Bank Of Maharashtra vs Fabtech Projects And Engineers Ltd.

Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Bench by an order dated 24.09.2019 (Admission Order) and Mr. Vijay Pitamber Lulla, was appointed as Interim Resolution Professional. Thereafter, Interim Resolution Professional upon verification of the same, constituted the CoC. ii. The CoC in its (1^{\text{st}}) meeting held on 01.11.2019 appointed (the present Applicant) as the Resolution Professional (RP). The Resolution Professional issued public announcement in "Form A" on 03.01.2019 for inviting claims from the creditors against the Corporate Debtor. iii. Pursuant to the public announcement Resolution Professional received five (05) Expression of Interests from the Prospective Resolution Applicants (PRA's). iv. The Applicant in compliance of the provisions of the Code and Rules framed there under conducted the CIRP of the Corporate Debtor.

Manjeet Cotton Pvt. Ltd. ii. Consortium G.B. Mane Deshmukh & L B Kunjit iii. Mr. Jagdish Nade on behalf of Shri. S. M. Autade Pvt. Ltd. iv. Sanjay Tate Deshmukh

Odyssey Global Pvt. Ltd.

- Provides for payment of Insolvency Resolution Process Costs in a manner specified by the board in priority to the payment of other debts of Corporate Debtor.

- Provides for payment of the debts of the Operational Creditors in such manner as specified by Regulation 38(1) of the IBBI (Insolvency Resolution Process for Corporate Persons Regulations) 2016.

- Provides for management of the affairs of the Corporate Debtor after the approval of the Resolution plan.

A. The Resolution Applicant Manjeet Cotton Private Ltd., has steadily grown to become the largest ginners of raw cotton in India, with 1250 DBRs (Double Roller Gin machines) and their operations spread across all the 8 cotton growing states in the country. With over 3 decades of presence in Cotton Processing & Trading Business, 'Manjeet Group' is the largest operating player in private sector in the Cotton Trade holding dominant share in domestic and export business.

B. Parason Group is one of the largest manufacturer & Supplier of pulp and paper machinery. Renowned scientist & metallurgist Dr. Desarda is Founder & Chairman of the Company. Parason started its first research unit for pulp and paper machinery in the Year 1977.

C. The Corporate Debtor has 2 divisions namely, Textile Division and EPC Division. For revival of operation of the Corporate Debtor, one of the Resolution Applicants namely, Manjeet Cotton Private Ltd has vast experience of textile industry and another Resolution Applicant namely Parason Group has vast experience of EPC industry.

In accordance with Section 30(2) of the Code and the Regulations, the Resolution Applicants hereby state as follows:

a. The payment towards the Corporate Insolvency Resolution Process cost will be made in priority to any other debts of the Corporate Debtor.

b. The Resolution Applicants or any of its related parties have neither failed to implement nor contributed to the failure of implementation of any other resolution plan approved by the adjudicating authority at any time in the past.

c. The amount payable under the Resolution Plan -

to the Operational Creditors shall be paid in priority over Financial Creditors; and to the Financial Creditors, who have a right to vote under sub-section (2) of section 21 of the Code and did not vote in favour of the Resolution Plan, shall be paid in priority over Financial Creditors who voted in favour of the Resolution Plan.

d. The Resolution Plan deals with the interests of all stakeholders, including Financial Creditors and Operational Creditors of the Corporate Debtor as mentioned in the Resolution Plan;

e. The Resolution Applicants confirms that the Resolution Applicants and their connected persons are not disqualified from submitting a resolution plan under Section 29A and other provisions of the Code as well as any other Applicable Law;

f. The Resolution Plan provides for the term of the Resolution Plan and its implementation schedule, the management and control of the business of the Corporate Debtor during its term; and adequate means for supervising its implementation;

g. The Resolution Plan addresses the cause of default. It contains provision for its effective implementation and approvals required herein and the timelines for the same and the Resolution Applicants has the capability to implement the Resolution Plan.

h. The Resolution Applicants confirms that to the best of the knowledge of the Resolution Applicants, the Resolution Plan is not in contravention of the provisions of Applicable Law and is in compliance with the Code and the Regulations.

