that report identifying possible PUFE transactions applications were filed before this tribunal u/s 43,49 and 66 of the Code wherein notices were issued on 19.07.2024 and the same is presently pending adjudication.

After finalising the eligibility criteria for submission of resolution plan and inviting expression of interest from the prospective resolution applicants, Form G was published on 30.12.2023 in All India Editions of Business Standard (English & Hindi) inviting EOI with last date for receipt of EOI being 20.01.2024. However, only one entity namely Subhalaxmi Investment Advisory Pvt Ltd submitted the EOI till the last date and hence upon the recommendation of the CoC, FORM G was published on 23.01.2024 in Raipur Edition of Times of India (English) and Raj Express (Hindi) with last date for submission being 07.02.2024. In pursuant of the fresh publication another EOI from SPSS Infrastructure Pvt. Ltd was received and the final PRA list comprised of Subhalaxmi Investment Advisory Pvt Ltd (hereinafter PRA 1/SRA) and SPSS Infrastructure (hereinafter PRA 2) Pvt. Ltd.

Both the PRAs were provided with Request For Resolution Plan (RFRP) including evaluation matrix and information memorandum and the last date for submission of Resolution Plan was 23.03.2024 but PRA 1 sought an extra 15 days for submission of Resolution plan and upon consultation with the CoC PRA 1 was allowed a 15 days extension and PRA 1 submitted its plan on 06.04.2024 with Earnest Money Deposit (EMD) of Rs.2,00,00/- and no resolution plan was received from PRA 2.

In pursuance of the order dated 05.03.2024 of this tribunal directing the suspended directors to provide complete cooperation, the technical person appointed by the applicant visited the premises of the CD and identified 7 types of items which were available during physical inspection. The registered valuer also visited the premises on 08.04.2024 for the purpose of valuation of the assets of the CD. The list of available inventory along with photographs were presented before the CoC in the 6th Meeting held on 20.04.2024 and it was informed that the assets of the CD were still lying in the premises of a third party and upon deliberation regarding the custody of the assets it was concluded by the CoC that since the weight of the material lying in the premises of third party weights around 25MT and since those were customised to suit the needs of the CD and its storage cost is really high, hence to realise the maximum value of the said assets it is best to sell them as 'scrap by weight'. Subsequently the same was sold to the highest bidder i.e. one M/s Om Shri Ganapati Lime and Minerals for Rs.9,62,640/- @Rs.36 per kg on 29.05.2024.

The Resolution plan submitted by Subhalaxmi Investment Advisory Pvt Ltd was deliberated upon and after multiple meetings the CoC approved the plan on 21.09.2024 and a Letter of Intent (LoI) was issued to the SRA and the SRA was asked to deposit Rs. 4,50,500/- i.e. 10% of the total plan value as performance security, which was compiled by SRA by making the payment on 25.09.2024. The applicant RP has provided the brief details regarding the total cost of the Resolution Plan at clause 5.7 of the plan as follows:

It is further stated that the RP, in compliance with Regulation 39(4) of CIRP Regulations, 2016, has prepared Form H.

The timeline of implementation of resolution plan as provided in the plan at page 63 is as follows:

The compliance aspect of the Resolution Plan has been given in Para No. 9 of Form H, which is as follows:

received, as referred to in sub-regulation (4A) of regulation 36B.]015300 dated 25.09.2024 for Rs. 4,50,500 (10% of the resolution plan amount) received m account no. 0048102000025850 of the corporate debtor maintained with IDBI Bank, Bhilai Branch

The approval of the resolution plan has been sought under Section 31(1) of the Code, which reads as follows:

The conditions provided in Section 31(1) of the Code for approval of resolution plan are as follows:—

The Applicant submits that the COC has approved the Resolution Plan with 100% of the voting share of the financial creditors, and the conditions provided for by Section 30(4) of the Code are satisfied.

