AMD Industries Limited vs M/S VHV Beverages Private Limited

A. To consider the present application under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (Code) for liquidation of the Corporate Debtor; and/or;

B. To appoint the liquidator of the Corporate Debtor in terms of the provisions of Section 34 of the code; and/or;

C. To direct the Registry to communicate this order to the concerned registrar of the Companies and to the Insolvency and Bankruptcy Board of India (IBBI), New Delhi; and/or;

D. To consider declaring under Section 31(3) (a) of the Code that the moratorium passed u/s 14 of the Code shall cease to have effect and fresh moratorium under Section 33 (5) of the Code shall commence; and/or;

E. To consider that this order is deemed to be a notice of discharge to the officer, employees and the workmen of the Corporate Debtor as per Section 33 (7) of the Code; and/or;

F. To consider that no suit, prosecution or other legal proceeding shall lie against the Insolvency Professional for anything done or intended to be done in good faith under Section 233 of the Code; and/or;

G. Pass such other or further order(s) / direction(s) as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case in the interest of justice.

Brief background of the case as mentioned in the application:

“RESOLVED THAT the present Resolution Professional Mr. Umesh Chand Goyal is hereby directed by the members of COC to stop the process of Expression of Interest in response to Form G published on 17.07.2022 in compliance of the authorization granted by the CoC in its 11th meeting held on 12.07.2022, absolving him of all his duties & responsibilities under the Insolvency and Bankruptcy Code 2016, the IBBI (Insolvency Resolution Process of Corporate Persons) Regulations 2016, the IBBI (Insolvency Professionals) Regulations 2016 and any other related provisions and that any responsibility in this regards shall lie with the members of the CoC jointly and severally.”

“FURTHER RESOLVED THAT in the event of this resolution not getting approval from the requisite voting share, the Request For Resolution Plan (RFRP) and Bid Evaluation Matrix (BEM) earlier approved in 4th CoC meeting held on 14.03.2022, shall stand approved for this ongoing process and the present RP will be authorized to issue the same on 04.08.2022 as per the timeline for Form G approved by the CoC in its 11th meeting on 12.07.2022.”

The above Resolution was rejected with no vote in ‘Yes’, 2 members with 28.50 % voting share selected option “Abstained from Voting” and remaining 5 members (71.50%) did not vote. Accordingly, the Applicant issued the RFRP and BEM earlier approved in 4th CoC meeting held on 14.03.2022.

IA-6134/2022

This is an application filed for seeking the Liquidation Process. Ld. Counsel for the CoC states this application is not filed with the approval of the CoC.

He seeks to place the matter before the CoC for further consideration as to how to proceed with the matter.

In view of the above, IA-6134/2022 is closed and stands disposed of.

At the request and with the consent of both parties, list the matter for a physical hearing on 09.01.2024 along with the pending applications.

“Ld. Counsel Mr. Pramod Dalela appeared on behalf of the CoC. In view of the submission made by the Ld. Counsel and reasons quoted above, we allow the application as prayed for and appoint Mr. Pankaj Mahajan as a new Resolution Professional in place of Shri Umesh Chand Goyal. The RP, Mr. Umesh Chand Goyal is directed to hand over all the records to the new RP, Mr. Pankaj Mahajan on proper acknowledgement and the CoC is also directed to pay the pending dues of the RP. In view of above IA-3590/2023 is allowed & stands disposed of.”

ITEM NO.5

TO DISCUSS AND TAKE NOTE OF THE ACTIONS TAKEN BY THE RP

i.

RP apprised the members that he had issued the final list of Potential Resolution Applicants (PRA's) on the 16th of March, 2024, and had revised the final list on 18th of March, 2024 where the two directors of the company (suspended powers) were declared ineligible after the COC did not approve the exemption proposed to them from various eligibility criteria conditions in the voting on the resolution proposed in the 27th COC meeting. The voting was ended on 18th of March, 2024 and the voting results were shared in this regard on the same day. There are now ten PRAs as listed below:

1.

M/s. United Biotech Private Limited and M/s. Sabrimala Industries India Limited (in Consortium)

2.

Nalwa Steel & Power Ltd

3.

Dickey Alternative Investment Trust

4.

Resurgent Property Ventures Private Limited

5.

Ruptex Mineral Water Pvt. Ltd.

6.

Sagacious Capital Private Limited

7.

Metrro Waste Handling Private Limited 8 Masatya Technologies Private Limited

9.

Anuj Goyal

10.

Pooja Aggarwal The last date for submission of the resolution plan was 10.04.2024, which was further extended by 15 days till 25.04.2024, 05:00 p.m. in the 29th CoC held on 12th April, 2024.