In the event the CIRP cost increases beyond Rs. 0.30 crore, the Resolution Applicants shall bring additional funds to pay the excess amount.

** In the manner as provided under this Resolution Plan

$This amount also includes the amount equivalent to 52.50% of the invoked Bank Guarantees issued by the Secured Financial Creditors pertaining to large projects, to be paid to such respective Secured Financial Creditors whose bank guarantees are invoked. Further this also includes amount equivalent to 100% of the invoked Bank Guarantees issued by the Secured Financial Creditors pertaining to the small projects, to be paid to such respective Secured Financial Creditors whose bank guarantees are invoked.

It may be clarified here that the Performance Bank Guarantee of 10% of the Resolution Plan towards the amount payable to the stakeholders shall be paid by the resolution applicant either by way of a demand draft or in the form of performance bank guarantee in favour of the Corporate Debtor with the RP/CoC having power to enforce the same in case of default by the resolution applicant.as mentioned in the RFRP the said performance bank guarantee shall be adjusted by the Committee of Creditors at the time of the payment of the last instalment by the Resolution Applicants//Corporate Debtor under this resolution plan including towards bank guarantee.

Treatment: The Insolvency Resolution Process Costs will be paid out in priority over payments to any other Creditors within 30 days from the Final Order.

Note 2: Operational Creditors :-

Against these operational debts an aggregate sum of Rs. 0.20 crore is proposed to be paid within 30 days of Final Order, from out of the funds infused by the Resolution Applicants by way of debt or equity in the Corporate Debtor. The distribution of amount, as aforesaid, amongst the above operational creditors will be based on pro rata basis. In respect of operational creditors (statutory dues/Authorities) an aggregate sum of Rs. 0.13 Crores is proposed to be paid. The distribution of amount, as aforesaid, amongst the above operational creditors will be based on pro rata basis.

Operational Creditors include the Statutory Government dues to PF and ESIC who have filed claims against the Corporate Debtor for some of their dues and raised demand notices for some of their dues as detailed in the table below. In addition, the resolution professional has also received recovery/demand notices from various statutory authorities as summarized in the table below. The treatment of these liabilities shall be as follows:

The total amount of all the above comes to Rs. 22.28 crore. It is proposed to pay the aforesaid operational creditors a sum of to Rs. 3.64 crores against full and final settlement of EPF and ESIC dues and an amount of Rs. 0.01 crores shall be paid. towards the other operational creditors on pro rata basis, thereby paying Rs. 3.65 crore in aggregate, in final settlement of their dues within 30 days of the Final Order.

Note 3: Payments to Financial Creditor :-

Secured Financial Creditor: As per the Information Memorandum dated September 22, 2020, admitted claims of SFCs amount to Rs. 843.21 crore. The details of the SFCs are provided hereunder:

The Resolution Applicants shall make a payment of Rs. 192.24 crore to the Secured Financial Creditors against full and final settlement of Claims of the Secured Financial Creditors.

The Resolution Applicants/ Corporate Debtor shall make an upfront payment as mentioned in below table within 30 days of Final Order. The source of the said upfront payment is collective network of Manjeet Cotton Private Ltd and Parason Machinery (India) Pvt Ltd. Further, letter of commitment shall be shared in due course. The distribution of Upfront Payment to the Secured Financial Creditors: (Rs. crore)

Note: It is clarified here that in addition to the above, the cash balance upto Rs. 5 crore available with the Corporate Debtor as on the NCLT approval date, shall be distributed among the lenders/ CoC.

The Corporate Debtor shall issue Zero Coupon Secured Non-Convertible Debentures to the Secured Financial Creditors of EPC Division as under: (Rs. crores)

Treatment under the Resolution Plan for Secured and Unsecured Financial Creditors of Fabtech Sugar Limited and Fabtech Education Society ("Other Secured & Unsecured Financial Creditors") (the details whereof is appearing in Annexure-F to the Information Memorandum :-

a. Claims admitted: The admitted claims of the Other Secured and Unsecured Financial Creditors are Rs. 326.50 crores as per the details provided at Annexure-F of the IM circulated on September 22, 2020 and addendum thereto.

b. Treatment for the claims received from Other Secured and Unsecured Creditors as on the Insolvency Commencement date as provided below: (Rs. crore)

c. Unsecured Financial Creditors- Related Parties:- The admitted claims of Unsecured Financial Creditors- Related Parties are Rs. 5.72 crores.

