Bhavi Shreyans Shah, Resolution Professional of Techno Forge Limited

JUDGMENT

'10. In the case of Essar Steel (supra), the Hon'ble Supreme Court while holding that the timeline should be maintained, being one of the prime objectives of the IB Code, 2016, also observed that in a specific case where the corporate debtor could be put into back on its feet some relaxations in the timelines can be given. In the present case, as stated earlier, the corporate debtor is a going concern and can be revived and continued as a going concern as well. Hence, though more than 330 days have passed which include exceptional circumstances due to the COVID-19 pandemic, we are of the view that an opportunity may be given for the revival of the corporate debtor through a Resolution Plan. However, considering the factor of timelines is also one of the prime considerations and key objects of IB Code, 2016, we direct the applicant to submit their final proposal within 15 days from the date of this order to the CoC who shall take a final call from the date of this order to CoC who shall take a final call on the resolution plan so submitted within 15 days thereafter. If no resolution works out, then the CoC may again recommend for liquidation of the corporate debtor and direct RP to complete the procedural formalities by filing the necessary additional affidavit in IA 346 of 2021 before this Adjudicating Authority within seven days thereafter, this Adjudicating Authority may pass an appropriate order therein.

Further, IA 346 of 2021 is kept pending ...

PART A: COST OF CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP)

Since the Resolution Professional is making payments of all Insolvency Resolution Process Costs from the running business the revenue of the Corporate Debtor is sufficient to pay the Insolvency Resolution Process Costs which has been estimated at an amount of Rs. 40.00Lakh which includes the payment to Interim Resolution Profess and/ or Resolution Professional and all amount of expenses incurred by IRP and/or RP, or any other expenses to the extent duly ratified or approved by the committee of creditors (COC). So there is no provision made. However, if the revenue of the Corporate Debtor is in a shortfall to cover the Resolution Process Cost, the Resolution Applicant shall bring the amount from their own funds to meet such shortfall amount.

Part B: SETTLEMENT OF CORPORATE FINANCIAL DEBTS AND WORKMEN OR EMPLOYEES DUES:

Secured Financial Creditor:

List of Secured Financial Creditors:

Name of the Financial Institutions	Claims received by RP (Rs)	Claims admitted by RP (Rs.)
Bank of India	35,46,06,384	35,46,06,384
Total	35,46,06,384	35,46,06,384

Terms of Settlement:

Resolution Applicants proposes to settle the dues of secured financial creditors by making the payment of Rs. 9,00,00,000/- along with interest @ 10% p.a. amounting to Rs. 87,28,125/- aggregating a total payment of Rs. 9,87,28,125/-

Resolution applicants shall make payment in the following manner:

Term of Payment	Amount of principal payment	% of payment offered
Upfront Payment within 90 days	3,00,00,000	33.33%
Payment in Year – 1 (in 3 Qtrs)	1,27,50,000	14.17%
Payment in Year – 2 (in 4 Qtrs)	2,60,00,000	28.89%
Payment in Year – 3 (in 2 Qtrs)	2,12,50,000	23.61%
Total	9,00,00,000	100.00%

Sr. No.	Particulars	Corporate Secured / unsecured Financial Creditors
1	Admitted Dues	35,46,06,384
2	Amount to be paid	Consolidated sum of Rs. 9,87,28,125/- inclusive interest for all the dues and all claims of Secured Financial Creditors, Principal Amount: 9,00,00,000/- Interest: 87,28,125/- Total: Rs.9,87,28,125/-
3	Repayment tenure	2 years and 6 months from effective date (In 10 Quarterly Instalments)
4	Interest of Payment term	Interest at 10% p.a. shall be payable on the balance amount after the moratorium period of 90 days.
5	Other terms	➤ No pre-payment penalty shall be levied/collected from the Resolution Applicants if any amount is paid by the Resolution Applicants prior to the date on which it falls due

for payment. ➤ 3 months grace period shall be given in case any instalment falls due for payment and no payment is made by the Resolution Applicants due to any unwanted situation. In such a situation, the balance of unpaid EMIs shall be shifted by one quarter. However, the Resolution Applicants shall pay interest @ 10% p.a. for any such delay and the shifting of EMI shall be allowed only once in the entire tenure of the resolution plan

Repayment Schedule of Amount Mentioned in Resolution Plan for Secured FC:

Quarter	Amount	Interest	Total	Balance	Percentage of Principal amount	% of Payment in Year
Upfront along with Plan	50,00,000	–	50,00,000	8,50,00,000	5.56%	Year – 1 47.50%
Upfront within 60 days	1,00,00,000	–	1,00,00,000	7,50,00,000	11.11%
Upfront within 90 days	1,50,00,000	–	1,50,00,000	6,00,00,000	16.67%
2	42,50,000	15,00,000	57,50,000	5,57,50,000	4.72%
3	42,50,000	13,93,750	56,43,750	5,15,00,000	4.72%
4	42,50,000	12,87,500	55,37,500	4,72,50,000	4.72%