ITEM NO. 6

TO OPEN THE RESOLUTION PLAN RECEIVED IN FRONT OF COC, IN THE PRESENCE OF RA

The RP brought to the notice of the COC members that 25.04.2024 being the last date for the submission of Resolution Plan, RP had received only one resolution plan (in password protected PDF via mail and in sealed envelope). The RA, Ms. Pooja Aggarwal, had initially authorized her husband, Mr. Piyush Aggarwal, to attend the COC meeting on her behalf, but due to demise of some close relative (as per her mail), Mr. Piyush Aggarwal could not attend the meeting too. The RP, subsequently, received the mail from the RA authorizing Ms. Sunita to attend the meeting. RP requested for and received Ms. Sunita's identity proof on mail.

Ms Sunita had joined the meeting at 3 PM but was requested to leave and was advised that she shall be called upon to join the meeting when the agenda related to the plan is taken up. The RP's team, after appraising the members regarding the authorization, invited her to join the meeting. Post joining, RP established her credentials based on the identity proof. RP, thereafter, displayed the sealed envelope containing the resolution plan and opened it in the front of all the participants. Thereafter, Ms. Sunita was requested to provide the password for opening the copy of the plan received on mail. The password was obtained, and the mail was opened in the presence of all the participants via share screen option. The plan was displayed on the screen and the financial bid by the RA was read out the members. Ms. Sunita was asked about the basis of providing for an amount for provident fund liability when no claim has been received from the said department. She replied that such provision has been made based on the financials of the CD. She was further asked about the CIRP cost amount provided in the plan, as to whether the increase in CIRP cost shall entail an increase in the plan value to which she asserted that the resolution plan value shall not change, and any incremental CIRP cost shall be adjusted in the payment proposed to the creditors. It was confirmed from her that the plan sent via mail is same as the plan submitted physically. The representative of the RA was, thereafter, requested to leave the meeting.

RP apprised the members that he and his team shall analyse the plan and prepare a report on compliance with the IBC code and applicable regulations which shall be presented to the COC in the next meeting. The RP assured to complete the said activity within a week's time.

RP also brought to the notice of the members that no expenses had been incurred since last COC. Therefore, the no agenda related to CIRP cost approval was kept in this meeting.

At this stage, RP requested Mr. Vishnoo Mittal to leave the meeting as the summary of the valuation reports was to be presented to the members of the COC. Mr Mittal left the meeting. The RP displayed the summary of the average fair value and liquidation value on the screen and the value of each component of the valuations (land and building, Plant and machinery and SFA) was read out to the members. The members took note of the same.

ITEM NO. 6

TO CONSIDER AND APPROVE THE RESOLUTION FOR THE LIQUIDATION OF THE CD AND APPOINTMENT OF LIQUIDATOR:

As mentioned supra, M/s K G Somani & Co. LLP (KGS) have carried out the due diligence of the plan received from Ms Pooja Aggarwal, partner of Crystal Beverages who is the O&M operator at the plant of the CD. RP had appointed KGS on 01/05/2024 and they had shared the required information and documents with the RA on 03/05/2024. On 04/05/2024 and 06/05/2024 KGS sought additional information. After a substantial delay and a lot of follow up, the RA provided some information 14/05/2024 and on the basis such information KGS sought some additional information. On 17/05/2024, KGS summarized all pending points and mailed to RA. RP also constantly followed up with RA for the information vide mails dated 06/05/2024, 07/05/2024, 09/05/2024, 10/05/2024, 14/05/2024, 18/05/2024 & 20/05/2024. The flow of information from RA has been sketchy and delayed.

The chairman opened both the reports and read out the contents in a summarized way for the benefit of the members. The members were also informed about the developments that took place after the issue of the notice and agenda. Foremost among that was the mail sent by the RA where an individual had committed to lend an amount of one million dollars to the RA and an extract of the funds available have been shared too. The Chairman apprised that the said communication was received on 24th of May, 2024 ie well beyond the extended timeframe provided to the RA. Also, to allay the concerns of the funds' availability, it would not be prudent to rely on a commitment by an individual. He further expressed his opinion that a term sheet from a Bank/ FI/ NBFC would carry weight/ credibility in such a case.

Chairman apprised the COC members that the resolution plan received from the resolution applicant is not passing the test of section 30 (2) (d) of the code in terms of implementation and is not feasible and viable under Regulation 38(3)(b) of the IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 (Regulations). In terms of Section 30 (3) of the Code, RP shall present only those plans to the COC for approval which confirm to the conditions of Section 30 (2). This plan, not being compliant, is not being put forward to the COC for their approval.

The Chairman apprised the members of the COC that there is no way forward as the CIRP period will end on 27.05.2024 (being the 900th day from the date of initiation of CIRP) and there is no plan in hand to consider as stated above.

In view of the foregoing, the liquidation of the Corporate Debtor is the only option. Therefore, the Corporate Debtor may be liquidated in accordance with Section 33 of the Insolvency & Bankruptcy Code, 2016.

