Amit Pareek, Resolution Professional vs Shree Sai Rolling Mills India Limited

IA (IBC) 102/33(2)/GB/2023 has been filed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 by the Resolution Professional in the matter of CD- Shree Sai Rolling Mills India Limited, for an order of Liquidation of the Corporate Debtor.

IA (IBC)/107/60(5)/GB/2023 has been filed by Mr. Rajeev Kumar Singhal (Lead Member of the Consortium) and others under Section 60(5) of the Insolvency and Bankruptcy Code 2016, read with Rule 11 of the NCLT Rules, 2016 with the prayer to direct the Respondents to call and conduct a CoC meeting and consider the Resolution Plan of the Applicants.

IA (IBC) 100/33(2)/GB/2023 has been filed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 by the Resolution Professional in the matter of CD- Shree Sai Smelters India Limited, for an order of Liquidation of the Corporate Debtor.

IA (IBC)/106/60(5)/GB/2023 has been filed by Mr. Rajeev Kumar Singhal (Lead Member of the Consortium) and others under Section 60(5) of the Insolvency and Bankruptcy Code 2016, read with Rule 11 of the NCLT Rules, 2016 with the prayer to direct the Respondents to call and conduct a CoC meeting and consider the Resolution Plan of the Applicants.

IA (IBC) 101/33(2)/GB/2023 has been filed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 by the Resolution Professional in the matter of CD- Shree Sai Prakash Alloys Private Limited, for an order of Liquidation of the Corporate Debtor.

Since the issue of controversy involved in all the above IAs is common, all the above IAs are hereby disposed of through this common order.

The main crux of the issue involved in the above IAs are as follows: 7.1 The Corporate Insolvency Resolution Process of all the three Sister Companies/Corporate Debtors- Shree Sai Rolling Mills India Limited; Shree Sai Smelters India Limited and Shree Sai Prakash Alloys Private Limited were initiated by an order of this Tribunal dated 23.08.2019. Thereafter, the CD preferred appeals before the Hon'ble NCLAT against the order of NCLT dated 23.08.2019 which was allowed by the NCLAT vide its order dated 18.06.2020. Aggrieved by the order of the Hon'ble NCLAT, the Financial Creditor in all the three cases approached the Hon'ble Supreme Court challenging the order of Hon'ble NCLAT dated 18.06.2020 and the Hon'ble Supreme Court on 14.07.2022, allowed the appeals in favour of the FC and the matters were remanded back to NCLAT for fresh Adjudication of the Appeals.

On 02.09.2022, the Hon'ble NCLAT dismissed the 3 appeals filed by the CDs bearing No. 1003/2019, 1004/2019 and 1005/2019 challenging the admission order passed by this Tribunal dated 23.08.2019 and remanded the matter back to NCLT for fresh hearing. 7.3 This tribunal on 30.09.2023 after hearing the matter afresh, admitted all the 3 Company Petitions and the Corporate Insolvency Resolution Process of all the three Sister Companies/Corporate Debtors- Shree Sai Rolling Mills India Limited; Shree Sai Smelters India Limited and Shree Sai Prakash Alloys Private Limited were initiated in Company Petition No. 22/GB/2019; Company Petition No. 23/GB/2019 and Company Petition No. 23/GB/2019 respectively. 7.4 Mr Amit Pareek was appointed as Interim Resolution Professional in all the three cases and he had constituted a Committee of Creditors and the Committee of the Creditors in the Second CoC meeting held on 07.11.2022 with 100 % voting confirmed Mr. Amit Pareek as Resolution Professional (RP) in all the three cases. 7.5 The IRP made Public Announcement on 07.10.2022 in prescribed format "FORM A" which was published in The Shillong Times and Rupang (English & Regional Language) having wide circulation in Meghalaya. The last date of submission of claim was fixed as 14.10.2022. The Resolution Professional has received different claim forms on different dates from claimants and accordingly RP submitted the revised list of creditors to NCLT Guwahati Bench. Subsequently, the RP appointed six Valuers on 11.11.2022 to determine the fair market & liquidation value of the Corporate Debtors.

The RP in the 3rd CoC meeting put forth the agenda for publication of 'FORM G' inviting expression of interest ("EOI") and the same was approved in the meeting for submitting Resolution Plans for Corporate Debtor on 15.12.2022 in The Shillong Times (English) and Rupang (Regional) having vide circulation in Meghalaya and in The Times of India on 17.12.2022 and the original date for submission of EOI was fixed on 30.12.2022. The RP informed the COC members that he has received few emails and calls expressing their interest and the process document was shared to them but no EOI was received, further pursuant to the approval of COC in 4th meeting of COC held on 10.01.2023, the RP re-published FORM G in the aforesaid Newspaper vide First Extension on 13.01.2023 but no EOI was received by the Resolution Professional by the last date fixed i.e., 25.01.2023. Thereafter, EOI was published again on 16.02.2023 but again no EOI was received by the last date i.e. 24.02.2023. However, RP was receiving the enquiries related to the submission of EOL, hence considering the better realization and maximization of the value of CD, one more extension for submission of EOI was considered as the liquidation of CD may adversely affect the interest of its stakeholders. Therefore, the last date for submission of EOI was extended to 12.04.2023.

