AJS Impex Private Limited vs Nyka Steels Private Limited

This Application has been filed on 26.02.2024 by the Resolution Professional under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 on behalf of the Committee of Creditors seeking approval of the Resolution Plan submitted by the Successful Resolution Applicant and approved by 100% of the voting share of the members of the Committee of Creditors (hereinafter referred to as 'CoC') of the Corporate Debtor viz. Nyka Steels Private Limited (hereinafter referred to as 'Corporate Debtor').

The brief facts of the Application are as follows:

Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated vide an order dated 03.02.2023 of this Court in C.P.(IB)-1009(MB)/2020 on an application filed by AJS Impex Private Limited (Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code 2016. Mr. Hitesh Kothari (Reg. No.: IBBI/IPA-002/IP-N00324/2017-2018/10929 was appointed as Interim Resolution Professional (IRP). The Erstwhile IRP made a public announcement in the newspapers (in Mumbai) in Form-A on 10.02.2023 inviting claims from the creditors, workers/employees of the Corporate Debtor and from government bodies. IRP constituted the Committee of Creditors (CoC) based on the claims received by him and the first meeting of the CoC held on 09.03.2023. The second meeting of the CoC was held on 13.04.2023 wherein the resolution was passed for appointment of Mr. Avil Menezes as the Resolution Professional of the Corporate Debtor and the same was allowed vide an order of this Tribunal dated 12.05.2023.

Form G was published on 21.06.2023 and the last date for submission of the resolution plan was 04.09.2023 which was extended by CoC till 03.10.2023. The following Application for seeking extension under section 12(2) was filed and sought:

The Applicant submits that there were 15 Expression of Interest's received from Prospective Resolution Applicant (PRAs) out of which 2 PRAs has submitted the Resolution Plan i.e. DM Metalloys Private Limited and Lalita Santosh Powle in Consortium with Pravesh Seafood Private Limited.

The Resolution Plan submitted by the Resolution Applicant viz. Lalita Santosh Powle in Consortium with Pravesh Seafood Private Limited was approved by the CoC in the 10th meeting held on 04.01.2024 and the same was put for e-voting which concluded on 09.02.2024, approving the Resolution Plan submitted by Lalita Santosh Powle in Consortium with Pravesh Seafood Private Limited unanimously with 100% voting. The resolution is reproduced below -

The Applicant issued Letter of Intent dated 10.02.2024 to the Resolution Applicant. It is submitted that the Successful Resolution Applicant has provided the required Performance Security as under:

Therefore, RP states that the Resolution Plan approved by the CoC is in compliance with the requirements of Section 30(2) of the Code.

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:

a. Provides for payment of Insolvency Resolution Process cost in a manner specified by the Board in the priority to the payment of other debts of the corporate debtor;

b. Provides for management of the affairs of the Corporate Debtor after approval of Resolution Plan;

c. The implementation and supervision of Resolution Plan;

d. Does not prima facie contravene any of the provisions of the law for time being in force,

e. Conforms to such other requirements as may be specified by the Board.

f. As per the Affidavit received and the further documents submitted, the Resolution applicants are not covered under 29A.

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

a. The cause of the Default

b. It is feasible and viable

c. Provision for effective implementation

d. Provisions for approvals required and the time lines for the same.

e. Capability to Implement the Resolution Plan

The Resolution Applicant viz. Lalita Santosh Powle in Consortium with Pravesh Seafood Private Limited i.e. Mrs. Lalita Powle is proprietor of Sanlita Exports having specialization in the area of overall management supervision and corporate social responsibilities. She handles local trading activities of Groundnuts, Corainder Seeds, Sesame Seeds, Shrimps and Fishes and Pravesh Seafood Private Limited, consortium member, having registered office at 415,4th Floor, Silver Spring, Opp MIDC Office, MIDC Taloja, Dist. Raigad, State Maharashtra. The Company commenced the operations in the year 2014-15, as Merchant Exporter registered under MPEDA for processing and Exports of Marine products. The Resolution Applicant confirmed that it is eligible to submit Resolution Plan as per Section 29A of Insolvency and Bankruptcy Code.

