Bank Of India vs Sri Balaji Forest Products Private Limited

Per Harish Chander Suri, Member (Technical)

This Court convened through hybrid mode.

I.A. (IB) No. 319/KB/2021 is an application under Section 30 (6) and Section 31 of the Code after approval of the resolution plan by the Committee of Creditors [“CoC”].

This Application was moved by Mr. Aditya Kumar Tibrewal, Resolution Professional of Sri Balaji Forest Products Private Limited (CIN: U20101WB1997PTC085819), by invoking the provisions of Section 30(6) and Section 31 of the Insolvency and Bankruptcy Code ,2016 [ hereinafter referred to as “the Code” or “IBC”] 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 “CIRP Regulations”] for approval of a Resolution Plan in respect of Sri Balaji Forest Products Private Limited.

The underlying Company Petition in C.P. (IB) No. 518/KB/2018 was filed by Bank of India against Sri Balaji Forest Products Private Limited, the Corporate Debtor, under section 7 of the Insolvency and Bankruptcy Code, 2016 which was admitted vide order dated 18.10.2019 in C.P. (IB) No. 518/KB/2018.

Initially, the Applicant herein, Mr. Aditya Kumar Tibrewal (IBBI Reg. No. IBBI/IPA-002/IP-P00743/2017-2018/11249) was appointed as the Interim Resolution Professional. He was later confirmed as the Resolution Professional of the Corporate Debtor at the 2^ndmeeting of the Committee of Creditors on 04.12.2019.

The IRP made public announcement on 24.10.2019 in 2 newspapers namely, Financial Express (English) and Aajkal (Bengali) regarding initiation of Corporate Insolvency Resolution Process [hereinafter referred to as “CIRP”] and called proof of claims from the financial and operational creditors, workers and employees of the Company in the specified form till 02.11.2019.

The Applicant states that a total of 17 CoC meetings have been held during the CIRP period, as follows:

The Applicant submits that as per the requirements of Section 25(2)(h) of the IBC,2016 read with regulation 36A(1) of the CIRP Regulations, 2016, invitations in Form ‘G’ for Expression of Interest (EoIs) from potential resolution applicants were issued on 11.02.2020 in Financial Express (in English) and Aajkal (in Bengali) Newspapers. The publication for EoIs have been issued a number of times including extensions on various such dates such as 11.02.2020; 07.03.20202; 08.08.2020 and 01.10.2020. As per the latest Form-G, the last date for receipt of the EOI was 27.09.2020, and last date for submission of resolution plan was 08.11.2020 which was extended upto 26.11.2020.

The Applicant/RP submits that up till the last date of submission of EoIs i.e., 26.11.2020, the Resolution Professional did not receive any EoI from prospective resolution applicants.

The Applicant submits that pursuant to appointment of valuers in accordance with Regulation 27 and 35 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 the fair market value and liquidation value of the Corporate Debtor, as per the valuation reports, is as under:

It is stated that pursuant to expiry of the last date for submission of EoI by any prospective resolution applicant, one M/s. Swadeshi Marketing Private Limited filed an application being I.A. (IB) No. 1290/KB/2020 for consideration of their resolution plan by the Committee of Creditors. This Tribunal, vide its order dated 02.12.2020 directed the Resolution Professional to accept the EoI of M/s. Swadeshi Marketing Private Limited to enable them to submit their resolution plan.

Pursuant to passing of the order dated 02.12.2020, Swadeshi Marketing Private Limited duly furnished Earnest Money Deposit of Rs. 50,00,000/-(Rupees Fifty Lakh only) in the form of Demand Draft/ Pay Order along with EoI to the Resolution Professional.

Accordingly, the Applicant/ RP shared the request for resolution plan (RFRP), information memorandum and evaluation matrix with the sole prospective resolution applicant. The sole Prospective Resolution Applicant duly represented its resolution plan before the Committee of Creditors in the 12^th meeting of the CoC held on 15.12.2020 and thereafter pursuant to negotiations and deliberations between the prospective resolution applicant and the members of the CoC in the 13^th, 14^th, 15^th, 16^th and 17^th meeting of the Committee of Creditors.

