Bank Of India vs Indu Projects Limited

PER: BENCH

The present Application bearing IA No. 861/2020 is filed by the Resolution Professional under section 31(1) of the IB Code, 2016, R/w regulation 39(4) of the IBBI (Insolvency Resolution for Corporate Persons) Regulations, 2016, seeking approval of resolution plan of Earthin Projects Limited in consortium with K. Ramachandra Rao Transmission & Projects Pvt L. as duly approved by the Committee of Creditors.

The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Bench by an order on 25.02.2019 and Mr. Gopikrishna Byadigera was appointed as Interim Resolution Professional (IRP). The Committee of Creditors (CoC) in its 1st meeting approved appointment of Mr. Anup Kumar Singh, the Applicant herein as Resolution Professional (RP). The Applicant in compliance of the provisions of the Code and Rules framed thereunder conducted the CIRP of the Corporate Debtor. Subsequently, after revalidation of claims, the reconstitution of Committee of Creditors Report was filed before this Adjudicating Authority on 15.10.2019. Further, the Resolution Professional filed report certifying second reconstitution of Committee of Creditors (CoC) as required under Regulation 17(1) of Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 vide his memo dated 27.12.2019. The second reconstituted CoC comprise of the following Financial Creditors:

During the period of CIRP 07 Expressions of Interest were received from the following prospective Resolution Applicants as under:-

In the meantime, the CIRP period of 180 days was extended by another 90 days by this Adjudicating Authority vide order dated 21.08.2019 and 270 days period came to an end on 29.11.2019. After granting several exclusions, the 330 days CIRP period ended on 05.09.2020.

Out of above 07 EOIs received, the resolution plans submitted by two Prospective Resolution Applicants i.e. Shyamraju & Company (India) private Limited and Ramky Estates & Farms Limited in consortium with Cirkil-C Contrakts were deliberated in the (11^{\text{th}}) CoC meeting held on 24.01.2020 and after evaluating in terms of both qualitative and quantitative criteria and aggregate, Shymraju & Company was declared as H1 bidder for Indu Projects Limited by CoC. However, when the said plan failed to attain the minimum threshold percentage of (66%) for approval of the Resolution Plan, the Applicant herein preferred an application for initiation of liquidation proceedings of the Corporate Debtor, which was pending adjudication before this Tribunal owing to covid induced lockdown.

As things stood thus, the Applicant received EoI from M/s Earthin Projects Limited. The Bench after taking into consideration the request of the members of the CoC, allowed further exclusion of 54 days from overall CIRP period of 330 days vide order dated 01.07.2020 for consideration of the said plan. However, pursuant to publication of revised Form-G on 25.07.2020, the Applicant received EoIs from the following prospective resolution applicants which were deliberated upon in the (13^{\text{th}}) meeting of CoC:

The CoC asked the Resolution Applicants to enhance their offer as suggested by the CoC in its 14th meeting and to submit their revised resolution plan.

The CoC after several rounds of negotiations, evaluated the Resolution Plans submitted by aforesaid three Prospective Resolution Applicants as per the Evaluation Matrix and in terms of Section 29A of the Code which were put for e-voting as per the decision taken in the 16th CoC meeting from 28.08.2020 to 04.09.2020.

In all, the Applicant has conducted 16 CoC meetings. The plan was approved by the CoC with 97.34% votes in favour of the Resolution Plan submitted by Earthin Projects Limited in consortium with K. Ramachandra Rao Transmission Projects Private Limited (herein referred to as Resolution Applicant) under Section 30(4) of IBC in the 16th CoC meeting. The Applicant further submits that all the requirements envisaged under the Code and Rules/Regulations made thereunder have been met.

The Applicant had received Performance Bank Guarantee bearing No. 20765BG000023 dated 24.07.2020 which was valid till 23.07.2021 only. On seeking clarification by the Adjudicating Authority, a new PBG bearing No. 52760IGL003421 dated 31.07.2021 issued by the Union Bank of India, Hyderabad for an amount not exceeding Rs. 5,00,00,000/- (Rupees Five Crores only) was submitted along with memo dated 02.08.2021. The same is valid till 23.01.2022.

CONTOUR OF THE RESOLUTION PLAN: (A) The Resolution Plan is submitted by Earthin Projects Limited in consortium with K. Ramachandra Rao Transmission Projects Private Limited (herein referred to as Resolution Applicant). The Company was established as Partnership firm in the name of M/s Geetika Constructions in July, 2005 and was later converted into Public Limited Company on 15.03.2018 in the name of Earthin Projects Limited and is carrying on business as Infrastructure Developer, led by Mr. Alturi Ravi Mohan. K. Ramachandra Rao Transmission and Projects Private Limited /KRRTPPL was incorporated in the year 1984 as a partnership firm led by Mr. K. Ramachandra Rao and later got converted into Private Limited company w.e.f 01.07.2005.