The Resolution Applicant has confirmed that -

As per the RP the Fair Value and Liquidation Value determined by the registered Valuer are as follows:

Resolution Plan for the Corporate Debtor (the key features of the Resolution Plan submitted by Lalita Santosh Powle in Consortium with Pravesh Seafood Private Limited is summarized below):

The value of the said Resolution Plan is Rs. 8,11,00,000/- which includes the payments towards the CIRP cost, payment to Secured Financial Creditors, and the summary of payment is enumerated below:

It is submitted that there is an application pending apropos certain fraudulent transaction under section 66 of the code, as duly mentioned in Form H Hereto. It is submitted that clause 9.1 of the Resolution Plan provides that “Any monies received pursuant to exercise of powers and obligations by the Resolution Professional under Sections 43 to 51 (both inclusive) and Section 66 of the IBC, shall be vested in the Secured Financial Creditor. However, we have not been provided details of any transactions falling above referred sections. It is clarified that upon successful implementation of Resolution Plan and discharge of the Resolution Professional any application filed by the Resolution Professional under Section 43 to 51 & 66 of the Code shall be pursued by the Secured Financial Creditor directly and all cost and benefits to this account shall accrue to Secured Financial Creditor. The Secured Financial Creditor shall be entitled to make suitable applications with the Hon’ble NCLT to enable them to pursue the said application and subsequent recoveries if any”.

It is submitted by the Applicant in the Resolution Plan that a monitoring Committee shall be constituted within a period of 7 days from effective Date for a period from the Effective Date till the Transfer Date to oversee the implementation of the Resolution Plan. The Monitoring Committee shall comprise of the following members:

a. One authorized representative appointed by members of the Committee of Creditors of the Corporate Debtor.

b. One authorized representative of Resolution Applicant; and

c. Monitoring Agent- Erstwhile Resolution Professional.

Ld. Counsel for the Resolution Professional has annexed a certificate of the Form-H to the Application under Regulation 39(4) In Form-H of the CIRP Regulations, 2016 to certify that the Resolution Plan has approved by the CoC meets all the requirements of the IBC and its Regulations.

The CIRP has been conducted as per the timeline indicated as under:

The time frame proposed for obtaining relevant approvals is as under:

The Successful Resolution Applicant has sought certain reliefs, concessions and dispensation as more particularly set out under Clause 8 of the resolution plan.

The Resolution Plan is not subject to any contingency.: Yes

Following are the deviations / non-compliances of the provisions of the Insolvency and Bankruptcy Code, 2016, regulations made or circulars issued thereunder )If any deviation/ non-compliances were observed, please state the details and reasons for the same(: NIL

The Resolution Plan was filed on 26 February 2024, i.e. 2 days before the expiry of the period of CIRP provided in section 12 of the Code. Hon'ble NCLT vide order dated 12 March 2024, Hon'ble NCLT allowed the extension of 74 days from 16 December 2023, making 28 February 2024, the last of CIRP.)

14A. Whether the resolution professional has, in accordance with regulation 35A,-

- (a) applied to the Adjudicating Authority on or before the one hundred and thirty-fifth day of the insolvency commencement date: No, the RP was appointed vide order dated 12 May 2023, which was received by RP on 20 May 2023. Pursuant to appointment and as approved by CoC, the auditor was appointed on 21 June 2023 and the final audit report was received on 09 January 2024.

Provide details of section 66 or avoidance application filed / pending.

15A. The committee has approved a plan providing for contribution under regulation 39B as under: The members in the 10th CoC Meeting unanimously decided that the above shall be discussed and pursued in the ensuing CoC meeting, if none of the resolution plan receive requisite majority.

15B. The committee has recommended under regulation 39C as under:

a. Sale of corporate debtor as a going concern: NA

b. Sale of business of corporate debtor as a going concern: NA

Note: The members in the 10th CoC Meeting unanimously decided that the above shall be discussed and pursued in the ensuing CoC meeting, if none of the resolution plan receive requisite majority.

15C. The committee has fixed, in consultation with the resolution professional, the fee payable to the liquidator during the liquidation period under regulation 39D. - NA

Note: The members in the 10th CoC Meeting unanimously decided that the above shall be discussed and pursued in the ensuing CoC meeting, if none of the resolution plan receive requisite majority.