It is also pertinent to mention here that one M/s. Hilarious Apartments Private Limited filed an interlocutory application being I.A. (IB) No. 64 of 2021 before this Tribunal for inter alia seeking submission of their EoI in the CIR Process of corporate debtor. However, such application was never pursued by the said applicant and consequently, the said application was dismissed by this Tribunal vide its order dated 24.08.2021.

It is also noteworthy to mention here that the Applicant/ RP has sought exclusion and extension of time on numerous occasion in the CIR Process of Sri Balaji Forest Products Private Limited as under:

The Successful Resolution Applicant presented the entire resolution plan, including the feasibility and viability and other requirements for resolution of the Corporate Debtor before the Committee of Creditors of Sri Balaji Forest Products Private Limited in the 14^th meeting of the CoC held on 30.12.2020. Pursuant to series of deliberations and negotiations amongst the members of the Committee of Creditors and the Resolution Applicant, the final resolution plan of the Resolution Applicant was duly put to voting on 14.02.2021 and the voting was kept open until 21.02.2021. However, one of the constituents of the CoC, namely, Bank of Baroda, requested the Applicant/ Resolution Professional to extend the last date for voting for a further period of 48 hours, i.e. till 23.02.2021, and the same was duly extended by the Applicant/ RP. However, on request of Bank of Baroda, holding 59.79% of voting rights in the Committee of creditors, the last date for voting was extended to 08.03.2021 till 08:00 p.m.

The Committee of Creditors duly approved the Resolution Plan of M/s. Swadeshi Marketing Private Limited by 93.46% voting on 09.03.2021. ICICI Bank Limited, being one of the members of the CoC, having voting share of 6.54% has voted against the approval of the Resolution Plan of the successful resolution applicant.

Applicant further submits that the Successful Resolution Applicant has also duly furnished Performance Bank Guarantee to the tune of Rs. 2,00,00,000/-(Rupees Two Crore only) in accordance with the terms and conditions of the IM and RFRP document.

It has been decided in the 17^th CoC meeting that all the secured financial creditors and the Chairman shall constitute the Monitoring Committee to facilitate implementation of the Resolution Plan being approved.

The Successful Resolution Applicant further increased its outlay and proposed to offer a revised sum of Rs. 26.40 Crore in the resolution plan.

The Applicant submits details of various compliances envisaged within the Code and the CIRP Regulations which requires a Resolution Plan to adhere to, which is reproduced hereunder:

Applicant submits that the Successful Resolution Applicant has submitted an affidavit of eligibility under Section 29A of the Code, which has been annexed as to the Application.

Applicant submits that the RP has submitted the certificate certifying and confirming the eligibility of the SRA under Section 29A of the Code, which has been annexed to the Application.

The Applicant has filed a compliance certificate in the prescribed form, i.e., Form ‘H’ incompliance with Regulation 39(4) of the CIRP Regulations which has been annexed as to with the Application.

The Applicant submits the relevant information with regard to the amount claimed, amount admitted and the amount proposed to be paid by the Successful Resolution Applicant i.e. Swadeshi Marketing Private Limited, under the said Resolution Plan is tabulated as under:

Details on Management/ Implementation and Reliefs as per the Resolution Plan – Salient Features The Resolution Plan also provides for –

a. Management of Company after resolution in Chapter VIII Clause C;

b. Term of the resolution plan in Chapter VIII; and

c. Implementation and Supervision of the resolution plan in Chapter VIII.

It has been faintly objected by Ld. Counsel appearing for Sri Balaji Logs Private Limited that the ingress and egress rights sought in another application being I.A. (IB) No. 1421/KB/2020 cannot be granted by the Adjudicating Authority in as much as there is no recorded agreement between the parties and further the said ingress and egress right is mere encroachment on the property of Sri Balaji Logs Private Limited.

It was stated by the Ld. Senior Counsel for the Resolution Professional that there is no approach road to the factory land of the corporate debtor situated at Mouza Chinmore, JL-92, Bagdanga, Gram Panchayat. The approach road from the highway to the land of the Corporate Debtor it in the name of one of the sister concerns of the Corporate Debtor, namely, M/s. Sri Balaji Logs Products Private Limited.