Compliance of mandatory contents of Resolution Plan under the Code and CIRP Regulations:-

Further the Learned Counsel for the Applicant stated that the Resolution Plan takes care of the interest of the stakeholders concerned which includes Financial Creditors, Operational Creditors and payment of CIRP costs is being taken care in priority to payment to the other creditors.

We heard the Counsel for Applicant. He submits that the Resolution Plan meets the requirement of Section 30 (2) of the Code in the following manner:

The Resolution Applicant has inter-alia, sought certain directions to the statutory and regulatory bodies to grant necessary approvals.

The Resolution Applicant proposed to appoint Directors to the Board of Directors as stated above in terms of Section 30 (2) (d). The Plan also provides for the implementation and supervision of the Resolution Plan. The Resolution Professional has given a declaration that the Resolution Plan does not contravene any provisions of the law for the time being in force. The Resolution Plan is in compliance of Regulation 38 of the Regulations in the following manner:

The Resolution Plan has been approved by the CoC through e-voting held from 28.08.2020 to 04.09.2020, with 97.34% votes in favour of the said Resolution Plan. In K. Sashidhar v. Indian Overseas Bank & Others (in Civil Appeal No. 10673/2018) 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. On receipt of such proposal, the Adjudicating Authority (NCLT) is required to satisfy itself that the resolution plan as approved by CoC meets the requirements specified in Section 30(2). No more and no less.

Further, the Hon'ble Court has further held at para 35 of the said judgement that the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 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.

As held in para 42 of the judgement by Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors "the limited judicial review available to AA has to be within the four corners of section 30(2) of the Code. Such review can in no circumstance trespass upon a business decision of the majority of the CoC. As such the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved.

In the light of above and settled position of law, the instant Resolution Plan meets the requirements of Section 30 (2) of the Code and Regulations 37, 38, 38 (1A) and 39 (4) of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law.

The Resolution Plan submitted by Earthin Projects Limited in consortium with K. Ramachandra Rao Transmission & Projects Private Limited ("Resolution Applicant") annexed to the Application is hereby approved. It 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.

It is clarified that under the Insolvency and Bankruptcy Code, 2016, all crystallized liabilities and unclaimed liabilities of the Corporate Debtor as on the date of this order shall stand extinguished on the approval of this Resolution Plan. We refer to para 67 of the Judgement of Hon'ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta & Ors (MANU/SC/1577/2019), which is as under, for better appreciation:-

In view of the above ruling of Hon'ble Apex Court, the Resolution Applicant takes over the Corporate Debtor with all its assets and liabilities as specified in the Resolution Plan subject to orders passed herein.

The Applicant/Resolution Professional has submitted that the Resolution Applicant has sought certain waivers and reliefs in the Resolution Plan. We are, however, not inclined to grant such concessions or waivers. The approval of the Resolution Plan shall not be construed as waiver of any statutory obligations/ liabilities of the Corporate Debtor and shall be dealt with by the appropriate Authorities in accordance with law. Any waiver sought in the Resolution Plan, shall be subject to approval by the Authorities concerned. As regards to the reliefs sought, the Corporate Debtor has to approach the authorities concerned for such reliefs and we trust the authorities concerned will do the needful. The same has also been held by Hon'ble Supreme Court in Ghanashyam Mishra and Sons Private Limited Versus Edelweiss Asset Reconstruction Company Limited.

The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the Registrar of Companies (RoC) Hyderabad for information and record. For effective implementation of the Plan, the Resolution Applicant shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed.

Henceforth, no creditors of the erstwhile Corporate Debtor can claim anything other than the liabilities referred to in para 10 (C) supra.

The moratorium under Section 14 of the Code shall cease to have effect from this date.

The 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.

The Applicant shall forthwith send a copy of this order to the CoC and the Resolution Applicant.

The Registry is directed to communicate this order to the Registrar of Companies, Hyderabad for updating the master data and to IBBI.

The IA No.861 of 2020 stands disposed off.

The Applications bearing Nos. 175/2021 and 177/2021 are filed by IFCI Limited under Section 60 (5) of Insolvency & Bankruptcy Code, 2016, praying not to pass orders in IA No. 861/2020 which is filed for approval of the Resolution Plan in respect of M/s Indu Projects Limited/Corporate Debtor (IPL) and to provide a copy of the Resolution Plan respectively. Further IA No. 174/2021 is filed under Rule 13 of NCLT Rules for urgent listing of IA 861/2020. Since the Applicant and Respondents arrayed in these IAs are same, a common order is passed.

