Anshul Gupta vs Tarapur Textile Park Limited

Per: Sh. Hariharan Neelakanta Iyer, Member (Technical)

The present application was filed by Mr. Anshul Gupta, Resolution Professional of Tarapur Textile Park Limited (Corporate Debtor) on 08.11.2024 under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (Code) seeking approval of the Resolution Plan for the Corporate Debtor submitted by Mr. Suraj Arukumar Muchchala (Successful Resolution Applicant/SRA) which was approved by the Committee of Creditors (CoC) by 92.72% voting at its 15^th Meeting convened on 03.10.2024. It is stated that the e-voting concluded on 11.10.2024. The prayer in the present application is extracted below:

Upon an application under section 7 of the Insolvency and Bankruptcy Code, 2016 ('the Code') filed by Awaita Properties Private Limited ('Original Petitioner'), the Corporate Insolvency Resolution Process ('CIRP') of Tarapur Textile Park Limited ('Corporate Debtor') was initiated by this Tribunal vide Order dated 06.12.2022 and Ms. Veena Sharma was appointed as the Interim Resolution Professional ('IRP').

However, since the AFA of Ms. Veena Sharma got expired, the said information was communicated to the Original Petitioner vide email dated 08.12.2022. Subsequently, this Bench vide order dated 20.12.2022 appointed Mr. Prashant Jain as the IRP of the Corporate Debtor.

The IRP made public announcement on 05.01.2023 under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP Regulations') in two newspapers, namely, Financial Express and Navakal for inviting claims from the creditors of the Corporate Debtor.

Accordingly, the Committee of Creditors (CoC) was constituted and the 1^st CoC meeting was held on 02.02.2023. The list of members of the CoC is as follows:

In the meantime, the admission order of this Tribunal dated 06.12.2022 was challenged before the Hon'ble NCLAT vide Company Appeal (AT) (Ins) No. 121/2023. Subsequently, on 15.02.2023, the Hon'ble NCLAT allowed to proceed with the CIRP process but directed the CoC not to take any decision on the Resolution Plans.

The IRP during the 1^st CoC Meeting on 02.02.2023 appointed A.B.B. Associates for conducting transactional audit to conduct transaction audit of the accounts of the Corporate Debtor to determine any avoidable transactions under sections 43, 45, 50 and 66 (PUFE Transactions) of the Code. The RP submits that no PUFE transactions has been determined by the Transaction Auditor or the RP.

Further, in the said meeting, the CoC also passed resolution for replacement of the IRP and resolved to appoint Mr. Anshul Gupta as the Resolution Professional (RP). Accordingly, IA/1698/2023 was filed seeking replacement of RP. The said IA was allowed vide order dated 30.06.2023 and Mr. Anshul Gupta (the Applicant herein) was appointed as the Resolution Professional of the Corporate Debtor.

The IRP, in accordance with Regulation 35 of the CIRP Regulations, 2016 and with the approval of the CoC in the 1^st CoC Meeting held on 02.02.2023, appointed two Registered Valuers for determining the Fair Value and Liquidation Value of the Corporate Debtor.

The Fair Value and the Liquidation Value of the Corporate Debtor is as follows:

At the 2^nd CoC Meeting held on 27.02.2023, the CoC discussed about the Expression of Interest (EoI), the Earnest Money Deposit (EMD) and the Performance Security Deposit.

Thereafter, in terms of Section 25(2)(h) of the IBC, the RP made public announcement inviting Expression of Interest (EoI) on 04.03.2023.

Upon failure of the 1^st EoI, the CoC approved fresh issuance of Form G. Accordingly, the IRP issued second Form G on 07.06.2023, pursuant to which, the IRP received Resolution Plans from 2 (two) Prospective Resolution Applicants (PRAs).

In the meantime, as already mentioned in Para 6.2, the Applicant was appointed as the Resolution Professional (RP) of the Corporate Debtor vide order dated 30.06.2023.

Thereafter, the RP/Applicant placed the Resolution Plans before the CoC during the 9th CoC Meeting held on 09.08.2023 wherein the CoC was of the view that there was limited participation from the PRAs and that the proposed values put forth by the two PRAs was not up to expectations.

The CoC decided to issue Form G once again to facilitate the involvement of genuinely interested parties. Accordingly, the RP issued Form G on 21.08.2023 and the last date for submission of EoI was fixed at 05.09.2023.

Pursuant thereto, 17 PRAs submitted their EoIs to the RP. The PRAs requested several extensions which were duly granted by the RP with the approval of the CoC from 20.10.2023 to 20.11.2023 to 05.12.2023 to 04.01.2024 to 02.02.2024 till 03.04.2024.