Accordingly, the following resolutions were put to vote

“RESOLVED THAT in pursuant to Section 33(2) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the consent of members of the COC be and is hereby accorded to approve the liquidation of CD.

RESOLVED FURTHER THAT pursuant to the provisions of Section 33(2) and other applicable provisions of the Insolvency and Bankruptcy Code, 2016 and Rules and Regulations framed there under, the Resolution Professional be and is hereby authorized to file an application as approved by the Committee of Creditors to the Hon’ble Adjudicating Authority and to do all such acts, deeds and things as may be required or considered necessary or incidental thereto.”

Objections raised by the respondent:

Findings and analysis:

Issue-1

Section 15.

Public announcement of CIRP:

(1)

The public announcement of the corporate insolvency resolution process under the order referred to in section 13 shall contain the following information, namely:—

- (a) name and address of the corporate debtor under the corporate insolvency resolution process; - (b) name of the authority with which the corporate debtor is incorporated or registered; - (c) the last date for submission of claims, as may be specified; - (d) details of the interim resolution professional who shall be vested with the management of the corporate debtor and be responsible for receiving claims; - (e) penalties for false or misleading claims; and - (f) the date on which the corporate insolvency resolution process shall close, which shall be the one hundred and eightieth day from the date of the admission of the application under sections 7, 9 or section 10, as the case may be.

(2)

The public announcement under this section shall be made in such manner as may be specified.

Section 17.

Management of affairs of corporate debtor by interim resolution professional.

(1)

From the date of appointment of the interim resolution professional,—

(a)

the management of the affairs of the corporate debtor shall vest in the interim resolution professional;

(b)

the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended[1] and be exercised by the interim resolution professional;

(c)

the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such

(2)

The interim resolution professional vested with the management of the corporate debtor shall—

(a)

act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other documents, if any;

(b)

take such actions, in the manner and subject to such restrictions, as may be specified by the Board;

(c)

have the authority to access the electronic records of corporate debtor from information utility having financial information of the corporate debtor;

(d)

have the authority to access the books of account, records and other relevant documents of corporate debtor available with government authorities, statutory auditors, accountants and such other persons as may be specified; and

(e)

be responsible for complying with the requirements under any law for the time being in force on behalf of the corporate debtor.

Section 20:

Management of operations of corporate debtor as going concern.

(1)

The interim resolution professional shall make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern¹¹.

(2)

For the purposes of sub-section (1), the interim resolution professional shall have the authority—

(a)

to appoint accountants, legal or other professionals as may be necessary;

(b)

to enter into contracts on behalf of the corporate debtor or to amend or modify the contracts or transactions which were entered into before the commencement of corporate insolvency resolution process;

(c)

to raise interim finance provided that no security interest shall be created over any encumbered property of the corporate debtor without the prior consent of the creditors whose debt is secured over such encumbered property: Provided that no prior consent of the creditor shall be required where the value of such property is not less than the amount equivalent to twice the amount of the debt.

(d)

to issue instructions to personnel of the corporate debtor as may be necessary for keeping the corporate debtor as a going concern; and

(e)

to take all such actions as are necessary to keep the corporate debtor as a going concern.

Section 25.

Management of operations of corporate debtor as going concern.

(1)

It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor.

(2)

For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:—

(a)

take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor;

(b)

represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings;

(c)

raise interim finances subject to the approval of the committee of creditors under section 28;

(d)

appoint accountants, legal or other professionals in the manner as specified by Board;

(e)

maintain an updated list of claims;

(f)

convene and attend all meetings of the committee of creditors;

(g)

prepare the information memorandum in accordance with section 29;

(h)

invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans.

(i)

present all resolution plans at the meetings of the committee of creditors;

(j)

file application for avoidance of transactions in accordance with Chapter III, if any; and

(k)

such other actions as may be specified by the Board.

Section 30

Submission of resolution plan

(1)

A resolution applicant may submit a resolution plan ¹[along with an affidavit stating that he is eligible under section 29A] to the resolution professional prepared on the basis of the information memorandum.

(2)

The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan--

(a)

provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the ²[payment] of other debts of the corporate debtor;

(b)

provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than--

(i)

the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or

(ii)

the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.

Explanation 1.--For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors.

Explanation 2.-- For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor--

(i)

where a resolution plan has not been approved or rejected by the Adjudicating Authority;

(ii)

where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or

(iii)

where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;]

(c)

provides for the management of the affairs of the Corporate debtor after approval of the resolution plan;

(d)

the implementation and supervision of the resolution plan;

(e)

does not contravene any of the provisions of the law for the time being in force;

(f)

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

[Explanation. -- For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law];

(3)

The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2).