The Applicant vide this Application is requesting this Authority to consider their objections before deciding IA No. 861/2020 which is filed for approval of the Resolution Plan in respect of IPL.

The averments in IA 175/2021 and IA No. 177/2021 are similar. The Applicant provided a term loan by way of a Loan Agreement dated 27.02.2009 for a sum of Rs. 60.00 crores to Indu Tech Zone Pvt Ltd (ITZPL) for partial funding of its SEZ located at Shamshabad, Hyderabad, out of which a sum of Rs. 9.90 crores was disbursed and un-availed balance of Rs. 50.10 crores was cancelled on 31.03.2011. The Respondent-1 Company executed an Irrevocable and Unconditional Deed of Guarantee dated 27.02.2009 in favour of applicant as guarantee for the said loan. In the meantime, CIRP was initiated against IPL. Upon failure to repay the loan, the Deed of Guarantee executed by R-1 was invoked and their claim of Rs. 22,10,80,018/- was admitted and the Applicant being Financial Creditor, became a member of CoC of IPL.

When matter stood thus, CIRP was initiated against Indu Techzone Private Limited (ITZPL). As such the Applicant withdrew from the CoC of IPL. Later, the CIRP against ITZPL was stayed by Hon'ble NCLAT vide order dated 22.05.2020.

The Applicant by placing reliance in the matter of "State Bank of India vs. Athena Energy Ventures Private Limited" passed by Hon'ble NCLAT vide order dated 24.11.2020 wherein it is held that simultaneous remedy is available when the Principal Borrower and Guarantor are undergoing CIRP, the Applicant requested Resolution Professional to admit their claim of Rs. 22,10,08,108.50. The same was however rejected by Resolution Professional on the ground that resolution plan is already approved by the COC and pending before this Adjudicating Authority for approval.

We heard the Applicants in the aforementioned IAs and the Resolution Professional. These IAs are filed by IFCI Limited against rejection of claim by the Resolution Professional on the ground of delay in filing the same. In the instant case, the claim was filed after the approval of the Resolution Plan by the CoC. If such claim is to be entertained at this stage, it would be detrimental to the interest of the other creditors and it would also increase the burden of the Resolution Applicant, whose plan is already approved by CoC. Further, CIRP Regulation 12(2) does not grant any discretion to the Resolution Professional for admitting belated claims as categorically held by Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 1050/2020 in the matter of Mukul Kumar, RP of KST Infrastructure Ltd Vs M/s RPS Infrastructure Limited.

Accordingly, IA Nos. 175 & 177/2021 stand disposed of and IA No. 174/2021 is disposed of as being infructuous.

PER: BENCH

The instant application is filed by the Applicant under Section 60 (5) read with Section 30 (2) and 31 of the Insolvency & Bankruptcy Code, 2016, seeking restraint orders with respect to shares and property as well as to secure claims of the Applicant in the subsidiaries of the Corporate Debtor/ Inc. Projects Limited as they foresee imminent threat of their disposal upon their inclusion in the Resolution Plan of the Corporate Debtor.

It is averred that by way of Memorandum of Agreement dated 22.12.2008 ("MOA"), the Government of Andhra Pradesh allotted and transferred certain lands to Lepakshi Knowledge Hub Private Limited (R-4) for setting up a Global Knowledge Hub. In continuance of the above, certain obligations and incentives were laid down as per the Govt of Andhra Pradesh order dated 21.02.2009. R-4 set up Lepakshi Science and Technology Parks Pvt Ltd on 02.12.2021 (R-2) and Lepakshi Heritage Wellness Village Pvt Ltd on 20.04.2010 (R-3).

The genesis of the present matter is another Memorandum of Understanding dated 07.1.2012 (MOU) entered into between the Applicant and Respondent No.1. The main covenants of the MOU are detailed at page nos. 7 & 8. As part of the Inter Corporate Deposit (ICD) agreement, an amount of Rs. 5.00 crores was advanced by the Applicant to R-2 and in accordance with the provisions of MOU, the land situated at Chilamattur and Gorantla, AP were to be transferred to R-2 & 3 vide separate sale deeds on 19.04.2012 and the Applicant was to purchase the entire shareholding of R-2 & 3. When the parties were in discussion for entering into share purchase agreements, the Applicant herein was informed by Respondent No.4 that Andhra Pradesh Government had proposed to cancel the concessions given to R-4, and as such no definitive agreements were entered into. Subsequently, the Applicant gained knowledge about initiation of CIRP against Corporate Debtor/Indu Projects Limited (IPL) and about acceptance of Resolution Plan / proposal by the CoC of Indu Projects Limited. They informed the RP that their claim to the shareholding of R2 and R3 and purchase of 2,650 acres of land owned by R-2 & 3 should not be dealt with in any manner. However, in response, the RP informed the Applicant that the MOU had lapsed and not subsisting.

