Edelweiss Asset Reconstruction Company Limited vs ND S Art World Private Limited

Per: Justice V. G Bisht, Hon’ble Member (Judicial)

The present Application is moved by Resolution Professional Mr. Jitendra Kothari (“Applicant”) Under Section 30(6) and Section 31 (1) of the Insolvency and Bankruptcy Code, 2016 (“Code”) r/w Regulation 39(4) and Regulation 13(1C)(b)(ii) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (“CIRP Regulations”) along with Rule 11 of the National Company Law Tribunal Rules, 2016 ("NCLT Rules") for seeking approval of the Resolution Plan submitted by Maharashtra Film Stage and Cultural Development Corporation Limited, a Government of Maharashtra Undertaking, (“Successful Resolution Applicant/SRA”) and approved by Committee of Creditors of NDS Art World Private Limited (“Corporate Debtor”). This application is filed for passing order/appropriate direction that this Tribunal may deem fit in the present matter.

The Corporate Debtor is a private limited company incorporated under the erstwhile Companies Act, 1956 on 05.12.2022 and validly existing under the provisions of the Companies Act, 2013. The Corporate Debtor is engaged in the business of organizing, maintaining, operating replicas of historical monuments and providing facilities and services related to hotels, theme restaurants, shopping malls and recreation centers.

In or around 2016, the Corporate Debtor availed a loan facility from ECL Finance Limited and subsequently approached the same lender for an additional loan. The total aggregated loan amount amounted to Rupees 181 Crore. However, due to defaults in repaying the loan facilities, the Corporate Debtor was admitted into the Corporate Insolvency Resolution Process (“CIRP"). The CIRP of Corporate Debtor was initiated upon an application filed by CFM Asset Reconstruction Private Limited ("CFM"). Subsequently, Edelweiss Asset Reconstruction Company Limited ("EARC") substituted CFM before the National Company Law Tribunal, Mumbai Bench ("NCLT") under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("Code"). This Tribunal admitted the application and vide order dated 25.07.2023 commenced the CIRP for C.P (IB) 895(MB)/2022. The Applicant was appointed as Interim Resolution Professional vide the same order.

Post the Public Announcement under Form A inviting claims issued by the Applicant was published on 28.07.2023, thereafter on 02.08.2023 one of the suspended Directors Mr. Nitin Chandrakant Desai committed suicide at the Studio which was followed by an FIR being lodged on 04.08.2023 by Ms Naina alia Neha Nitin Desai (wife of the deceased) inter alia against the Applicant under Sections 306 and 34 of the Indian Penal Code, 1860. On 08.08.2023, the Applicant filed Criminal Writ Petition No. 2807 of 2023 before the Hon'ble High Court of Bombay, seeking, inter alia, the quashing and setting aside of the aforementioned F.I.R. As of the date of filing of the present Interlocutory Application, the said Criminal Writ Petition has yet to be substantially heard and remains sub judice before the Hon'ble High Court of Bombay.

During the happening of the extraordinary circumstances the Applicant filed for I A 3834 of 2023 seeking declaration allowing him to fulfill his duties as Interim Resolution Professional under the Code only after normal conditions resume, without facing repercussions for delays due to circumstances beyond his control. Additionally, he requested for a directive to all stakeholders, including creditors and the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (“IBBI”), to refrain from taking any action against him for unintentional delays or potential depreciation of the Corporate Debtor's assets in light of these extraordinary circumstances. This Tribunal vide its Order dated 28.08.2023, was pleased to allow the said Interlocutory Application.

The Applicant, in accordance with Section 13(2) and Section 15 of the Code and Regulation 6 of the CIRP Regulations, issued a public announcement on 28.07.2023 in The Free Press Journal and Navakal, setting 10.08.2023 as the final date for claim submissions. Subsequently, the Applicant formed the Committee of Creditors (CoC) with EARC as the sole member, holding 100% voting rights, and submitted an Interlocutory Application (I.A. No. 3768 of 2023) to record the CoC constitution. This application was disposed of by the Tribunal on 24.08.2023.