(4)

The committee of creditors may approve a resolution plan by a vote of not less than 6[sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, 7[the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor] and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017(Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of section 29A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section.] [Provided also that the eligibility criteria in section 29A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.]

(5)

The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor.

(6)

The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority.

38. Mandatory contents of the resolution plan.

(1)

The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors.] (1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.

(IB)

A resolution plan shall include a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past.]

(2)

A resolution plan shall provide:

- (a) the term of the plan and its implementation schedule; - (b) the management and control of the business of the corporate debtor during its term; and - (c) adequate means for supervising its implementation.

(3)

A resolution plan shall demonstrate that –

- (a) it addresses the cause of default;

(b)

it is feasible and viable;

- (c) it has provisions for its effective implementation;

- (d) it has provisions for approvals required and the timeline for the same; and

- (e) the resolution applicant has the capability to implement the resolution plan.]

TO OPEN THE RESOLUTION PLAN RECEIVED IN FRONT OF COC, IN THE PRESENCE OF RA

The RP brought to the notice of the COC members that 25.04.2024 being the last date for the submission of Resolution Plan, RP had received only one resolution plan (in password protected PDF via mail and in sealed envelope). The RA, Ms. Pooja Aggarwal, had initially authorized her husband, Mr. Piyush Aggarwal, to attend the COC meeting on her behalf, but due to demise of some close relative (as per her mail), Mr. Piyush Aggarwal could not attend the meeting too. The RP, subsequently, received the mail from the RA authorizing Ms. Sunita to attend the meeting. RP requested for and received Ms. Sunita's identity proof on mail.

Ms Sunita had joined the meeting at 3 PM but was requested to leave and was advised that she shall be called upon to join the meeting when the agenda related to the plan is taken up. The RP's team, after apprising the members regarding the authorization, invited her to join the meeting. Post joining, RP established her credentials based on the identity proof. RP, thereafter, displayed the sealed envelope containing the resolution plan and opened it in the front of all the participants. Thereafter, Ms. Sunita was requested to provide the password for opening the copy of the plan received on mail. The password was obtained, and the mail was opened in the presence of all the participants via share screen option. The plan was displayed on the screen and the financial bid by the RA was read out the members. Ms. Sunita was asked about the basis of providing for an amount for provident fund liability when no claim has been received from the said department. She replied that such provision has been made based on the financials of the CD. She was further asked about the CIRP cost amount provided in the plan, as to whether the increase in CIRP cost shall entail an increase in the plan value to which she asserted that the resolution plan value shall not change, and any incremental CIRP cost shall be adjusted in the payment proposed to the creditors. It was confirmed from her that the plan sent via mail is same as the plan submitted physically. The representative of the RA was, thereafter, requested to leave the meeting.

RP apprised the members that he and his team shall analyse the plan and prepare a report on compliance with the IBC code and applicable regulations which shall be presented to the COC in the next meeting. The RP assured to complete the said activity within a week's time.

RP also brought to the notice of the members that no expenses had been incurred since last COC. Therefore, the no agenda related to CIRP cost approval was kept in this meeting.

At this stage, RP requested Mr. Vishnoo Mittal to leave the meeting as the summary of the valuation reports was to be presented to the members of the COC. Mr Mittal left the meeting. The RP displayed the summary of the average fair value and liquidation value on the screen and the value of each component of the valuations (land and building, Plant and machinery and SFA) was read out to the members. The members took note of the same.

TO CONSIDER AND APPROVE THE RESOLUTION FOR THE LIQUIDATION OF THE CD AND APPOINTMENT OF LIQUIDATOR

As mentioned supra, M/s K G Somani & Co. LLP (KGS) have carried out the due diligence of the plan received from Ms Pooja Aggarwal, partner of Crystal Beverages who is the O&M operator at the plant of the CD. RP had appointed KGS on 01/05/2024 and they had shared the required information and documents with the RA on 03/05/2024. On 04/05/2024 and 06/05/2024 KGS sought additional information. After a substantial delay and a lot of follow up, the RA provided some information 14/05 2024 and on the basis such information KGS sought some additional information. On 17/05/2024, KGS summarized all pending points and mailed to RA. RP also constantly followed up with RA for the information vide mails dated 06/05/2024, 07/05/2024, 09/05/2024, 10/05/2024, 14/05/2024, 18/05/2024 & 20/05/2024. The flow of information from RA has been sketchy and delayed.

The chairman opened both the reports and read out the contents in a summarized way for the benefit of the members. The members were also informed about the developments that took place after the issue of notice and agenda. Foremost among that was the mail sent by the RA where an individual had committed to lend an amount of one million dollars to the RA and an extract of the funds available have been shared too. The Chairman apprised that the said communication was received on 24^th of May, 2024 ie well beyond the extended timeframe provided to the RA. Also, to allay the concerns of the funds' availability, it would not be prudent to rely on a commitment by an individual. He further expressed his opinion that a term sheet from a Bank/ FI/ NBFC would carry weight/ credibility in such a case.

