Allahabad Bank (Now Indian Bank) vs Southern Batteries Pvt. Ltd.

The main Company Petition bearing CP (IB) No.357/BB/2019 filed by the Financial Creditor i.e. Allahabad Bank (now Indian Bank) u/s 7 of the Code for initiation of the Corporate Insolvency Resolution Process (CIRP) in respect of Corporate Debtor, namely, M/s.Southern Batteries Private Limited, was admitted by this Adjudicating Authority, vide order dated 19.02.2020, and the CIRP of the Corporate Debtor was initiated by appointing Mr. Ramanahalli Shivanna Doddabyregowda as the Interim Resolution Professional and he was directed to take necessary actions in accordance with relevant provisions of the Code and Regulations made thereunder.

Pursuant to the aforesaid appointment, the IRP had issued public announcement on 26.02.2020 calling upon various creditors of the Corporate Debtor to submit their claims with proof on or before 09.03.2020. The IRP filed a report on 13.03.2020 certifying the constitution of the CoC of the Corporate Debtor. CoC in its 1st meeting held on 18.03.2020 inter alia resolved to appoint the aforesaid IRP as the Resolution Professional (RP) of the Corporate Debtor. Accordingly, this Adjudicating Authority approved the said appointment as the RP, vide order dated 16.06.2020 in IA No.188 of 2020.

It is stated that pursuant to the approval provided by the CoC members in the 2nd CoC meeting, the erstwhile RP appointed Kanti Karamsey & Co. and S.J. Ranganathan for registered valuer of Land and Building; Kanti Karamsey & Co. and Motappa Thimmaraya Swamy for registered valuer of Plant and Machineries; R. Srinivasan and Devarakonda Ravi Sankar as the registered valuer of Securities and Financial Assets, for the purpose of determining the Fair Value and Liquidation Value of the assets of the Corporate Debtor in accordance with Regulation 35 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations).

The erstwhile RP in the (3^{\text{rd}}) CoC meeting held on 20.06.2020 informed that due to country wide lockdown declared by the Govt. of India and State Govt., time bound activities could not be carried out as per the timelines of CIRP process of the Corporate Debtor and thus requested the CoC to take decision to exclude lockdown period from the CIRP period.

The erstwhile RP in the (4^{\text{th}}) CoC meeting held on 08.08.2020 requested the members of the CoC to consider and approve the appointment of Transaction Auditors and fixing their remunerations, and based on the voting results, NVA & Associates were appointed for conducting Transaction Audit of the Corporate Debtor.

Pursuant to the approval of the eligibility criteria of the prospective resolution applicants in the (5^{\text{th}}) CoC meeting held on 10.08.2020, the erstwhile RP published the invitation for Expression of Interest (EoI) in Form-G on 13.08.2020 in the 'Financial Express' and 'Samyuktha Karnataka' regional publications, wherein, the timeline for submission of EoIs was up to 09.09.2020.

Pursuant to Section 29 of the Code r/w Regulation 36(2) of the CIRP Regulations, an Information Memorandum ('IM') was prepared by the erstwhile RP in such form and manner as specified under the CIRP Regulations for formulating a Resolution Plan and the same has only been shared with the members who have provided a confidentiality undertaking as required under the Code and CIRP Regulations, and with the Prospective Resolution Applicants (PRAs).

It is stated that the Adjudicating Authority vide its order dated 02.09.2020 in IA No.321 of 2020, granted an exclusion of 116 days from the statutory period of 180 days.

Pursuant to the publication of the Form-G, the erstwhile RP received Expressions of Interest (EoI) from the PRAs. In accordance with Regulation 36A(10) of the CIRP Regulations, the erstwhile RP issued the provisional list of PRAs on 09.09.2020, and then subsequently, in accordance with Regulation 36A(11) of the CIRP Regulations, there were objections received to the provisional list of PRA, thereby, the erstwhile RP brought to the notice of CoC that, as per the time norms, and provisions of Regulation 36B(1)(a) & (b) bid documents were issued to both PRA and the PRA that has contested the provisional list. Further, in accordance with the CIRP Regulations, the erstwhile RP issued the final list of PRAs along with the Request for the Resolution Plan ('RFRP'), IM and Evaluation Matrix ('EM') as approved in the 7th CoC meeting dated 23.09.2020.

