Arvind Kumar vs Maxim Infra Venue Pvt. Ltd.

Per: Ajay Kumar Vatsavayi, Member (Judicial)

The present application is filed by Resolution Professional (RP) under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the Regulations) seeking sanction of resolution plan as approved in the meeting of Committee of Creditors (CoC) held on 25.05.2019.

It has been submitted that the insolvency petition was filed by the corporate applicant i.e. Maxim Infra Venue Pvt. Ltd. under Section 10 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP) in the case of M/s Maxim Infra Venue Pvt. Ltd. (Corporate Debtor) and the same was admitted vide order dated 13.09.2018 and the CIRP of the Corporate Debtor was initiated. It is submitted that the applicant was appointed as Interim Resolution Professional (IRP) vide order dated 20.09.2018 and within two days of the appointment order, the IRP issued a public announcement as per Regulation 6 of the Regulations read with Section 15 of the Code in Form A in two newspapers i.e. The Tribune, an English newspaper dated 22.09.2018 and Divya Himachal (Hindi) thereby inviting claims from the creditors of the Corporate Debtor as envisaged in the Code.

It is submitted that in pursuance of the public announcement, claims were received from the Financial Creditors, Operational Creditors and Workmen/employees, which were verified and after collation, the IRP constituted the CoC as per the provisions of Section 21 of the Code. It is stated that initially the CoC was constituted with two Financial Creditors i.e. State Bank of India having a voting share of 50% and Mr. Mohinder Lal Sharma, Guarantor of the Corporate Debtor, having a voting share of 50%. These creditors filed their claims which were approved by the RP, in view of the unamended Regulation 12 of the Regulations and intimation in this regard was given to this Tribunal vide Diary No. 3935 dated 10.10.2018.

It is submitted that the applicant as IRP has also appointed two valuers to determine the liquidation value of the corporate debtor in accordance with Regulation 35 of the Regulations and the liquidation value as assessed on the basis of these two reports as per unamended Regulation 35 which are as follows:-

The average values are:

It is stated that in the 1^st meeting of the CoC held on 17.10.2018, the CoC resolved to continue with the IRP and appointed him as Resolution Professional (RP). It is further submitted that in the 3^rd meeting of the CoC held on 15.12.2018, the CoC suggested the eligibility criteria for the selection of the suitable resolution applicants and such applicant must be according to the norms of the business of corporate debtor in which it has been operating and as per the circular published by the Insolvency and Bankruptcy Board of India (IBBI). It is also stated that the Expression of Interest (EOI) has been called from eligible resolution applicants on 03.12.2018, 21.12.2018 and 04.01.2019 as prescribed in Regulation 36 (A) of the Regulations by publishing Form G in ‘The Tribune (English)’ and Amar Ujala (Hindi). It is also submitted that a valuation matrix was approved by the CoC in their 3^rd meeting held on 15.12.2018.

It is submitted that after publication of Form G, four prospective resolution applicants came forward and expressed their interest to submit resolution plan in respect of the corporate debtor and three resolution applicants were found to be eligible to submit the resolution plan.

It is submitted that CoC in 4^th meeting resolved and directed the applicant-RP to file an application before the Adjudicating Authority seeking an extension of the CIRP by 90 days. This Tribunal vide its order dated 26.02.2019 was pleased to extend the period of CIRP in respect of Corporate Debtor by 90 days. Copy of the order is at Annexure A-12 of the application. It is stated that out of three eligible applicants, Shri Ram Prakash Singh and Smt. Indu Walia jointly submitted a resolution plan within the stipulated time.

It is further stated in the seventh meeting of the CoC held on 08.02.2019, the CoC decided the terms and conditions of the performance security to be provided by the resolution applicants after the approval of the plan by CoC. It is also submitted that the requirement of performance security was communicated to the prospective resolution applicants.

It is stated that the resolution plan was opened in front of COC in the 8^th meeting and was further analysed in 9^th, 10^th and 11^th meeting of the CoC held on 08.04.2019, 15.04.2019 and 14.05.2019 respectively.