Chairman apprised the COC members that the resolution plan received from the resolution applicant is not passing the test of section 30 (2) (d) of the code in terms of implementation and is not feasible and viable under Regulation 38(3)(b) of the IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 (Regulations). In terms of Section 30 (3) of the Code, RP shall present only those plans to the COC for approval which conform to the conditions of Section 30 (2). This plan, not being compliant, is not being put forward to the COC for their approval.

The Chairman apprised the members of the COC that there is no way forward as the CIRP period will end on 27.05.2024 (being the 900^th day from the date of initiation of CIRP) and there is no plan in hand to consider as stated above.

In view of the foregoing, the liquidation of the Corporate Debtor is the only option. Therefore, the Corporate Debtor may be liquidated in accordance with Section 33 of the Insolvency & Bankruptcy Code, 2016.

ORDER

IA-29/2024 Liq.

Heard Mr. Milan Negi, Ld. Counsel for M/s. Crystal Beverages, Mr. Abhishek Anand, Ld. Counsel for Suspended Board and Mr. Sanjeev Panda, Ld. Counsel for the RP. Ld. Counsel for the RP seeks time to get instruction from CoC and report to us. At request, list the matter on 05.08.2024 for reporting.

Cont.P-16/2022, IA-2176/2022, IA-2460/2022, IA-3954/2022, IA-4065/2022, IA-4807/2022, IA-4373/2022, IA-6095/2022, IA-1981/2022, IA-3539/2022, IA-4037/2022, IA-4042/2022, IA-4854/2022, IA-5260/2022, IA-5081/2023, IA-2891/2024

At request, list these IAs on 05.08.2024

5.

TO TAKE NOTE OF THE PROCEEDINGS HELD IN THE LIQUIDATION APPLICATION FILED BY THE RP AND DELIBERATE UPON THE OBJECTIONS RAISED BY THE RESPONDENTS AND TAKE A COLLECTIVE DECISION THE OPPORTUNITY TO ADDRESS THE CONCERNS OF THE RESPONDENTS

The Chairman apprised the COC members that this meeting has been called to apprise the members about the proceedings of the hearing held at the Honourable NCLT on 30-07-2024 and take a suitable decision based on the discussions. First and foremost, the background of the matter was provided from the minutes of the 31^st COC meeting held on 27^th of May, 2024. It was recalled, for the benefit of the members, that only one plan was received in the process from Ms Pooja Aggarwal, partner of Crystal Beverages who is the O&M operator at the plant of the CD. M/s K G Somani & Co. LLP (KGS) had been appointed for carrying out the due diligence under Section 29 A and vetting the plan in terms of compliance of the various provisions of the IBC code and CIRP regulations before submission of the plan to the COC for voting. It was informed that the consultants had shared the reports which were presented to the COC in the 31^st meeting. The fact about the flow of information from the PRA being sketchy and delayed was also read out from the last minutes. The chairman, then sought the attention of the members to the following paragraph of the minutes of 31^st COC.

Chairman apprised the COC members that the resolution plan received from the resolution applicant is not passing the test of section 30 (2) (d) of the code in terms of implementation and is not feasible and viable under Regulation 38(3)(b) of the IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 (Regulations). In terms of Section 30 (3) of the Code, RP shall present only those plans to the COC for approval which conform to the conditions of Section 30 (2). This plan, not being compliant, is not being put forward to the COC for their approval.

The RP went on to explain that the PRA had failed to submit the sources of funds inspite of various opportunities provided to her. The Net worth of the RA, Rs. 10.36 crores, consisted of a factory land worth Rs. 10.32 crores where the RA was holding 75% share. On being questioned about the ways to liquidate the said asset with 25% share being held by another entity, the PRA had categorically stated that the said land was not planned to be sold for the implementation of the plan submitted. On being asked to provide the sources of funds, the PRA had provided a comfort letter from a dry fruit company by the name of Arnav Ansh Private Limited. To establish the credibility and paying capacity of the proposed lender, the Balance Sheet, net worth, liquid fund availability and resolution of the board of the company were asked to be submitted but the same were not provided. On 24^th of May, 2024, at around 10 PM, a proposal from an individual by the name of Vijay Verma, holding USD 4.14 lacs in his JP Morgan Account was mailed.

The RP mentioned that since the sources were not clear inspite of various opportunities afforded to the PRA, the RP could not submit his certificate regarding the plan being compliant of Section 30 (2) (d) of the code and did not seek the voting of the COC on the plan.