The erstwhile RP in the (8^{\text{th}}) CoC meeting held on 07.11.2020 requested the members of the CoC to deliberate upon the Resolution Plan submitted by the consortium of the Promoters of the Corporate Debtor and Aharnisha Consultings Pvt. Ltd. It was observed that the Resolution Applicants are ineligible u/s 29A of the Code. The Promoters of the Corporate Debtor insisted that the Corporate Debtor is a Micro Small Medium Enterprise ('MSME') and also submitted the Certificate of Registration issued by Udyam Registration Certificate dated 29.09.2020, certified by the Deputy Director of MSME.

The CoC along with the erstwhile RP deliberated on the eligibility of the Promoters u/s 29A to Promoters. Additionally, the CoC was apprised by the fact that case u/s 43 and 66 of the Code is pending against the Promoters of the Corporate Debtor before the Tribunal, and also that the lenders expressly admitted that the loans sanctioned by them were not covered under MSME Scheme. Moreover, the consortium failed to submit the bond amount of Rs. 5 Crores. Thereby, because of the aforementioned reasons the Resolution Plan was rejected in the (8^{\text{th}}) CoC meeting and a resolution was passed by the CoC to allow erstwhile RP to call for fresh Eol.

CoC in its (9^{\text{th}}) meeting allowed the erstwhile RP to file an application for the exclusion of 119 days from the CIRP period. During the (10^{\text{th}}) CoC meeting held on 29.12.2020, the erstwhile RP apprised the members of the CoC that the IA filed before the Tribunal for extension / exclusion of CIRP period is admitted and an order of exclusion of 77 days from the CIRP period was granted on 08.12.2020. The last date for submission for EoI was decided to be 23.11.2020. The CoC also decided on replacement of the erstwhile RP on an account of medical exigency and that he would be discharged from his duties.

The erstwhile RP in the 11th CoC meeting held on 28.01.2021 apprised the members of the CoC that the Valuers have submitted the Valuation Report. The Resolution Plan was submitted by Aharnisha Consultings Pvt. Ltd., the CoC was requested to deliberate upon the feasibility and viability of the Resolution Plan and was kept e-voting, thereby, the Plan was approved by 99.33% of the voting share.

Pursuant to the directions received from the CoC in the 12th meeting dated 08.02.2021, an application bearing IA No.91 of 2021 was filed by erstwhile RP before this Tribunal for the approval of Resolution Plan. It is stated that the Promoters of the Corporate Debtor ('Promoters') filed an application seeking intervention of the Tribunal to set aside the decision of the erstwhile RP of rejecting the Resolution Plan submitted by the Applicant in the 8th CoC meeting as the Corporate Debtor is a MSME under Udyam Registration Certificate. The Adjudicating Authority, vide its order dated 04.03.2021 in IA No.521 of 2020, allowed the Promoters to participate in the CIRP process as the Corporate Debtor is an MSME. It further directed the erstwhile RP to allow the Resolution Plan as submitted by the Applicant to be presented before the CoC and be considered and voted upon by the CoC.

During the 13th CoC meeting held on 17.03.2021, the Promoters were allowed by the RP to present their Resolution Plan, the discussions were held regarding its viability and feasibility and CoC requested the Promoters to present the modified resolution plan in the next meeting. Additionally, Shri Kanekal Chandrasekhar was appointed as a Resolution Professional as the erstwhile RP resigned due to some medical exigency. Upon filing an application, the Adjudicating Authority, vide its order dated 09.04.2021 in IA No.110 of 2021, approved the appointment of Shri Kanekal Chandrasekhar as the RP of the Corporate Debtor.