It is submitted in the 12^th meeting of CoC held on 25.05.2019, the resolution plan after incorporating the suggestions of the Members of CoC, was presented and got approved by 100% voting in favour of it. Copy of the complete resolution plan is at Annexure A-14 of the application.

It is also submitted that CoC while accepting the bid had taken care of all the provisions and Regulations. It is prayed that the application may be allowed and resolution as approved by the CoC in the CIRP of the Corporate Debtor be approved. Learned counsel for the RP submitted that no claim with regard to the statutory dues or labour dues have been received. The learned counsel for the RP submitted that as per Form H (Annexure A1 of Diary No. 4030 dated 13.08.2019), all the provisions of the Code and Regulations were complied with and that the approval of the resolution plan was made by 100% voting share of the financial creditors in the meeting of the CoC held on 25.05.2019 and therefore, resolution plan submitted by Mr. Ram Prakash Singh and Smt. Indu Walia may be approved.

We have carefully considered the submissions of the learned counsel for the RP and the learned Counsel for the resolution applicant and have also perused the record.

The corporate debtor was incorporated on 21.04.2015 for the purpose of purchasing land, plots of land or immovable property and to develop and construct residential or commercial complexes for sale or self-use or for earning rental income by letting out individual units comprised in such buildings and as discussed above, the CIRP proceedings were initiated by order delivered on 13.09.2018. The present application is filed for approval of the resolution plan submitted jointly by Shri Ram Prakash Singh & Smt. Indu Walia (Resolution Applicant). The approval has been sought under the provisions of Section 31 (1) of the Code.

We may first of all state that after receipt, verification and collation of claims as discussed above, the IRP constituted the CoC as per the provisions of Section 21 of the Code. The details of the financial creditor, the distribution of voting share among them and the position of voting for the resolution plan is as under (para no.5 of Form H – Annexure A1 of Diary No. 4030 dated 13.08.2019):-

The details of stakeholders under the resolution plan given in Para 7 of Form H, Annexure A1 of Diary No. 4030 dated 13.08.2019):-

Sl. Category of Stakeholder Amount Amount Admitted Amount Amount No. Claimed Provided under Provided to the the Plan# Amount Claimed (%) 1 Dissenting Secured - - - -Financial Creditors 2 Other Secured Financial 1,11,76,413 1,11,76,413 3539570 31.67% Creditors(SBI) 3 Dissenting Unsecured - - - -Financial Creditors 4 Other Unsecured - - - -Financial Creditors 5 Operational Creditors - - - -Government - - - -Workmen - - - -Employees - - - -….. 6 Other Debts and Dues - - - -Total 1,11,76,413 1,11,76,413 3539570

It is contended that the claim of Mohinder Lal Sharma was accepted as Financial Creditor being guarantor of the corporate debtor and it was also stated that this claim was against guarantee obligation. It is submitted that the resolution plan proposes extinguishment of the guarantee obligation of the guarantor and provides no separate positive payment to the creditor.

The compliance of the resolution plan has been given in Para No. 9 of Form H as follows:-

costs? The resolution plan provides for payment of full CIRP cost in priority to all other debts with in 1month of the approval of the plan Clause-6(b) to 463-468 Yes ^(b) ** ^{Provides for the payment 6(d) Page 12-}of the debts of operational 17 creditors? There are no Operational Creditors as the Corporate Debtor never commenced any business Clause-16 481 (c) Provides for the management Page-30 of the affairs of the corporate Yes debtor? As per the plan the Land of Corporate Debtor will be utilized for the benefit of m/s Shaveta Golden Foods Pvt. Ltd. As the land is un-demarcated and there are no other asset. Thus , the affairs of the CD will be managed by KMP of Shaveta Golden Foods Pvt. Ltd. . Clause-15 479 Yes (d) Provides for the Page 28 implementation and supervision of the resolution plan? The resolution plan provides for constitution of monitoring committee which shall be responsible for implementation and supervision of the resolution plan. The COC has constituted the monitoring committee and nominated the persons who shall be part of the committee. (e) Contravenes any of the Compliances 505-506 No provisions of the law for the of Code given time being in force? on Page No. 54-55 The resolution plan does not contravene any provision of the IN code. Details of the compliance of plan with Code is provided by the resolution applicant.