Despite the extensions granted by the CoC and RP, no Resolution Plans were received. Accordingly, the CoC in its 12th Meeting held on 18.04.2024, again deliberated for issuance of fresh Form G.

Thereafter, Form G was issued by the RP on 21.04.2024. In furtherance of the Form G, the RP received Resolution Plans from two PRAs, i.e. Ritika Hotels Private Limited and Mr. Suraj Arunkumar Muchchala.

In the 13^th and 14^th CoC meetings held on 22.08.2024 and 11.09.2024, the resolution plans of the PRAs were discussed and deliberated upon. Further, Mr. Suraj Muchchala who is also the suspended director of the Corporate Debtor, has submitted its revised resolution plan on 01.10.2024 which was discussed by the CoC in its 15^th meeting held on 03.10.2024.

In the 15^th CoC Meeting held on 03.10.2024, the revised resolution plan of Mr. Suraj Arunkumar Muchchala was placed before the CoC for approval. The e-voting concluded on 11.10.2024. The revised Resolution Plan submitted by Mr. Suraj Arunkumar Muchchala (Successful Resolution Applicant/SRA) was approved by the CoC by 92.72% of voting. Accordingly, the RP issued a Letter of Intent dated 25.10.2024 which has been unconditionally accepted by the SRA.

The Resolution Plan states that the Successful Resolution Applicant/SRA is one of the promoters of the Corporate Debtor and was appointed as the director of the Corporate Debtor in June 2010. The SRA is stated to have developed a niche in the line of activities concerning the Corporate Debtor’s projects and is also said to have gained a reputation in Real Estate Development. At present, SRA is a suspended director of the Corporate Debtor.

The Corporate Debtor in the present case is an MSME and therefore, in accordance with section 240A of the Code, the suspended director/promoter of a Corporate Debtor is permitted to submit a resolution plan for the revival of the Corporate Debtor.

The Resolution Plan states that the Successful Resolution Applicant is not barred by Section 29A read with section 240A of the Code and an affidavit in this regard was also submitted by the Successful Resolution Applicant along with the Resolution Plan.

The CoC at its 15^th Meeting held on 03.10.2024 resolved that the SRA shall deposit the performance security amounting to 10% of the total plan value within 30 days from the Effective Date or on 30.11.2024, whichever is earlier. The Resolution Plan value, as submitted, is Rs. 100,39,75,948/- plus CIRP Costs (at actuals).

Source of Funds as provided in the Resolution Plan:

The Effective Date is defined as “the date of approval of the Resolution Plan by the NCLT”. Completion Date is “Effective Date + 35 Months.”

Clause 18.9 of the Resolution Plan states that “All payments proposed to be made pursuant to this Resolution Plan to the secured financial creditors will be in US Dollar ($) and for operational creditors and statutory dues will be in Indian Rupees (Rs.). The conversion in this Resolution Plan is taken @83.55 based on RBI rate as on 25.09.2024. the currency fluctuation is borne by the Resolution Applicant.”

In accordance with Regulation 38(1-A) of the IBBI Rules, 2016, the statement showing the treatment given to the stakeholders as stated in Form H is given below:

CIRP Costs The Resolution Plan has provided for payment of entire CIRP Costs at actuals and the same shall be made within 15 days from the Effective Date. It is submitted that the CIRP Costs is over and above the amount contemplated under the Resolution Plan. This Tribunal vide its order dated 30.04.2025 sought clarification as there was no estimation of CIRP Cost provided in the Resolution Plan. Pursuant to the same the RP filed Additional Affidavit dated 08.05.2025 submitting that the CIRP Cost is Rs. 2,58,42,915/- (Rupees Two Crores, Fifty-Eight Lacs, Forty- Two Thousand Nine Hundred and Fifteen Only).

- Upfront payment of Rs. 10,02,60,000 payable in USD 1.2 Million within 30 days from the Effective Date or 30th November 2024, which is earlier. - Rs. 12,53,25,000 equivalent to USD 1.50 Million within 5 months from the Effective Date. - Rs. 12,53,25,000 equivalent to USD 1.50 Million within 17 months from the Effective Date. - Rs. 12,53,25,000 equivalent to USD 1.50 Million within 23 months from the Effective Date. - Rs. 16,17,00,000 equivalent to USD 2.00 Million within 29 months from the Effective Date. - Rs. 23,39,40,000 equivalent to USD 2.80 Million within 35 months from the Effective Date.

It is submitted that the RP has not received any claims from employees and/or workmen. Therefore, the amount proposed to be paid is Nil.