The provisions of Section 30(2) of the Code are as follows:

We have perused the submissions made by the RP and the Plan submitted before us and the following is observed regarding the following:

a. The Resolution Plan has been filed by the applicant after 329 days from the date of Commencement.

b. The Plan proposes to settle dues with the sole secured financial Creditor by paying a lump sum amount of Rs.24,50,000/- as against the claimed and fully admitted dues of Rs.2,23,94,148.32. It is also observed that though initially the claim amount of the Financial Creditor was Rs.3,31,94,148.32 but it was subsequently revised upon realisation of Rs.1,08,00,000/- from sale of immovable property of Personal Guarantor of CD. The Financial Creditor is taking a haircut of approximately (88%).

c. As per the Information Memorandum and the Plan NIL Claims were submitted on behalf of unsecured creditors.

d. The Resolution Plan at Clause 5.7 and Clause 7.3.3 states that The Resolution Applicant will share (25%) of the recovery made from any debtor till 2.5 years from the date of approval shall be shared with the secured debtor and (15%) of the recoveries made from the proceedings initiated for alleged PUFE transactions will also be shared with the secured financial Creditors. Both these amounts will be paid over and above the amount proposed in the plan.

e. There are no Dissenting Financial Creditors as the plan has been approved by 100% vote.

f. Total claim amounting to Rs 2,39,63,259.97 was received from Operational Creditors other than Workmen & Employees & Statutory Authorities and an amount to the tune of Rs.1,84,82,861.21/- was admitted. The Plan provides Rs.50,000/- pari passu as the full and final settlement against the claims of this category of creditors. The plan states at clause 5.3.1 that since the average fair value of the CD is approximately 43.07 lakhs and the Liquidation value is approximately Rs.27.99 Lakhs and hence in case of liquidation the Operational Creditors in terms of Section 53(1) of the Code is expected to be NIL. The Plan also provides for priority payment to the Operational Creditors over Financial Creditors.

g. No Claims have been received from Workmen and Employees.

h. Regarding Statutory Dues, EPFO has initially filed a claim of Rs.74,380/-which was admitted by the RP. It has been submitted by the RP in the application and stated by the Resolution Applicant in its plan that after the commencement of CIRP the EPFO raised dues u/s 7A of Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act,1952) to the tune of Rs.18,33,528/- but no claim had been filed with respect to the same before the RP. It has also been stated that RP through the suspended directors had sought to review the assessment order of the PF dues u/s 7B of the EPF Act,1952 and the same was under adjudication while the Resolution Plan was filed. In the Plan under clause 5.2.4 at page 30 the Resolution Applicant has made a provision of Rs.5,000/- against the claim made by the EPFO. In the present application, the RP has submitted that the review application u/s 7B has been rejected subsequent to the submission of the Plan vide order dated 28.08.2024.

j. As per Clause 5.7 and Clause 7.3.3 of the Plan 5% of the recoveries made from the proceedings initiated for alleged PUFE transactions will also be shared with the Operational Creditors on pari passu basis. Both these amounts will be paid over and above the amount proposed in the plan.

k. No Proposal has been provided for any other creditors as no Claims were received in Form F

l. As per Clause 7.1 of the Plan the management of the Company after the date of approval of the plan till the implementation of the plan will be done by a Monitoring Committee which will be comprised of (i) "Resolution Professional as Chairman (ii) One Representative on behalf of the Resolution Applicant. (iii) One representative, nominated by the financial creditor

m. As per clause 7.2.1 of the plan upon approval of the resolution plan two escrow accounts shall be maintained with the IDBI bank one for recoveries of debtors and other for recoveries from PUFE transactions and which will be operated in terms of the Resolution Plan.

n. As per clause 7.3 of the plan the Resolution applicant will the pending applications at its own cost and will also share any recoveries made from the proceedings with the Secured Financial creditor and Operational creditors in proportion as described in the plan.

o. The Applicant/RP has also certified that M/s. Subhalaxmi Investment Advisory Private Limited, the Successful Resolution Applicant, has submitted an affidavit dated 20.01.2024 pursuant to Section 30(1) of the Code confirming its eligibility under Section 29A of the Code to submit the resolution plan, and the contents of the said affidavit are in order.

p. As per the requirement of Regulation 39(4) of the CIRP Regulations for performance security, it is stated that the SRA has provided a Performance Bank Guarantee of Rs. 4,50,500/- , which is also affirmed in the Form-H by the Applicant.

q. With regard to compliance under Regulation 35A, it is stated that the application has already been filed before the Tribunal and is sub judice and the same shall be continued by the SRA.

r. With Regard to Regulation 37 the Resolution Applicant has stated that it is not applicable in its case.