	0	00	0	00
5	65,00,00 0	11,81,2 50	76,81,25 0	4,07,50,0 00	7.22%	Year – 2
6	65,00,00 0	10,18,7 50	75,18,75 0	3,42,50,0 00	7.22%
7	65,00,00 0	8,56,25 0	73,56,25 0	2,77,50,0 00	7.22%	28.89 %
8	65,00,00 0	6,93,75 0	71,93,75 0	2,12,50,0 00	7.22%
9	1,06,25, 000	5,31,25 0	1,11,56,2 50	1,06,25,0 00	11.81%	Year – 3
10	1,06,25, 000	2,65,62 5	1,08,90,6 25	0	100%	23.61 %
	9,00,00, 000	87,28,1 25	9,87,28,1 25

Terms and Conditions for Secured Financial Creditors

1.

Resolution Applicants proposes to settle the Corporate Financial Debts through Settlement amount as mentioned the below table "Terms of Settlement to be paid within 2 years and 6 months from the effective date.

2.

Upon making an upfront payment to secured financial creditors of Rs. 3.00 Cr., RA shall be at liberty to dispose of the obsolete stock and machinery at their own discretion. No prior permission or NOC shall be required to be taken from the secured financial creditor. If the receivable from such disposed asset exceeds beyond Rs. 3.00 Cr. then the additional amount over the Rs. 3.00 Cr. shall be deposited to the bank and adjusted towards the principal amount of the upcoming instalment.

3.

The Secured Financial Creditor will cease to have and release their all claims/lien/charges/ encumbrances/mortgage/hypothecation on the Fixed Assets, Current Assets and Non-Current Assets of the Corporate Debtor on full and final payment of the amount as envisaged under Implementation plan of this Resolution Plan.

4.

Simultaneously, upon release of all claims charges/lien/encumbrances, the secured lender shall hand over original title document/ security documents to the authorized person of Resolution Applicants and effectively intimate to concerned Sub Registrar and Revenue authorities for such release of charge.

5.

There would be no further claim of whatsoever nature or right of recompense of Secured Financial Creditors in any form or manner against C.D. and / R.A.

6.

The secured financial creditors shall release all existing personal guarantees of existing directors or promoters or guarantors of the Corporate Debtor if any executed by the Promoter/Directors/Guarantors of the Corporate Debtor on full and final payment of the amount as envisaged under this part.

7.

Any amount paid by CD or appropriated by the financial creditor after the commencement of the CIRP process shall stand adjusted in amount and such financial creditor will be entitled to balance / net amount only

8.

Upon receipt of full payment of the amount, the Financial Creditors shall issue the No Due Certificate to the Corporate Debtor and existing directors and promoters of the Corporate Debtor and also remove the name of the Corporate Debtor and its promoters and guarantors from the list of Defaulters.

WORKMEN & EMPLOYEES DUES

1.

As per the information given in the Information Memorandum, there is no claim received from workmen and employees. As per Audited Financial Statements, there are no outstanding liabilities of Corporate Debtor towards workmen & employees. Hence, no payment is proposed towards dues of Workmen & Employees by Resolution applicants. All dues and claims of the workmen and other employees against the corporate debtor if any arise in future due to past performance, shall stand waived/satisfied in terms of Regulation no 37(f) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Unsecured Financial Creditor:-

As per the Information Memorandum, under "List of Financial Creditors" total outstanding of Unsecured Financial Creditors (Non-Related) of the Company is Rs. 4,33,32,138/- who has submitted the claims and also verified and admitted by Resolution Professional are as follows:

List of Unsecured Financial Creditors:

Name of the Financial	Claims received by RP (INR)	Claims admitted by RP (INR)

Institutions
Paisalo Digital Limited (Formerly known as S.E. Investments Limited)	4,33,32,138	4,33,32,138
Total	4,33,32,138	4,33,32,138

Proposal for Payment: -

All claims of such financial creditors shall stand extinguished and no claim shall be raised by such creditor on approval of resolution plan by Adjudicating Authority.

Proposal for Statutory Dues of Corporate Debtor

As per Information Memorandum, the total amount claimed by statutory departments of the corporate debtor at Rs. 1,65,50,258/- Whereas the admitted claim by the Resolution Professional is Rs. 1,65,18,989/- The RA has proposed to pay 0.01% of the Amount claimed admitted i.e. Rs. 1700/- (rounded off to nearest Rs. 100/-) within 90 days from the effective date.