The members were, thereafter, informed that the PRA and the ex-director of the company had filed an application with similar objections questioning the decision of the RP for not taking the plan to the COC for voting. After hearing the arguments, the bench was of the view that the RP could have issued the certificate mentioned above with a disclaimer and left it for the COC to decide on the plan. RP informed the members that the bench was apprised that the complete report on viability and compliance had been submitted to the COC for consideration and the plan too had been shared with the minutes of the 30th COC meeting. The counsel of the RP, Mr. Sumit Shukla, explained, in detail, the proceedings that took place in the hearing on 30th of July, 2024. He mentioned that the bench was inclined to issue notice to the COC members and had suggested withdrawal of the liquidation application with the other parties too withdrawing the applications. The counsel submitted that he suggested for a short date to enable the RP to convene a COC meeting to take his instructions from the COC in this regard. The COC members asked the counsel as to whether the bench had passed any order to the COC to consider the plan again. It was explained that these were the observations of the bench during the hearing, where RP, his counsel, the counsel for the PRA and the counsel for the ex-director were present.

After a detailed discussion the COC instructed the Resolution professional as under:

- Since the COC already has approved the Liquidation of the CD whereas the application filed by the RP basis such decision is pending before the Hon'ble AA - As regards to the objections of the RA and the ex- director, the RP may ask the PRA to submit the submit the Revised Resolution Plan to the RP and - Subject to prior approval of the AA the COC shall consider such revised Resolution Plan as may be submitted by the RA, after vetting by the RP, in terms of above discussions

RP was advised to apprise the bench about the decision of the COC.

The views of Mr. Vishnoo Mittal were also sought on the discussions while bringing to his notice that one of the objections raised in the application by ex-management regarding non sharing of the resolution plan was not factually correct. He acknowledged that the said objection in the application was incorrect. He submitted to the participants that he just wishes to have a successful resolution of the CD.

A. The plan was presented to the COC along with the observation by the undersigned that the plan could not be put up for voting on account of the plan being non compliant of the Section 30 (2)(d) of the IBC, there being no clarity/ visibility about the availability of funds for implementation of the plan. The fact was aptly recorded in the 31^st COC meeting held on 27^th of May, 2024 where the resolution for the liquidation of the CD was passed.

B. In the 32^nd COC, on the instructions of the AA, the view of the COC was sought as to whether the COC was ready to consider the existing/ improved plan. The COC decided that in view of the liquidation application being filed, the existing/ improved plan cannot be considered unless there are clear instructions of the bench.

RP apprised the members that the bench has, in the last hearing, specifically enquired as to whether the COC had also considered the plan as non-viable. In view of above RP sought the views of the COC members

In response to the query raised by the RP, representative of SBI stated that, the resolution plan submitted by Ms Pooja Agarwal being the Partner of Crystal Beverages LLP is not acceptable for the following key reasons:

1.

The reports on Feasibility and Viability issued by K G Somani and Co LLP. The said report was presented by the RP before the COC and the key aspects were read out for the benefit of the members. The non clarity of sources of funds in the resolution plan makes the resolution plan non-viable and uncertain;

2.

The conduct of Crystal Beverages, the partnership firm of the PRA, Ms Pooja Agarwal, is known to the COC which is marked by constant defaults and non-cooperation. The fact that the outstanding dues under the operations and management agreement has not been paid by the partnership firm even after multiple reminders and filing of application before the Hon'ble NCLT, which has led to eviction notice been issued, further enforces the view of mala fide intent and lack of funds with the PRA;

3.

The fact that 27^th of May, 2024, was the last day of CIRP of the CD after accounting for all the extensions was also recorded in the minutes along with the fact that there is no compliant plan with the COC.

4.

Accordingly, the resolution plan is neither feasible nor viable and SBI had taken a conscious decision of voting for liquidation keeping all the above factors in mind and hence the RP should proceed with pressing the liquidation application.

RP sought other members views on and other CoC members agreed with the views expressed by SBI. Accordingly, it was decided that the minutes of this CoC meeting will be placed before the Hon'ble NCLT for expeditious disposal of the applications.

The summary is tabulated below:

S. No.	Name & Address of the COC Member	Voting Share	Views of the members
1	Indian Bank	24.32%	Supported and echoed the views of SBI and thus in favour of liquidation application being pressed.
2	Punjab National Bank	19.90%	Supported and echoed the views of SBI and thus in favour of liquidation application being pressed.
3	State Bank of India	19.16%	Captured in detail in the para above this table.
4	Tamilnad Mercantile Bank	13.34%	Supported and echoed the views of SBI and thus in favour of liquidation application being pressed.
5	Bank of Baroda	13.75%	Supported and echoed the views of SBI and thus in favour of liquidation application being pressed.
6	The Karur Vysya Bank Limited	8.60%	Supported and echoed the views of SBI and thus in favour of liquidation application being pressed.
7	TATA Capital Financial Services Ltd	0.93%	Did not attend the meeting
	Total	100.00%

The members took note of the above.