Following CoC formation, the Applicant convened the 1st CoC meeting on 25.08.2023, where a resolution was introduced to appoint the Applicant as the Resolution Professional (RP) from Interim Resolution Professional. E-voting on this resolution commenced on 27.08.2023 at 4 PM IST and concluded on 29.08.2023 at 5 PM IST, resulting in unanimous approval. The Applicant then filed I.A. No. 4169 of 2023 to formally record his appointment as RP, which the Tribunal disposed of on 13.09.2023.

On 23.09.2023, the Applicant published Form G – Invitation to Expression of Interest, in The Free Press Journal and Navakal, setting 08.10.2023 as the deadline for submission. Due to requests from potential applicants and confirmation from the CoC member, the Applicant extended the deadline by 15 days through a further publication on 06.10.2023.

The Applicant received Expressions of Interest (“EOIs”) from Prospective Resolution Applicants (“PRAs”) on 23.10.2023. Subsequently, on 30.10.2023, the Applicant issued the Information Memorandum (“IM”), followed by a provisional list of PRAs on 02.11.2023, allowing until 07.11.2023 for objections; however, no objections were received. On 13.11.2023, the Applicant issued the Request for Resolution Plan (“RFRP”) and released the final list of PRAs on 13.11.2024. A revised RFRP and Evaluation Matrix were issued on 21.11.2024 which is given as below:

Due to extraordinary circumstances, the Applicant faced challenges in securing control and custody of the Corporate Debtor’s assets. Following the alleged suicide of Mr. Nitin Chandrakant Desai, on 02.08.2023, the Applicant postponed necessary steps until rituals related to Mr. Desai's passing were completed. Also, since the incident occurred in the Corporate Debtor's Studio which is a key asset where all the records were stored the Applicant was unable to take control of the Studio immediately due to its sensitive nature of the death, potential for local unrest, and an ongoing police investigation on the matter which restricted his access to the premise.

Once the situation stabilized, the Applicant, on 23.11.2023, sought the CoC approval to delegate authority to his team for securing the Studio. The sole CoC member, EARC, granted this prior approval via email on the same date. Subsequently, on 28.11.2023, the Authorized Person acquired the custody, control and visiting rights of the Studio, as per the requirement of Section 28(l)(h) of the Code and CIRP regulations. The CoC ratified this delegation of authority in its 4^th meeting on 09.01.2024.

On or round 13.11.2023, the Applicant filed Interlocutory Application No. 5303 of 2023 ("Moratorium Breach Application") with this Tribunal against multiple parties for unlawful payments made during the moratorium period, including payments for pre-CIRP dues, during the moratorium period and after the CIRP Commencement date without the Resolution Professional's knowledge. This application was disposed of by the Tribunal.

Additionally, the original deadline for submission of the Resolution Plan was 22.12.2023. At the request of the Successful Resolution Applicant, the Applicant extended this deadline to 25.01.2024 after obtaining prior approval from the CoC via email which was later ratified in the 4^th CoC meeting.

On 19.01.2024, following the decision of the 4^th COC meeting, the Applicant filed Interlocutory Application No. 1306 of 2024 before this Tribunal seeking a 90-day extension of the CIRP period, which was set to expire on 21.01.2024. The requested extension would last until 20.04.2024. The Tribunal, by order dated 26.03.2023, granted the 90 days extension, citing that the resolution plan submitted by the Successful Resolution Applicant (“SRA”) was under consideration by the COC.