Proposal for Contingent Liabilities and Other Operational Creditor of Corporate Debtor

Resolution Applicants shall pay 0.01% of the amount so determined subject to a maximum of Rs. 11,41,500/- against all contingent liability known or unknown after the resolution plan is approved by the Adjudicating Authority.

Proposal for Shareholders of Corporate Debtor

1.

On the effective date existing issued, subscribed and paid-up share capital held by promoters and a group of promoters shall stand cancelled and considered extinguished. New Shares shall be issued in the name of Resolution applicants or any person nominated by Resolution Applicants in the ratio as proposed by Resolution Applicants upon approval of this resolution plan, against the upfront payment to be brought by Resolution Applicants.

2.

Shares held by the public (Public Shareholding) shall be reduced to 5% of their shareholding.

3.

Any other equity-linked securities/ warrants, securities/ warrants convertible into or exchangeable with equity shares of the corporate debtor and all other securities of the corporate debtor, if any, shall also stand cancelled and extinguished without any payment and for further act and deed. None of the Equity Shareholders, Preference Shareholders or holders of any security/warrants convertible rights shall stand cancelled immediately upon sanction of the Resolution Plan by NCLT.

4.

In terms of the circular (ref IBC/01/2017) dated 25 October 2017 issued by the Ministry of Corporate Affairs, approval of the shareholders of the corporate debtor to the transactions contemplated under the instant Resolution Plan including the transfer of the existing share capital shall deemed to have been given without any further act and deed on the approval of the plan by this Tribunal.

5.

Upon approval of the Resolution Plan by this Tribunal, within 7 days of the sanction of the Resolution Plan, the Resolution Professional shall:

a. file the certified copy of the approved Resolution Plan to the Registrar of Companies;

b. Reconstitution of Existing Board of Directors as may be communicated by RA by complying with the requirements of the Companies Act with ROC;

c. Handover the records of the company by proper handover document.

Treatment of Listing Status of the Corporate Debtor

Corporate Debtor was listed on the Bombay Stock Exchange. However, due to various non-compliances and non-payments, the Listing of the Corporate Debtor was suspended. Securities and Exchange Board of India and Bombay Stock Exchange, on approval of this resolution plan, shall relist the securities of the Corporate Debtor without making any payment of any additional fees or outstanding fees. RA shall complete the necessary formalities to get the securities listed as per provisions of the SEBI Act and Companies Act. Public Shareholding shall be increased to the minimum threshold requirements within 2 years from the date of relisting of security as per provisions of SEBI.

On approval of this resolution plan SEBI/BSE/DP/RTA/Banks shall defreeze the demat account of all the promoters and their relatives, which were frozen due to non-compliance on the part of the Corporate Debtor."

- a. The CD is stated to be a MSME but necessary documents in support were not provided. - b. The Resolution Plans were repeatedly submitted by the same applicants who were part of suspended management under Section 29 (A) of the IB Code, 2016 they were otherwise not found to be ineligible. The COC took an extraordinarily long time in deciding the proposal. The Ex-Management seeks to be exempt from the personal guarantee provided which has been objected by Dissenting F. In case of a Resolution Plan, if approved even with such conditions, the Personal Guarantee given continues to be liable to the extent up to which the stated guarantors have executed a commitment for any borrowing in a personal capacity. The Company seems to be a listed company and hence they need to comply with the modifications/compliance needed before altering the equity pattern as proposed in the plan. The Plan has been approved by the majority members of COC and is a commercial decision and provides for all the statutory requirements for all creditors. The Resolution Plan Applicants are individuals and their net worth is not stated. However, the resolution applicants were were same whenever EOI was made and bids received, COC has considered the same after directions of this Tribunal. There was an IA filed by the RP under Sec 43 was adjudicated and Disposed of due to full payment was made to CD’s A/c with the Bank of India. However, the clauses in the Resolution Plan on the discharge of personal guarantee stated to have been given in favour of the Dissenting FC, which stands to be against the provisions of the IBC in resolving the corporate entity as the resolution plan has not taken into consideration guarantee given by the directors or ex-management in their personal capacity while releasing them under the resolution plan. There is extinguishment of personal guarantee by the Resolution applicants who are the ex-management and no amount is reserved for such relief in the Plan. It is stated that the Resolution Applicant was offered a settlement of Rs 85 lakhs to the objector/dissenting Financial Creditor which was accepted but not acted upon. In view of the same, any concession of personal guarantee of directors is not allowed.

"Section 29A does not make per se promoters and directors ineligible to submit a plan unless they are ineligible under clauses (a) to (g)" of the IBC.

ORDER