It is submitted that though the RP has not received any claims from any Statutory Authorities, however, an amount of Rs. 3,75,948 is outstanding towards payment of tax dues. Accordingly, the Resolution Plan provides for 100% payment of the tax dues which shall be paid within 30 days from the Effective Date.

It is submitted that the RP has not received any claim from other Operational Creditors, and therefore, the Resolution Plan envisages Nil payment towards other Operational Creditors.

It is submitted that the RP has not received any claim from EPFO regarding Provident Fund, ESI or Gratuity dues, and therefore, the Resolution Plan envisages Nil payment towards the same.

It is submitted that there are no claims received from any other creditors by the RP.

Pursuant to Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Resolution Professional has prepared a Compliance Certificate in Form H which was annexed to the Application. However, perusal of the Form H revealed that the same was undated, for which clarification was sought from the RP on 30.04.2025. The RP was further directed to file the amended Form H as per new format provided by IBBI. In compliance thereof, the RP filed additional affidavit dated 08.05.2025 placing on record the revised form H as per the IBBI Notification dated 03.04.2025 which is annexed as Annexure B to the Additional Affidavit. The same is taken on record.

Compliance of mandatory requirements under the Insolvency & Bankruptcy Code, 2016, as submitted by the RP:

Compliance under mandatory requirements under IBBI (Insolvency Resolution Process of Corporate Debtors) Regulations, 2016, as submitted by the RP:

We note that the realizable amount by creditors of the Corporate Debtor is Rs. 100,39,75,948/- and CIRP Costs would be at actuals which is estimated at Rs. 2,58,42,915. Thus, the Resolution Plan value comes to Rs. 102,98,18,863/-.

It is further noted that out of the two unsecured financial creditors, one had voted against the Resolution Plan while the other had abstained from voting on the Resolution Plan. As per Regulation 38(1)(b) of the CIRP Regulations, 2016, the dissenting financial creditors have to be paid in priority to the assenting financial creditors. In the Resolution Plan proposed by the SRA, the upfront payment of Rs. 10,02,60,000 payable in USD 1.2 Million to the Assenting Secured Financial is stated to be paid within 30 days from the Effective Date whereas the unsecured financial creditors are proposed to be paid within 90 days from the Effective Date. Upon query, Ld. Counsel for the SRA as well the RP undertook to pay to the dissenting unsecured financial creditors within 30 days from the Effective Date in priority to the Assenting Financial Creditors. The said undertaking is taken on record.

Certain other relevant clauses as provided in the Revised Form H are reproduced below:

Certificate given by the RP in Form-H is reproduced below:

- 1 (one) representation of the CoC; - 1 (one) nominee of the Resolution Applicant; and - 1 (one) representation of the Resolution Professional.

The Resolution Plan proposes that there shall be continuation of directorships of the erstwhile management of the Corporate Debtor and the suspension be revoked with immediate effect. It is stated that “Upon approval of this Resolution Plan by the NCLT, the existing directors and key managerial personnel of the Corporate Debtor as on the Completion Date shall be deemed to continue and regain powers without any additional approval from the Shareholders.”

On perusal of Form-H as reproduced in Paragraphs 15.2 to 15.8 above, it is seen that the Resolution Plan is in compliance with the mandatory compliances as stipulated under Section 30(2) of the Code. The Resolution Plan also meets the requirements of Regulations 37, 38, 38(1A) and 39 (4) of the IBBI Regulations, 2016.

We note that the Corporate Debtor in the present case is an MSME and the Udyam Registration Certificate dated 07.12.2020 is annexed to the Application. However, when the application was heard on 16.01.2025, the RP apprised this Tribunal that the MSME Certificate annexed to the Application is incorrect. Perusal of the same revealed that the MSME Certificate annexed to the Application was of a different company, namely, M/s Siddhi Vinayak Industries. Thereafter, the RP filed an affidavit dated 03.02.2025 placing on record the MSME Certificate dated 05.09.2023 of the Corporate Debtor.

As we have already noted above, the Successful Resolution Applicant in the present case is the ex-director and promoter of the Corporate Debtor. Under the Code, an ex-director or promoter of a Corporate Debtor is ineligible to submit a resolution plan. However, section 240A of the Code that carves out the applicability of certain provisions of the Code in case of an MSME, exempts the applicability of section 29A(a) and 29A(c) of the Code and permits an ex-director or promoter of a MSME Company to submit a resolution plan for the revival of the company. Thus, we are of considered view that the Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law.