3.

That I state that the 35th COC meeting was convened on 29.10.2024 where the COC inter-alia discussed on the liquidation application pending before this Hon'ble Tribunal and the members of the COC were apprised by the deponent that during the course of discussions on the application, this Hon'ble Tribunal had sought the clarification as to what are the views of the COC with respect to the resolution plan. The deponent also apprised the members of the COC that this Hon'ble Tribunal specifically enquired as to whether the COC had also considered the plan as non-viable to which the representative of the State Bank of India (SBI) stated that, the resolution plan submitted by Ms Pooja Agarwal being the Partner of Crystal Beverages is not acceptable for the following key reasons:

A. The reports on Feasibility and Viability issued by K G Somani and Co LLP. The said report was presented by the RP before the COC and the key aspects were read out for the benefit of the members. The non clarity of sources of funds in the resolution plan makes the resolution plan non -viable and uncertain. B. The conduct of Crystal Beverages, the partnership firm of the PRA, Ms Pooja Agarwal, is known to the COC which is marked by constant defaults and non-cooperation. The fact that the outstanding dues under the operations and management agreement has not been paid by the partnership firm even after multiple reminders and filing of application before the Hon'ble NCLT, which has led to eviction notice been issued, further enforces the view of mala fide intent and lack of funds with the PRA; C. The fact that 27th of May, 2024, was the last day of CIRP of the CD after accounting for all the extensions was also recorded in the minutes along with the fact that there is no compliant plan with the COC. D. Accordingly, the resolution plan is neither feasible nor viable and SBI had taken a conscious decision of voting for liquidation keeping all the above factors in mind and hence the RP should proceed with pressing the liquidation application.

Response by Applicant

35. Fair value and Liquidation value.

(1)

Fair value and liquidation value shall be determined in the following manner:-

(a)

the two registered valuers appointed under regulation 27 shall submit to the resolution professional an estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor;

[Provided that the resolution professional shall facilitate a meeting wherein registered valuers shall explain the methodology being adopted to arrive at valuation to the members of the committee before computation of estimates.]

(b)

if the two estimates of a value in an asset class are significantly different, or on receipt of a proposal to appoint a third registered valuer from the committee of creditors, the resolution professional may appoint a third registered valuer for an asset class for submitting an estimate of the value computed in the manner provided in clause (a).

20.

The valuers appointed in the CIRP process are the registered valuers who are registered valuers and they are expert of the job and valuation given by the valuers are not to be lightly interfered with by the Adjudicating Authority in exercise of judicial review. When the report is based on relevant material, the Court cannot give its own opinion with regard to valuation of the assets. Counsel for the Respondent has rightly relied on the judgment of this Tribunal in “Beacon Trusteeship Ltd. v. Jayesh Sanghrajka, 2024 SCC OnLine NCLAT 667” wherein paragraphs 17, following has been observed:—

“17.

The argument that Valuation Reports were not correct has no substance. The RP has shared all information regarding the Corporate Debtor available with it to the valuers and valuers after detailed correspondence with the RP had provided the Valuation Report. Valuers who submitted the Reports are expert and it is not open for the Appellant or this Tribunal to sit in Appeal on the Valuation Report. It is submitted that Resolution Plan is fair and equitable to all Creditors, Homebuyers constituted a different category of Financial Creditor in a class and the fact that they are being provided homes without being asked to pay any escalation price is not a ground on which Resolution Plan can be interfered with, CoC in its commercial wisdom has approved the Resolution Plan which does not require any interference at the instance of the Appellant in this Appeal.”

21.

We may also notice the judgment of the Hon'ble Supreme Court in “M.K. Rajagopalan v. Periasamy Palani Gounder - (2024) 1 SCC 42” where the Hon'ble Supreme Court had approved the decision of the Adjudicating Authority and it was found that the process for valuation was undertaken by the Resolution Professional in accordance with law. In paragraphs 134, 135, 136, 137 are as follows:—

“134.

The Appellate Tribunal has laid great emphasis on the point that commercial wisdom of CoC was materially affected for want of existence of a valid and actual valuation report and sharing of all the relevant facts pertaining to the valuation with the members of CoC leading to violation of Regulations 27 and 35 of the CIRP Regulations. We are unable to agree.

135.