On 24.01.2024, the Applicant received the resolution plan from the SRA. The plan was formally opened in a physical meeting on 30.01.2024, attended by representatives of both the SRA and the sole COC member, EARC. On 06.02.2024, the Applicant convened the 5th COC meeting, during which one of the key agenda items was the deliberation on the resolution plan submitted by the Successful Resolution Applicant. The SRA's authorized representative was present at the meeting for discussions. The COC, along with the SRA, thoroughly reviewed various aspects of the resolution plan, and the SRA was requested to submit a revised plan based on the meeting’s discussions. Subsequently, on 06.03.2024, the Applicant called the 6th COC meeting to provide an update on the resolution plan. During this meeting, the Applicant informed the COC that he had not yet received the revised resolution plan from the SRA, but was actively coordinating with both the SRA and the COC to ensure its early submission.

During the 7th COC meeting i.e on 05.04.2024 the Committee unanimously approved a resolution to file an application seeking the exclusion of 116 days (from 04.08.2023 to 28.11.2023) from the calculation of the CIRP period, as the Successful Resolution Applicant was in the process of submitting a revised resolution plan. Subsequently, the Applicant filed Interlocutory Application I.A. No. 2243 of 2024, seeking the exclusion of the aforementioned 116-day period from the CIRP calculation. By order dated 08.05.2024, the Tribunal granted the requested exclusion, extending the CIRP period of the Corporate Debtor to 14.08.2024.

The COC recommended the inclusion of the belated claim from Paper Planes Pictures Private Limited during the 6th COC meeting held on 06.03.2024. Additionally, the belated claims from the Commissioner of CGST & CEX, Raigad Commissionerate, and Kheteshwar Electric & Hardware Store were recommended by the COC during the 9th COC meeting on 05.08.2024. The COC requested the Successful Resolution Applicant to address these claims in the resolution plan. On 09.07.2024, the Applicant filed the progress report for the quarter ending 30.06.2024 via Interlocutory Application No. 3910 of 2024, as directed by the Hon'ble Tribunal in its order dated 08.05.2024. When the application was listed on 12.08.2024, this Tribunal allowed and disposed of the application, taking the progress report on record.

On 02.08.2024, the Successful Resolution Applicant submitted the final resolution plan. The Applicant shared this plan with EARC on 03.08.2024. On 05.08.2024, the 9th COC meeting was convened, where representatives from the Successful Resolution Applicant and EARC were present. After the Successful Resolution Applicant left the meeting, the COC discussed the feasibility and viability of the plan. One of the agenda items was to approve the resolution plan, and voting on this began on 07.08.2024 and concluded on 12.08.2024, with EARC approving the plan with 100% voting in favor, as required under Section 30(4) of the Code. In the same 9th COC meeting, another agenda item was to approve a performance-linked payment to the Applicant under Regulation 34B(4) of the CIRP Regulations, 2016, for INR 15,00,000/- (Rupees Fifteen Lakhs Only). This item was put up for e-voting, and the COC, with EARC as the sole member, approved the agenda with 100% voting in favor. Additionally, the sale of the Corporate Debtor as a going concern or the sale of its business was discussed in the same CoC meeting pursuant to Regulation 39C of the CIRP Regulations, 2016, and relevant clauses of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. This agenda was also put up for e-voting, and it was approved with 100% voting in favor by the COC, which consists solely of EARC.

Following the approval of the Successful Resolution Plan on 12.08.2024, the Applicant issued a Letter of Intent (“LOI”) to the Successful Resolution Applicant on the same day. The LOI was counter-signed and confirmed by the Successful Resolution Applicant on 12.08.2024. In accordance with Clause 1.14.3.1 of the Request for Resolution Plan (RFRP), the Successful Resolution Applicant also issued a Demand Draft dated 12.08.2024 for INR 10,00,00,000/- (Indian Rupees Ten Crore Only) towards performance security, which was required to be submitted within five working days from the issuance of the LOI.