It was noted that the said MSME Certificate was obtained after the commencement of the CIRP of the Corporate Debtor. We are conscious of the judgment of Hon'ble Supreme Court in the matter of Hari Babu Thota [Civil Appeal No. 4422/2023], decided on 29.11.2023 wherein it has been held that the cut-off/crucial date for determination of the MSME status of the Corporate Debtor should be the date of submission of the resolution plan. On a query raised by the Tribunal in this Regard, Ld. Counsel for RP submitted that the Resolution Plan of the suspended director was received after the obtainment of the MSME Certificate.

We note from the Resolution Plan that the SRA proposes to infuse funds from third parties/other directors of the Corporate Debtor. However, the SRA shall do the same in accordance and in compliance with the Code, particularly, section 29A of the Code.

After hearing the submissions of the Ld. Counsel for RP together with the material placed on record, we are of considered opinion that the resolution plan is in conformity of section 30(2) of the Code read with the applicable regulations of the CIRP Regulations.

We refer to the judgment of K Sashidhar v. Indian Overseas Bank & Others (2019) 12 SCC 150, wherein 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 Apex Court further observed that the role of the NCLT is 'no more and no less'. The Hon'ble Apex 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.

It can be seen from the provisions of the I&B Code as well as in a catena of judgements that the commercial wisdom of the CoC in approving a resolution plan is given paramount importance and the scope of this Tribunal is limited to the extent of provisions under section 31 of IBC.

In Committee of Creditors of Essar Steel India Limited through Authorised Signatory Vs. Satish Kumar Gupta & Ors (2020) 8 SCC 531, 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 has approved.

In view of the law laid down by Hon'ble Supreme Court, the commercial wisdom of the COC is to be given paramount importance for approval / rejection of the resolution plan. As the Resolution Plan meets the requirements of the Code and the IBBI Regulations, the same needs to be approved.

Based on the above discussions, the Resolution Plan as modified in view of the Additional Affidavit dated 08.05.2025 and the undertakings given by the SRA, is approved under Section 31(1) of the Code, with the following directions:

The Additional Affidavit dated 08.05.2025 and the clarifications and undertakings by the SRA and RP shall form part of the Resolution Plan, and together they shall form part of this order. As per section 31 of the Code, the Resolution Plan 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.

ii) Effective Date is “the date of approval of the Resolution Plan by the NCLT”, and Completion Date is “Effective Date + 35 Months.”

iii) It is clarified that the CIRP Costs shall be paid within 15 days from the Effective Date. Further, the Upfront Payment to Assenting Secured Financial Creditor shall be made within a period of 30 days from the Effective Date, and the dissenting unsecured financial creditors and operational creditors shall also be paid within a period of 30 days from the Effective Date in priority to payment to the Assenting Secured Financial Creditor.

iv) The amount proposed to be paid to the sole secured financial creditor is USD 12 Million (converted to Rupees as per RBI Rates). Any difference due to currency fluctuation shall be borne by the SRA. Further, the interest is to be charged and paid by the SRA on the amount payable to the secured financial creditor on reducing balance and the applicable rate of interest will be 1.50% Plus UK Bank Rate from time to time. The said interest amount is over and above the total amount payable to the secured financial creditor.

No person will be entitled to initiate or continue any proceedings in respect to a claim prior to CIRP which is not a part of the Resolution Plan.

vi) The Applicant/Resolution Professional shall stand discharged from his duties as the Resolution Professional of the Corporate Debtor with effect from the date of this Order, save and except those duties that are enjoined upon him for implementation of the approved Resolution Plan.

vii) The Resolution Professional is further directed to handover all records, premises / documents to Resolution Applicant to finalise further line of action required for starting of the operation as contemplated under the Resolution Plan. The Resolution Applicant shall have access to all the records premises / documents through Resolution Professional to finalise further line of action required for starting of the operations.

viii) The Monitoring Agency shall supervise the implementation of the Resolution Plan and shall review operational performance of the Corporate Debtor.

ix) It is to be noted that Regulation 31A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that a regulatory fee calculated at the rate of 0.25 percent of the realisable value to creditors under the resolution plan approved under section 31, shall be payable to the Insolvency and Bankruptcy Board of India, where such realisable value is more than the liquidation value. In the present case, the Liquidation value is Rs. 80.12 crores while the Resolution Plan value is Rs. 102.98 crores. Hence, considering the mandate of Regulation 31A, the SRA is directed to pay the applicable Regulatory Fee.

xi) The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the concerned Registrar of Companies (RoC), 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.

xii) The Moratorium imposed under section 14 of the Code shall cease to have effect from the date of this order.

xiii) The Resolution Professional/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.

xiv) Liberty is granted for moving any appropriate application, if required in connection with the implementation of this Resolution Plan.

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

Accordingly, IA/101/2024 is hereby allowed and disposed of with the above directions.