---7.7 The 9th CoC meeting was held on 24.05.2023 wherein, RP informed the COC that he has received only one Resolution Plan from the Prospective Resolution Applicant in sealed envelope. The same was placed and opened before the COC in this Meeting. However, even after several meetings, discussion and negotiation between the CoC and the Prospective Resolution Applicant with regards to the resolution plan, the resolution plan was not approved.7.8 The CoC in its 12^th meeting dated 05.08.2023, rejected the resolution plan of the PRA and the resolution for liquidation of the Corporate Debtor was approved with 100% votes. The CoC recommended for sale of the Corporate Debtor as a going concern as per the provisions of law.8. We have heard the submissions made by the Ld. Counsel for the Applicants along with the Ld. Counsel for the Respondents and have meticulously gone through the documents produced on record. Before going into the arguments/contentions made by the ld. Counsels for the RP, FC and the PRA, it is important to mention here that the out of the three Corporate Debtors, the PRA has only contested the liquidation of two of the Corporate Debtors namely, Shree Sai Rolling Mills Limited and Shree Sai Smelters India Limited.9. The ld. Counsel for the PRA (Applicants in IA (IBC)/107/60(5)/GB/2023 and IA (IBC)/106/60(5)/GB/2023) submits that a Resolution Plan was submitted by the PRA on 22.05.2023 and the same was placed before the CoC for consideration, discussion, negotiation and necessary approval in the 9^th and 10^th CoC meetings. He further submits that in the 11^th CoC meeting dated 19.06.2023, the CoC requested the PRA to improve the plan amount and reduce the duration of deferred payment and after deliberate discussion and negotiation the PRA increased the payment to Financial Creditor. The PRA also agreed to reduce the duration for the deferred payment from 24 months to 18 months. Thereafter, the CoC resolved to forward the plan submitted by the Applicants to the Higher Authority of the CoC for necessary approval.

The Ld. Counsel for the PRA states that the value of resolution plan is more than the liquidation value of the CD. He further submits that after waiting for more than one month, the PRA were informed that resolution plan was rejected by the CoC in its 12^th CoC meeting held on 05.08.2023. Thereafter, the PRA requested the Resolution Professional and Financial Creditor to conduct a CoC meeting and offer to improve the Resolution Plan which will be beneficial to the CD being a MSME Unit and all the stakeholders, however, the same was refused by the Resolution Professional and Financial Creditor.

On the other hand, the Ld. Counsel for the Resolution Professional and Financial Creditor submits that the resolution plan was rejected by the CoC in its 12^th meeting based on the commercial wisdom as the liquidation value was found to be more than the offered amount and further the condition put forth regarding the timeline of 730 days (18 months + 6 months moratorium) for payment of the Resolution amount was also not acceptable. He further submits that since the PRA are now fully aware of the liquidation value, they have resorted to filing application against only two Corporate Debtors out of the three- Sai Smelters India Limited and Shree Sai Rolling Mills India Ltd., while excluding Sai Prakash Alloys Pvt. Ltd. The three Companies must be sold together to maintain business viability and maximize liquidation value and as such the resolution plan cannot be reconsidered.

In order to appreciate the contentions made, it is felt necessary to reproduce the relevant extracts from the 12^th CoC meetings.

- Item B.5 from the minutes of the 12^th CoC meeting has been reproduced as follows:

- Item B.6 from the minutes of the 12^th CoC meeting has been reproduced as follows:

From the plain reading of the resolutions above, it is observed that the CoC in its 12^th Meeting have mentioned that the resolution approving the resolution plan has been approved by the CoC members (Financial Creditors) having 100% voting right and further authorized RP to sign, submit, file and do all the necessary acts as required for filing and submission of resolution plan along with the final report to the Adjudicating Authority for its approval. Surprisingly, the CoC in the same meeting dissented for accepting the resolution plan and approved for liquidation under Item B-6.

---1. 13. This tribunal is unable to understand as to how the CoC can pass two resolutions simultaneously for both liquidation as well as for resolution in the same meeting. Therefore, the minutes itself speaks of the non-application of mind by both the CoC as well as the RP and further shows the casual approach of both.

14. It also appears that the present matter went several rounds of litigation up to the Hon'ble Supreme Court and more than 2 years have been spent in defending the litigation. Under these circumstances, keeping all the above facts in mind, this bench considers that this is a fit case to explore the available avenues for revival of the Company, CD being a MSME unit.

15. Furthermore, it is the contention of the PRA that they have given a higher value compared to the Liquidation Value as per the Valuation of the CD Company. Since, the CD is a MSME Unit and the object of IBC is revival of the Corporate Debtor (Resolution is Rule and the Liquidation is an Exception), this bench feels that it is appropriate to give one more opportunity to CoC to consider the resolution plan and take decision on merits of the plan, by duly recording the reasons.

16. In view of the above inconsistencies and for the foregoing reasons, this bench hereby redirects the matter to CoC to take a consistent stand with regard to liquidation or resolution and file an appropriate application in respect of all the three Corporate Debtors at the earliest preferably within 8 weeks from the date the order is uploaded on the e-portal, keeping in mind the timelines of the Code. It is also clarified that this bench has not expressed any opinion on merits with respect to the resolution plan submitted by the Resolution Applicant.

Accordingly, all the above 5 IAs are disposed of with the above observations and directions.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

Certified Copy of this order may be issued, if applied for, upon compliance of all requisite formalities.

File be consigned to records.