I, Avil Menezes hereby certify that the contents of this certificate are true and correct to the best of my knowledge and belief, and nothing material has been concealed therefrom.

Name of the Resolution Professional: Avil Menezes IP Registration No: IBBI/IPA-001/IP-P00017/2016-17/10041 Authorization for Assignment valid till 27th November 2024 Address as registered with the Board: 106, 1st Floor, Kanakia Atrium 2, Cross Road A, Behind Courtyard Marriott, Chakala, Andheri East, Mumbai - 400093 Email id as registered with the Board: avil@caavil.com Date: 23-05-2024

In the circumstances mentioned hereinabove, the Applicant has filed Application seeking approval of this Tribunal on the Resolution Plan, submitted by the Resolution Applicant i.e. Lalita Santosh Powle in Consortium with Pravesh Seafood Private Limited stating that the plan is in accordance with the Section 30(2) and other provisions laid down under the code.

On perusal of the Resolution Plan, it is observed that the Resolution Plan provides for the following:

a. Payment of CIRP Cost as specified u/s 30(2)(a) of the Code.

b. Repayment of Debts of Operational Creditors as specified u/s 30(2)(b) of the Code.

c. For management of the affairs of the Corporate Debtor, after the approval of Resolution Plan, as specified U/s 30(2)(c) of the Code.

d. The implementation and supervision of Resolution Plan by the RP and the CoC as specified u/s 30(2)(d) of the Code.

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 Regulations.

The RP has filed Compliance Certificate in Form-H along with the plan. On perusal the same is found to be in order. The Resolution Plan has been approved by the CoC in the 10th meeting held on 04.01.2024 with 100% (Hundred percent).

We make it categorically clear that approval of this Resolution Plan does not tantamount to allowance of any relief(s), concession(s) or dispensation(s) that fall within the domain of any government department(s) and/or authorities thereto. The reliefs, concessions and dispensations that pertain to other governmental authorities and/or departments shall be dealt with by the respective competent authorities/fora/offices, Government (State or Central) with regard to the respective reliefs, if any.

In the case of “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). The Hon’ble Court observed that the role of the NCLT is ‘no more and no less’. The Hon’ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 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) when the Resolution Plan does not conform to the stated requirements.

In CoC of Essar Steel (Civil Appeal No. 8766-67 of 2019 decided on 15.11.2019) the Hon’ble Apex Court clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved. In para 42 Hon’ble Court observed as under:

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, 38 (1A) and 39 (4) of the 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 needs to be approved. Hence ordered.

The Application IA-30/2024 in CP(IB)/1009/(MB-IV)/2020 is allowed. The Resolution Plan annexed to the Application is hereby approved. It shall become effective from this date and shall form part of this order.

It shall be binding on the Corporate Debtor, its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force is due, guarantors and other stakeholders involved in the Resolution Plan.

The approval of the resolution plan shall not be construed as waiver of any statutory obligations of the Corporate Debtor and shall be dealt by the appropriate authorities in accordance with law. Further in terms of the judgment of Hon'ble Supreme Court in the matter of “Ghanshyam Mishra And Sons Private Limited V/S Edelweiss Asset Reconstruction Company Limited, on the date of approval of the Resolution Plan by the adjudicating authority, all such claims which are not a part of Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim which is not a part of the Resolution Plan.

The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the Registrar of Companies (RoC), Mumbai, Maharashtra for information and record. The Resolution Applicant, for effective implementation of the Plan, shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed.

The moratorium under Section 14 of the Code shall cease to have effect from this date.

The Applicant shall supervise the implementation of the Resolution Plan and file status of its implementation before this Authority from time to time, preferably every quarter.

The Applicant shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the IBBI along with copy of this Order for information.

The Applicant shall forthwith send a certified copy of this Order to the CoC and the Resolution Applicant, respectively for necessary compliance.

The Interlocutory Application i.e. IA-30/2024 in CP(IB)/1009(MB)/2020 is allowed accordingly disposed of.