The Applicant, during the (14^{\text{th}}) CoC meeting held on 24.05.2021, informed the CoC that RP had received revised resolution plan by the Resolution Applicants and the said Plan after deliberations by the CoC requested the Resolution Applicant to make some final changes.

CoC in its (15^{\text{th}}) meeting held on 15.07.2021 deliberated upon the feasibility and viability of the Resolution Plan along with the addendum dated 15.07.2021 and subsequently the Plan along with the addendum was put for e-voting. The CoC approved the said Plan with (74%) of voting shares. The full text of the approved Resolution Plan along with the addendum submitted by the Resolution Applicant, has been annexed to this Application as 'Annexure A'.

The Summary of the Financial Plan as stated in Page No.881 of the Application is as under:

Pursuant to Regulation 39(4) of the CIRP Regulations, the Applicant has prepared the Compliance Certificate in Form-H and the same is placed on record as Annexure-V. Further, the Resolution Applicant submitted a Performance Security in the form of a Bank Guarantee dated 23.07.2021 and is annexed as Annexure W (Colly.).

It is certified by the RP in para 4 of Form-H that the said Resolution Plan complies with all provisions of the Insolvency & Bankruptcy Code, 2016 (Code), the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP Regulations') and does not contravene any of the provisions of the law for the time being in force. It is also stated in para 4(ii) of Form-H that the Resolution Applicant (a) Mr. R. Sreenivasan (b) Mr. R. Sudarshan and (c) Mr. B.P. Radhakrishnan - all Ex-Promoters in consortium of M/s. Aharnisha Consulting Pvt. Ltd. has submitted an affidavit pursuant to section 30(1) of the Code confirming its eligibility u/s 29A of the Code to submit Resolution Plan and that the contents of the said affidavit are in order.

In Part-A of the Resolution Plan (Page No.48 of the Application) it is stated that the aforesaid Consortium Members / Resolution Applicants have incorporated a Special Purpose Vehicle ('SPV'), a Company named as 'Southern Energy Investments Private Limited' ('SIEPL') to implement the Resolution Plan. It is also stated that the Resolution Applicants together have more than 120 years hardcore professional experience in successfully running battery manufacturing industry, which is by far one of India's most experienced group of individuals in the battery manufacturing domain.

Projected Profit & Loss Account for FY ending March, 2022, Projected Balance Sheet as on 31st March, 2022 and Projected Cash Flow Statement as on March, 2022 of the Corporate Debtor are annexed as Schedule - 8, 9 and 10 of the Resolution Plan dated 15.07.2021.

It is further stated that the Applicant has verified and confirmed that the Resolution Plan along with the addendum dated 15.07.2021, herein would be beneficial to the Corporate Debtor and its Creditors, and thus seeking to allow the present Application.

The Resolution Plan is approved by the CoC under Section 30(4) of the Code;

The Resolution Plan so approved meets the requirements as referred to in Section 30(2) of the Code;

The Resolution Plan has provisions for its effective implementation. The satisfaction of the conditions is discussed below.

Section 30(2)(a): The Resolution Plan in Part III-Mandatory Provisions of the Plan (Page No.89 of the Application) stated that the CIRP costs and the cost of Monitoring Committee shall be paid in priority to any other Creditors of the Corporate Debtor, in the manner set forth in Part II - Financial Proposal of the Resolution Applicant (Page No.77 of the Application), wherein, it is inter alia stated that the Resolution Applicant expects that the total CIRP costs would approximately be Rs.50,00,000/- (Rupees Fifty Lakhs only). The same shall be paid by the RA in priority over all other debts and the same has been considered in the Plan. However, the RA undertakes if the actual cost exceeds the estimates, RA shall fund the additional amount.