The compliance of Section 30(2) of the Code is given in Para-No. 9 of Form H. The same is being further examined as under:

a. Section 30(2)(a): The Resolution Plan (Section V-Clause 5.1- Pg. No. 48 of the Resolution Plan) states that the Resolution Applicant shall make payment of the actual CIRP cost incurred (even if it exceeds the estimated costs) and approved by the COC in priority over payments to any other Creditors.

b. Section 30(2)(b): The Resolution plan states that (Section V-Clause 5.2.3.1- Pg. No. 51 of the Resolution Plan) As per information memorandum a total claim amounting to Rs.2,39,63,259.97 was filed and out of which Rs.1,84,82,861.21/- was admitted but the liquidation value of the assets of the Corporate Debtor is inadequate to cover the dues of the secured financial creditors in full in which light operational creditors would receive nothing in the event of liquidation and hence the Resolution applicant has provisioned to pay Rs.50.000/- pari passu to the Operational creditors towards full and final settlement of dues. As against the Government dues as observed in Para 24 (g) and (h) of this order, the Plan provides for Rs.5,000/- for the claims raised to the tune of Rs.74,380/- by EPFO. In case of subsequent recovery as envisaged in clause 7.3 of the resolution plan 5% of the net recovery will be paid on pro rata basis over and above the above-mentioned amount

c. Section 30(2)(c): From the Resolution Plan (Section IV-Clause A-Pg. No. 22), the Resolution Applicant has stated to make payment of Rs. 23.50 lakhs to the sole secured Financial Creditor towards full and final payment of their admitted claim amount of Rs. 2.23 Crores (approximately). All admitted debt of the sole Financial Creditor shall be extinguished upon the approval of this resolution plan and consequent payment by the Resolution Applicant. There is only one financial creditor.

d. Section 30(2)(d): In the Resolution plan it has been envisaged that an Implementation and Monitoring Committee comprising of 3 (three) Persons of which 1 is a Resolution Professional of the CD. 1 representative of the Resolution Applicant and 1 person from the Financial Creditor will be constituted without any further action required from the corporate debtor.

e. Section 30(2)(e): In Form H Para 4, the RP has certified that the Resolution Plan does not contravene any of the provisions of the law for the time being in force.

A perusal of Regulation 38 would clearly show that by virtue of mandatory contents of the resolution plan as discussed in the preceding paragraphs in relation to Section 30 and Section 31 of the Code, the requirement of Regulation 38 also stands fulfilled. Thus, the resolution plan fulfils all the requirements of Regulation 38 of the CIRP Regulations.

The Resolution Plan inter-alia entails the following:

a. No Corporate Restructuring by way of merger, amalgamation and demerger shall be allowed.

b. No cancellation of any consents, approvals, licenses, concessions, authorizations, permits or the like granted to the Corporate Debtor or for which the Corporate Debtor has made an application for renewal or grant.

c. Extinguishment of any/all claims against the Corporate Debtor along with related legal proceedings, including criminal proceedings and other proceedings which shall stand abated, settled, and extinguished.

d. If the implementation of resolution plan required any approval obtain necessary approvals required under any law for the time being in force within a period of one year from the date of the approval of resolution plan by Hon'ble Adjudicating Authority or within such period as provided for in such law, whichever is later

e. Regulation 3 7(h) of the CIRP Regulations, the Resolution Applicant has not proposed any amendments in the constitutional document of the Corporate Debtor in the Resolution Plan. However, the Resolution Applicant shall be at liberty to change the name of Corporate Debtor on approval of the Resolution Plan

f. The term of the plan and its implementation schedule is envisaged to be a period of 90 days.

In view of the above discussion, the Resolution Plan submitted by Subhalaxmi Investment Advisory Pvt Ltd as approved by the CoC under Section 30(4) of the Code is hereby authorised for a total Plan Value of Rs. 45,05,000/- (Forty Five Lakhs and Five Thousand Rupees) that includes Estimated CIRP Cost of Rs. 20 Lakhs, Rs 24.50 Lakhs as Liability towards Secured Financial Creditor, Rs. 50,000/- towards dues of Operational Creditors other than Statutory dues and Rs.5,000/- towards EPFO dues

The Resolution Plan so approved shall be 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 in force such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the Resolution Plan.

Under the provisions of Section 31(3) of the Code, we also direct as under:

In view of the foregoing, IA (IB) (Plan) No. 3/CB/2024 is ALLOWED and DISPOSED OF.