It has rightly been contended on behalf of the appellants that the members of CoC were provided with fair value and liquidation value after obtaining a confidentiality undertaking. We have reproduced hereinbefore all the material parts of the minutes of the meetings of CoC and it is at once clear that the members of CoC were fully satisfied with and endorsed the process of valuation and even reevaluation as undertaken by the resolution professional. Particularly, the minutes of second, fourth, sixth and seventh CoC meetings stand testimony to the fact that the requirements of Regulation were scrupulously followed and complied with and there had not been any doubt in CoC as regards the process of valuation as also supplying of fair and liquidation value to the members of CoC. The detailed findings of the adjudicating authority in this regard (reproduced in para 60 hereinabove) make it clear that the adjudicating authority independently applied its mind to the process of valuation and presentation of the matter to CoC. Rejection of all the objections in that regard by NCLT, called for no interference.

136.

The Appellate Tribunal appears to have unnecessarily and rather unjustifiably presumed that there had been blatant statutory violations and irregularities. Even if certain issues were raised in some of the meetings of CoC as regards the process of valuation, the clarifications from the resolution professional and the steps taken by him for valuation and re-valuation had been to the satisfaction of CoC. It has rightly been contended on behalf of the appellants with reference to the decision in Maharashtra Seamless 16 that resolution plan is not required to match the liquidation value as such.

137.

The findings of the Appellate Tribunal in regard to the question of valuation and thereby taking the resolution plan to be in contravention of Sections 30(2) and 61(3) of the Code cannot be approved and are required to be set aside.”

21.

It is clear from the above-cited CIRP Regulations that Regulation 27 provides for appointment of two registered valuers to determine the fair value and liquidation value of the corporate debtor in accordance with Regulation 35. Further Regulation 35(1)(b) provides that only when the two estimates of a value in an assets class are significantly different, or on the specific proposal of the CoC, that the RP may appoint a third registered valuer. In the present facts of the case, we notice that the CoC after deliberations decided in the 6th CoC meeting that a third valuer would require to be appointed only if there was gulf of a difference in the stock valuation figures estimated by the two appointed valuers, while the 7th CoC meeting after noticing the valuation reports of the two valuers decided against the appointment of the third valuer. This position was later confirmed by the CoC in their affidavit dated 01.09.2022 filed before the Adjudicating Authority.

24.

Given this position, we are of the view that the RP did not violate the CIRP Regulations in the conduct of the valuation exercise. The RP had followed Regulation 27 to disclose the estimated fair and liquidation value of the Corporate Debtor. Further, we find that the CoC had duly considered and deliberated upon the valuation reports before deciding not to have any report from a third valuer. That being the considered business decision of the CoC, the supremacy of the commercial wisdom cannot be questioned by the Appellants. In fine, we do not find any infirmity in the conduct of the valuation exercise. In the present case a conscious decision has been taken by the COC, therefore we find no merit in the aforesaid argument.

“19.

... In the present case, however our focus must be on the dispensation governing the process of approval or rejection of resolution plan by the CoC. The CoC is called upon to consider the resolution plan under Section 30(4) of the I&B Code after it is verified and vetted by the resolution professional as being compliant with all the statutory requirements specified in Section 30(2).

62.

... In the present case, however, we are concerned with the provisions of I&B Code dealing with the resolution process. The dispensation provided in the I&B Code is entirely different. In terms of Section 30 of the I&B Code, the decision is taken collectively after due negotiations between the financial creditors who are constituents of the CoC and they express their opinion on the proposed resolution plan in the form of votes, as per their voting share. In the meeting of CoC, the proposed resolution plan is placed for discussion and after full interaction in the presence of all concerned and the resolution professional, the constituents of the CoC finally proceed to exercise their option (business/commercial decision) to approve or not to approve the proposed resolution plan. In such a case, non-recording of reasons would not per se vitiate the collective decision of the financial creditors. The legislature has not envisaged challenge to the “commercial/business decision” of the financial creditors taken collectively or for that matter their individual opinion, as the case may be, on this count.”

“42.

... Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameter of such review having been clearly laid down in K. Sashidhar (supra).”

33. Initiation of Liquidation

(2)

Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors [approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in subclauses (i), (ii) and (iii) of clause (b) of sub-section (1).

[Explanation. – For the purpose of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.]

Order:

V. RELIEF(S) SOUGHT

In view of the above facts and circumstances, the RP most respectfully prays that this Hon'ble Tribunal may be most graciously pleased:-

A. To take on record the copy of the minutes of the 36th COC meeting of the Corporate Debtor held on 27.11.2024 along with the E-Voting held from 1100 Hrs on 28.11.2024 to 1800 Hrs on 03.12.2024 along with the written consent of Mr. Vivek Parti to act as liquidator along with AFA Form and same be considered as part and parcel of the liquidation Application bearing IA 29/2024; and/or; B. To appoint Mr. Vivek Parti as the liquidator of the Corporate Debtor in terms of the provisions of Section 34 of the code, in case the liquidation Application bearing IA 29/2024 u/s 33(2) of the Code is allowed by this Hon'ble Tribunal; and/or; C. Pass such other or further order(s) / direction(s) as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case in the interest of justice.