The Ld. Senior Counsel further contended that Sri Balaji Logs Products Private Limited was also being controlled and managed by the same family group of Promoters of Corporate Debtor. Mr. Om Prakash Pandey, the Promoter and Director of Corporate Debtor was also the Director of Sri Balaji Logs Private Limited.

It was apprised by the Ld. Senior Counsel for the RP that since Corporate Insolvency Resolution Process of Sri Balaji Logs Products Private Limited has also been commenced by order dated 17.07.2019 in C.P. (IB) No. 66/KB/2018, the Resolution Professional of the corporate debtor requested the Resolution Professional of Sri Balaji Logs Products Private Limited to clarify on the rights of the corporate debtor on the approach road owned by Sri Balaji Logs Products Private Limited by emails dated 22.11.2020 and 23.11.2020. The Resolution Professional of Sri Balaji Logs Products Private Limited expressed his inability to locate any agreement with respect to right of usage of the land of Sri Balaji Logs Products Private Limited by the corporate debtor.

It was further apprised that the plant and factory premises of the corporate debtor shall be disconnected from the main highway in the absence of the right to usage granted to the corporate debtor from the approach road on the land of Sri Balaji Logs Products Private Limited. The only way through which the premises of the corporate debtor can be accessed from the highway is through the approach road, which is owned by Sri Balaji Logs Products Private Limited.

It was thereafter contended that in accordance with Section 4 of the Easements Act, 1882, an easement is a right which the owner or occupier of certain land possesses, as such, for the beneficial enjoyment of that land, to do and continue to do something, or to prevent and continue to prevent something being done, in or upon, or in respect of, certain other land not his own. Dominant and servient heritages and owners.

Reliance was placed on Amar Singh v. Kehar Singh AIR 1995 HP 82 and it was contended that an easement is always appurtenant to the dominant tenement and inseparably attached to it. Furthermore, relying upon C. Mohammedd v. Ananthachari AIR 1988 Ker 298, it was contended that an easement is a privilege without profit, which the owner of one tenement has a right to enjoy in respect of that tenement in or over the tenement of another person, by reason where of the latter is obliged to suffer or refrain from doing something on his own tenement for the advantage of the former.

In light of the aforesaid, ingress and egress right of the Successful Resolution Applicant at the plant of Sri Balaji Forest Products Private Limited is a privilege without profit and consequently, any obstruction to such right of easement cannot survive. Accordingly, the Successful Resolution Applicant shall be granted unfettered and unhindered right of way to the plant of the Corporate Debtor.

It has further been apprised by the Ld. Senior Counsel appearing for the Resolution Professional that a specific relief and/ or concession, at Sr. No. 40 of Annexure 3 of the Resolution Plan has been sought by the Successful Resolution Applicant wherein the Successful Resolution Applicant seeks inclusion of the property of the suspended board of directors and guarantors of the Corporate Debtor in the Resolution Plan. The Resolution Plan submitted before us contains the relief and/ or concession to the following effect:

In order to contend that such inclusion of the property of the suspended board of directors and guarantors which have been mortgaged to the financial creditors of corporate debtor and have been invoked under the SARFAESI is permissible under law, Ld. Senior Counsel relied upon the judgment passed by the Hon’ble National Company Law Appellate Tribunal in the case of Vanguard Credit & Holdings Pvt. Ltd. Vs. Kshitiz Chhawchharia (RP) of Ramsarup Industries Ltd. & Anr. (Company Appeal (AT) (Ins.) No. 1125 of 2019).

It was contended that in the present case as well, the properties of the suspended board of directors and guarantors of the corporate debtor have been mortgaged with the Financial Creditors of the Corporate Debtor. It was further contended that notice under Section 13 (2) of the SARFAESI Act, 2002 was issued to not only the corporate debtor but the suspended board of directors and guarantors as well.

It is an undisputed fact that the suspended board of directors and guarantors of the corporate debtor have mortgaged the entire land to the financial creditors. It is further an undisputed fact that the entire plant, and factory of the corporate debtor is established on the same land which has been mortgaged to the financial creditors and owned by the suspended board of directors and guarantors to the corporate debtor. It is also an admitted fact that the corporate debtor had an unfettered right to use the plant and factory established at the land of the suspended board of directors and guarantors of the corporate debtor.