Note 4: Payments to Workmen - As per the information provided by the Resolution Professional in the IM, the claims admitted from workmen and employees are Rs. 0.31 crores.

Under this Resolution plan, a sum of Rs. 0.31 crore is proposed to be paid within 30 days of Final Order.

Payment to Equity Shareholders :- The outstanding equity share capital as on 31.03.2019 was Rs. 74.94 crore.

- The issued, subscribed and paid up share capital of the Corporate Debtor including preference shares if any, shall be cancelled and reduced in its entirety, without requiring any further act, instrument or deed, such that on effecting the said reduction, the entire share capital of the Corporate Debtor held by the shareholder of the Corporate Debtor shall deemed to have been cancelled and immediately on effectiveness of such cancellation and such reduction as above, the issued, subscribed and paid up share capital of the Corporate Debtor shall stand reduced to NIL.

The Resolution Applicant proposes to appoint suitably qualified and experienced persons, key personnel and other officer for operations of the Corporate Debtor in terms of Section 30(2)(c). The Plan also provides for implementation of provision of the Resolution Plan as stated above as per Section 30(2)(d). The Resolution Applicant 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 the Regulation 38 of the Regulations in terms of Section 30(2)(f) as under:

a. Payment to Operational Creditor will be made in priority over Financial Creditor (Regulation 38(1)(a)).

b. Since the Resolution plan has been approved by a requisite voting share of the CoC. This is in compliance of Regulation 38(1)(b) of the Regulations.

c. Declaration by the Resolution Applicant that the Resolution Plan has considered the interest of all the stakeholders of the Corporate Debtor, keeping in view the objectives of the Code (Regulation 38(1A)).

d. Declaration by the Resolution Applicant that neither the Resolution Applicant nor any of his related party has either failed or contributed to the failure of the implementation of any other approved Resolution Plan.

The Resolution Plan has been approved in the meeting of the CoC held on 30.1.2021 with e-voting results of the inter se bidding held between 02.02.2021 to 18.02.2021 with 85.18% votes in accordance with the provisions of the Code.

The Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.: (2019) SCC Online SC 1478 and in K. Sashidhar v. Indian Overseas Bank & Others: 2019 SCC Online SC 257 (2019) 12 SCC 150, 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 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.

The Resolution Plan submitted by Manjeet Cotton Pvt. Ltd. and Parason Machinery (India) Pvt. Ltd. is hereby approved. It shall become effective from this date and shall form part of this order. 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.

We shall clarify here that the Resolution Applicant shall take over the corporate debtor with all its assets and liabilities as per terms as approved in the Resolution plan. This Bench cannot allow any general power to Resolution applicant absolving him from the liability of the corporate debtor company, without knowing about the liability against which such exemption is sought. In other words, relief/ exemptions from only existing liabilities which are specifically identified are deemed to have been allowed and approved in the Resolution plan.

It is seen that the Resolution Plan seeks several dispensations, concessions and waivers. Approval of Resolution Plan does not mean automatic waivers. The Resolution Applicant on approval of the Plan may approach those competent authorities/ courts/ legal forms/ office(s) Government or Semi-Government/State or Central Government for appropriate relief(s) sought in the plan. iv. The Resolution applicant shall obtain the necessary approvals required under any law for the time being in force within one year from the date of this order or within such period as provided for in such law, whichever is later.

Given the above observations, we approve the resolution plan with modifications, as mentioned above, which shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors, Resolution Applicant and other stakeholders involved in the resolution plan. vi. The Resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the Resolution plan to the IBBI to be recorded on its database. The Resolution Professional is hereby discharged of his duties after handing over the documents to the Resolution Applicant and it taking charge. vii. 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.

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

The Applicant and the Monitoring Committee shall supervise the implementation of the Resolution Plan and the Applicant shall file status of its implementation before this Authority from time to time, preferably every quarter.

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 for necessary compliance.

The Interlocutory Application No. 607 of 2021 is accordingly allowed and disposed of.