Section 30(4) Whether the Resolution Plan

The resolution plan was circulated to the COC and the members of COC deliberated on the plan and its feasibility and Yes with viability for over 2 months. 100% voting Yes Many discussions were held share with the resolution applicants. The COC member SBI has its own in house standard operating procedure to evaluate the resolution plan. The member of COC have specifically evaluated the economic viability and operational feasibility of the resolution plan. The members of COC have recorded their reasoning to approve the plan in the 12^th meeting of the COC, as stated herein below:

The resolution passed with 100% votes in favour

Section 31(1) Whether the Resolution Plan has Clause-15 479 Yes provisions for its effective Page-28 implementation plan, according to the CoC?

After detailed discussion and deliberation on the Constitution of Monitoring Committee as provided in the plan , the CoC , passed the following Resolution:

Regulation 35A Where the resolution profesionalmade a Application Annexure A-8 Yes determination if the corporate debtor filed with page 214-216 has been subjected to any transaction NCLT u/s 66 of the nature covered under sections 43, of IBC 2016 45, 50 or 66,before the one hundred and fifteenth day of the insolvency commencement date, under intimation to the Board?

The resolution professional based on the examination of the books of accounts has made a determination of the transactions within 115 days of the insolvency commencement date and intimated the board about these transactions. The resolution professional has filed an application under section 66 of the code before the adjudicating authority seeking appropriate direction to the respondents to make contribution to the assets of the corporate debtor.

Regulation 38 Whether the Resolution Plan identifies (1) specific sources of funds that will be Appendix-6 used to pay the - Page A8-A11 516-519 & (a) Insolvency resolution process & Clause – 6 462-466 Yes costs? Page 11-15

The Resolution Applicant will pay CIRP cost within 1 month of approval of the plan by Adjudicating Authority.

There are no operational creditors

The dissenting financial creditor HDB Bank recovered their dues from one of the guarantors of the CD and hence nothing has been proposed for their payments in this plan.

Regulation Whether the resolution plan includes a Clause-7 Page 474-475 Yes 38(1A) statement as to how it has dealt with the 23-24 interests of all stakeholders?

The resolution plan includes statement as to how it has dealt with the interest of all the stakeholders. The plan provides details of the settlement proposed with all the stake holders.

Regulation Whether the Resolution Plan provides: 38(2) (a) the term of the plan and its Clause-17 Yes implementation schedule? Page 30-31 481-482

The resolution plan provides that the terms of the plan is 9 months and provides that it will be implemented by making payments as below;

The business of the Corporate debtor will be managed and controlled by the team proposed for management of the Shaveta Golden Foods Pvt.Ltd. Monitoring agency will supervise the implementation of the plan and ensure compliance with the terms of the plan.

The plan provides for appointment of Page 28 Monitoring agency which will supervise the implementation of the plan and ensure compliance with the terms of the plan. The composition of the monitoring agency has been finalised by the COC in its 12^th meeting. The monitoring agency shall be responsible for reporting the progress and breaches if any in the implementation schedule of the resolution plan. The COC has also provided for fixed meeting schedule of the monitoring agency.

The plan identifies reasons of default as CD failed to commence business and did not create any assets . The land mortgaged as collateral security is un-demarcated with land of Shaveta Golden Foods Pvt. Ltd., this land will be used for the benefit of the same company 501 Yes

The only asset available is land Page 50 mortgaged as collateral security which is un-demarcated with land of Shaveta Golden Foods Pvt. Ltd., this land will be used for the benefit of the same company

The plan provides for 479 Yes appointment of Monitoring . agency which will supervise the implementation of the plan and ensure compliance with the terms of the plan. The composition of the monitoring agency has been finalized by the COC in its 12^th meeting. The monitoring agency shall be responsible for reporting the progress and breaches if any in the implementation schedule of the resolution plan. The COC has also provided for fixed meeting schedule of the monitoring agency.The resolution applicant has also furnished performance security in form of fixed deposit equal to 2.5% of the plan value .