It is pertinent to mention that Regulation 37 (B) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 provides that "a Resolution Plan shall provide for the measures, as may be necessary for Insolvency Resolution of the Corporate Debtor for maximisation of value of its assets, including but not limited to the sale of all or part of the assets whether subject to any security interest or not."

As per Section 31 of the Insolvency and Bankruptcy Code, 2016, the approved Resolution Plan binds all the stakeholders, including the Corporate Debtor's Guarantors. Thus, the suspended board of directors and guarantors to the corporate debtor are bound by the approved resolution plan. In light of the above discussion, we believe that the objections raised by the suspended board of directors and guarantors to the corporate debtor are not sustainable. It is also pertinent to mention here that the suspended board of directors and guarantors are the persons who have been in complete controlled the corporate debtor till initiation of Corporate Insolvency Resolution Process.

It is also important to point out that land is an essential part of the corporate debtor's business. The entire plant and factory of the corporate debtor is being established on the said land sought to be transferred to the successful resolution applicant by virtue of the approval of the resolution plan. Therefore, it is an essential part of the Resolution Process. The value arrived in the ‘CIRP’, the purported liquidation value, all includes the value of the land and the same has always been the essence of the business of the Corporate Debtor.

It has also been contended by the Ld. Senior Counsel appearing for the Resolution Professional that the aforesaid decision of the Hon’ble Appellate Tribunal in Vanguard Credit & Holdings Pvt. Ltd. (supra) has not been interfered with by the Hon’ble Supreme Court in as much as the Civil Appeal being 1688 of 2021 was dismissed by order dated 02.07.2021.

In light of the aforesaid, relief and concession sought by the successful resolution applicant at Sr. No. 40 of Annexure 3 of the Resolution Plan is hereby granted in light of the judgment rendered by the Hon’ble National Company Law Appellate Tribunal in Vanguard Credit & Holdings Pvt. Ltd. (supra).

C. The resolution applicant undertakes to pay the stamp duty and relevant registrar of Assurance fees, if not waived by the concerned authorities, to effect all registration requirements in relation to the transfer of the said land under applicable laws.

Findings:

On hearing the submissions made by the Ld. Senior Counsel for the Resolution Professional, and perusing the record, we find that the Resolution Plan has been approved with 93.46% voting share. As per the CoC, the plan meets the requirement of being viable and feasible for revival of the Corporate Debtor. By and large, all the compliances have been done by the RP and the Resolution Applicant for making the plan effective after approval by this Bench.

On perusal of the documents on record, we are also satisfied that the Resolution Plan is in accordance with sections 30 and 31 of the IBC and also complies with regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

As far as the question of granting time to comply with the statutory obligations/seeking sanctions from governmental authorities is concerned, the Resolution Applicant is directed to do the same within one year as prescribed under section 31(4) of the Code.

In case of non-compliance of this order or withdrawal of Resolution Plan, the CoC shall invoke the Performance Bank Guarantee furnished by the Resolution Applicant.

Subject to the observations made in this Order, the Resolution Plan in question is hereby approved by this Bench. The Resolution Plan shall form part of this Order.

The Resolution Plan is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect.

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

The Resolution Professional shall submit the records collected during the commencement of the proceedings to the Insolvency & Bankruptcy Board of India for the record and also unto the Resolution Applicant or New Promoters.

Certified copy of this Order be issued on demand to the concerned parties, upon due compliance.

Liberty is hereby granted for moving any Application if required in connection with implementation of this Resolution Plan.

A copy of this Order is to be submitted in the Office of the Registrar of Companies, West Bengal.

The Resolution Professional shall stand discharged from his duties with effect from the date of this Order.

The Resolution Professional is further directed to handover all records, premises/factories/documents to the Resolution Applicant to finalise the further line of action required for starting of the operation. The Resolution Applicant shall have access to all the records/premises/factories/documents through the Resolution Professional to finalise the further line of action required for starting of the operation.

IA (IB) 319/KB/2021 in C.P. (IB) No. 518/KB/2018 shall stand disposed of accordingly.

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 the record.