Section 30(2)(b): The Resolution Plan in Part III-Mandatory Provisions of the Plan (Page No.89 of the Application) inter alia stated that as required u/s 30 of the Code, the Resolution Applicant undertakes to pay the operational creditors, at least (i) the amount to be paid to such creditors in the event of a liquidation of the Corporate Debtor u/s 53 of the Code; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the Plan (i.e., the Resolution Amount) had been distributed in accordance with the order of priority in sub-section (1) of section 53 of the Code. Further, the Resolution Plan at Part II-Financial Proposal of the Resolution Applicant (Page No.79 of the Application) inter alia stated that the verified amount of the admitted claims of the workmen and employees is Rs.3,25,24,207/- (Rupees Three Crore Twenty-Five Lakh Twenty-Four Thousand Two Hundred and Seven only) and shall be paid the entire 100% amount admitted as per the Implementation Provision in Schedule 2. As regards the Statutory Dues, the RA restricts the payment of Statutory Dues only to the extent of provident fund claims of the workmen and staff amounting to Rs.1,25,50,000/- (Rupees One Crore Twenty-Five Lakh and Fifty Thousand only) and the same shall be paid as per the Implementation Provision in Schedule 2. The other Operational Creditors shall be paid an amount of Rs.2,52,59,761/- (Rupees Two Crore Fifty-Two Lakh Fifty-Nine Thousand Seven Hundred and Sixty-One only) be paid on a pro-rata basis as per their verified amounts. Provided that, the amount payable under the Resolution Plan to the Operational Creditor shall be paid in priority over the Financial Creditor. Further, as regards the payment of amount to Dissenting Creditors, it is stated at Page 89 of the Application that in terms of Section 30(2) of the Code, the Dissenting Financial Creditors shall not be paid less than the amount payable to them in accordance with sub-section (1) of section 53 of the Code in the event of a liquidation of the Corporate Debtor. In terms of Regulation 38(1)(b) of the CIRP Regulations, the payment to the Dissenting Financial Creditors shall be made prior to any payment to the Consenting Financial Creditors.

Section 30(2)(c): The Resolution Plan in Part III-Mandatory Provisions of the Plan (Page No.89 to 93 of the Application), inter alia stated that pursuant to the approval of the Plan by the NCLT and effective until the Payment Date, a Committee comprising of the following shall be the members of the Monitoring Committee:

The Resolution Professional - Chairperson ii. 1 representative from Indian Bank - Secured Financial Creditor iii. 1 representative from Union Bank of India - Secured Financial Creditor iv. 1 representative from Dhanalaxmi Bank - Secured Financial Creditor

2 representatives from Resolution Applicant. The Monitoring Committee shall manage and control the Corporate Debtor as a going concern in the ordinary course of business, in trust and for the benefit of the creditors of the Corporate Debtor in furtherance of the resolution of the Corporate Debtor by the Resolution Applicant, and for the benefit of no other Person or stakeholder. Taking of any action by the Corporate Debtor and any decision by the Monitoring Committee shall be majority of the members of the Monitoring Committee. The Monitoring Professional shall inter alia have the responsibility of coordination amongst the stakeholders for smooth implementation of the Plan. The term of the Resolution Plan will be one year from the Effective Date.

Section 30(2)(d): The Resolution Plan in Part III-Mandatory Provisions of the Plan (Page No.93 of the Application) stated that the Monitoring Committee shall supervise the implementation of the Plan until the Payment Date. The monitoring professional on behalf of the Monitoring Committee will sign all applications on behalf of the Corporate Debtor that are proposed to be made to any Governmental Authority, based on the resolution passed by the Monitoring Committee and the monitoring professional shall make such applications in order to obtain the necessary approvals for implementation of this Plan in a timely manner. The mechanism for supervision of the payments to stakeholders of the Corporate Debtor after the Effective Date, in the manner contemplated in this Plan, shall be supervised by the Monitoring Committee.

- (a) The Bank Guarantee referred in para 21 above, shall be extended till the complete implementation of the Resolution Plan. - (b) The moratorium order passed by this Adjudicating Authority under Section 14 of the Code on 19.02.2020 in the main CP shall cease to have effect; and - (c) The Resolution Professional shall forward all records relating to the conduct of the Corporate Insolvency Resolution Process and the Resolution Plan to the Board to be recorded on its database.