The plan does not envisage any Schedule 10 special approval from any Page 51-52 agency except for the permissions already available and required in normal course of business.

39(2) Whether the RP has filed applications Application Yes in respect of transactions observed, filed with found or determined by him? NCLT u/s 66 of IBC 2016

**^{It was observed that when the matter was under consideration before this} Tribunal an amendment was introduced under Section 30(2)(b) and the following provision was inserted by Act No. 26 of 2019 w.e.f. 06.08.2019:-

It is observed that there is no amount payable to the operational creditors of the corporate debtor as provided in the resolution plan. Further, the amount to be distributed between operational creditors in the event of liquidation, if IN distributed in order of priority in Section 53(1) of the Code would also be NIL. As discussed above, there are no dissenting financial creditors, so no question of payment to dissenting financial creditors arises here, in the event of liquidation of the corporate debtor. Hence, Section 30(2)(b) (Act No. 26 of 2019) w.e.f. 06.08.2019 stands complied with.

The approval of the resolution plan has been sought under Section 31 (1) of the Code, reading as follows:-

The conditions provided for in Section 31(1) of the Code for approval of resolution plan are therefore:-

It is submitted by the RP that the resolution plan has been approved by a vote of 100% of voting share of the financial creditors and therefore, the conditions provided for by Section 30(4) of the Code are satisfied.

The provisions of Section 30(2) of the Code are as follows:-

The compliance of Section 30(2) of the Code is given in para No.9 of Form H (supra). The same is being further examined as under:-

We are now examining the compliance of the proviso to Section 31(1) of the Code that the resolution plan has provisions for its effective implementation. The resolution plan states that the resolution applicant undertakes that on approval of the resolution plan by the Adjudicating Authority, the resolution applicant also proposes to appoint a Monitoring Agency as would be decided by the Secured Financial Creditors. The term of the plan is stated to be 9 months from the approval of the plan by the Adjudicating Authority. The implementation of the plan will be made by making payments towards the CIRP cost within one month and payment to secured creditors in two quarterly instalments, after moratorium of three months. It is submitted that the corporate debtor is not in operation since inception and there are not any existing workman/employee working with the corporate debtor and the employees will be appointed by the resolution applicant as an endeavour to re-establish the operations of the corporate debtor.

We have discussed above that the requirements under Section 31(1) of the Code are satisfied in the present case. In para No. 4 of Form H (supra) the RP has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force. The RP has also certified that the joint resolution applicant Shri Ram Prakash and Smt. Indu Walia has submitted affidavit dated 02.03.2019 pursuant to Section 30(1) of the Code confirming its eligibility under Section 29A of the Code to submit the resolution plan and the contents of the said affidavit are in order. The RP has submitted that the resolution plan has been approved by the CoC with 100% voting share in accordance with the provisions of the Code and CIRP Regulations made thereunder and after considering the feasibility and viability and other requirements specified by the CIRP Regulations.

We shall now discuss the requirements of Regulation 39(4) of the Regulations. It is observed that in the 7^th meeting of CoC held on 08.02.2019, approval was given for obtaining performance security from the resolution applicant. As per the requirement of performance security, Fixed Deposit Certificate for a sum of ₹1,41,532/- in the nature of Kuber Yojna Deposit Scheme with UCO Bank in (Annexure A-16) and a copy of jamabandi in respect of the mortgaged land as performance security is found attached with the application as Annexure A-16. The RP should ensure that the performance security is received as per the decision of the CoC.

It is also stated that application dated 12.02.2019 has been filed on 26.02.2019 with this Tribunal regarding fraudulent transactions under Section 66 of the Code. The relevant CA No. 131/2019 is presently under hearing by the Tribunal.

In view of the above discussion, the resolution plan submitted by Shri Ram Prakash and Smt. Indu Walia as approved by the CoC under Section 30 (4) of the Code is hereby approved subject to comments in para No. 24 regarding performance security respectively. The resolution plan so approved shall be binding on the corporate debtor and 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 such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.

Under the provisions of Section 31 (3) of the Code, we also direct as under:-