The Applicant submits that they have repeatedly sought confirmation/clarification from the RP and the CoC so as to ensure their rights with respect to shareholding and/or land and/or assets of the subsidiaries of Indu Projects Limited (IPL) are not affected in any manner. The Applicant was informed by the Resolution Professional that Indu Projects Ltd is the ultimate owner of all the properties owned by Lepakshi Group of Companies including Lepakshi Science and Technology Private Limited and Lepakshi Heritage Wellness Pvt Ltd in view of its 100% ownership of the shareholdings. The Applicant further submits that RP vide his letter illegally stated that shares owned by IPL in Lepakshi Group of Companies and in turn their assets form integral part of assets of Indu Projects Ltd, thereby being part of IPL's resolution process. The Applicant thus apprehends that the shareholding and/or the land or assets of such subsidiaries of Indu Projects Ltd are being dealt with under the aforesaid resolution plan.

It is also stated that the Applicant filed a case before the Hon'ble Arbitral Tribunal against Respondents 2 & 4 and order was passed on 20.03.2021 granting limited relief to the Applicant. Aggrieved by the said order, an appeal was preferred to Hon'ble High Court of Delhi. The Hon'ble High Court, Delhi vide its order dated 24.05.2021 held that

The Applicant submits that neither the shares nor the assets of R-2 & 3 are owned by Indu Projects Limited and therefore it cannot be dealt with under the resolution plan. The Applicant reiterates that Resolution Applicant cannot deal with the assets of the subsidiaries in its resolution plan.

The Resolution Professional/R-1 filed written submissions stating that the Applicant has no locus to file the instant Application. He contends that as per the resolution plan, the money to be infused by Resolution Applicant shall be treated as equity of R-1 (IPL), which is under CIRP and the Company would be revived. The shares held by R-1 in R-2 to 4 will continue in the name of Corporate Debtor.

He further contends that the MOU entered into on 07.01.2012 was never acted upon by both the parties during the last 09 years though the obligations under the MOU were to be complied with in a time bound manner. The Resolution Professional further submits that an ICD of Rs. 5.00 crores provided to R-4 do not form part of consideration for acquisition of 100% equity and since no sale consideration was paid by Applicant, the share transfer has not taken place. The Applicant, as such has no right in the Equity of R -2 & 3 and basing on the said ICD, the Applicant cannot claim any right in respect of the lands and equity of R-2 & 3. The RP brings to the attention of the Bench that the Government had cancelled the allotment of land and challenging the same, a Writ Petition bearing No. 5028 of 2014 is filed before the Hon'ble High Court of Judicature at Hyderabad.

The Resolution Professional further refused to provide the Applicant copy of the resolution plan stating that the resolution of the Corporate Debtor is a matter between the Resolution Applicant and the CoC/RP.

Heard. Perused the record.

From perusal of record, it is seen that the main apprehension of the Applicant herein is in relation to the shareholding pattern of R2 & R3 companies and Land to the tune of 2,650 Acres.

It is not in dispute that the R4 is a wholly owned subsidiary of Corporate Debtor herein. It is pertinent to note that the certain lands were supposed to be transferred to R2 & R3 from R4 and the Applicant herein and the Corporate Debtor have entered into Memorandum of Agreement for purchase of (100%) shares of R2 & R3 by the Applicant. However, certain disputes in relation to the allotment of lands to R4 by Government of Andhra Pradesh arose and the same is pending before Hon'ble High Court.

Now issue before us is whether this Adjudicating Authority can interfere or declare that the RP has no right to proceed against the assets of the subsidiary of the holding company or not?

It is settled position of Law that all the assets held by any Corporate Debtor remains in its own name and the company remains afloat. Such being the case, the shares of subsidiaries held by the Corporate Debtor, shall remain with the Corporate Debtor and if in case, the Resolution Plan is approved, the litigation between the Applicant and the Respondents herein in relation to the shareholding and assets does not cease and the issue arising out of MoA and other pending litigations still remain open and can be agitated before appropriate forum.

This Adjudicating Authority under the IB Code, 2016 is not empowered to deal with any of the disputes in relation to the shareholding or assets of the subsidiary companies of the Corporate Debtor. As such, no interference by this Adjudicating Authority at this juncture is warranted for, with liberty to the Applicant to agitate this issue elsewhere in a manner known to Law.

With the above observations, this IA stands disposed of.