The key features and summary of the final Resolution Plan submitted by the Resolution Applicant and as approved by the COC are as under:

ii) Resolution Applicant proposes a total Consideration of Rs. 1,05,00,00,000 (Rupees One Hundred and Five Crores) to be paid in compliance with the Code to the stakeholders, under this Resolution Plan. The amounts are given as follows:

iii)Apart from these, upon completion of independent due diligence, the Resolution Applicant has ascertained that the secured financial creditor, the EARC, in whose favor security has been established against the land parcels, has initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”). The land parcels located at Khopoli and Hatnoli are integral to the operations of the studio managed by the Corporate Debtor. Therefore, it is crucial that these land parcels be acquired, as failure to do so may result in significant operational challenges for the studio. In light of this, the Resolution Applicant has submitted an offer of Rupees 15,00,00,000/- (Rupees Fifteen Crores) for the acquisition of the aforementioned land parcels. The details of the land parcels are given as below:

iv) It has been clarified that the promoters of the Corporate Debtor had provided personal guarantees in relation to the debts owed to the EARC. These guarantees will be released and waived by the EARC upon the sale of the assets to the Resolution Applicant, as outlined in Clause 5.5(8)(j). Once the Resolution Applicant completes the full payment, the EARC will relinquish all rights to the security created by the Corporate Debtor, including any mortgages, corporate guarantees, or personal guarantees from directors, promoters, or third parties. Hence, Total Consideration is amounting to Rs. 1,20,00,00,000/- (Rupees One Hundred Twenty Crores).

ii) In case of any the difference amount may be adjusted to the amount payables to the secured financial creditors, under the Resolution Plan

ii) The Resolution Applicant undertakes to pay Rs. 29,99,999/-(Rupees Twenty-Nine Lakh Ninety-Nine Thousand Nine Hundred and Ninety-Nine) as under;

iii)The Operational Creditors shall be paid in accordance with Section 30(2)(b), Section 53, Section 53(1) of the Code.

ii) The amount mentioned shall satisfy complete claim and the secured financial creditor shall provide a no due and security release certificate to this effect.

iii) The Resolution Applicant shall make a total payment of Re. 1/- (Rupee One) to unsecured financial creditors on approval of the Resolution Plan. Unsecured financial creditors for which the claim has been admitted by the Resolution Professional stands waived off and extinguished and no longer be payable under this Resolution Plan.

ii) On the Cut-off Date, a Monitoring Committee will be established, consisting of one representative from the Assenting Financial Creditors, one representative from the Resolution Applicant, and the Resolution Professional. Each member will have one vote, with the Resolution Professional serving as the Chairman for the meetings. During the term of the Resolution Plan, the Monitoring Committee will, among other responsibilities, supervise the implementation of the plan as follows:

iii)The following schedule is estimated by the Resolution Applicant for completion or implementation of actions as per the Resolution plan:

In para 10 of the Resolution Plan, the SRA has sought certain waivers/ reliefs/concessions, dispensations, other rights and benefits.

In para 10.2, the SRA has sought immunity from any past and existing defaults / non-compliance/ lapses/penalities (of any nature )/prosecution under any laws for any non-compliance of laws in relation to the Corporate debtor or by the Corporate debtor up to 12 (twelve) months after obtaining approval from the Adjucating Authority.

In para 10.3, the SRA has sought exemption of payments to statutory authorities, tax and stamp duty.

In para 10.3, the SRA has sought certain statutory authorities tax and stamp duty related exemptions / waivers

In para 10.3 (o) few other reliefs regarding the payments of outstanding debts, interest, penalty, cases along with settlement of claims

ii) The Directors of the Company will remain suspended and voting rights of the existing shareholders shall stand suspended and shall not be exercised.

iii)The Company shall continue to operate as a going concern and carry on its normal business activities upon the implementation of the Resolution Plan.

iv) Upon the approval of the Resolution Plan by the NCLT, the existing Directors shall be removed, and the Board of the Company will be reconstituted with the new Directors, as outlined below. However, the reconstituted Board shall act under the supervision and direction of the Monitoring Committee until its dissolution. The management of the Company shall vest in the reconstituted Board effective from the Completion Date.

In compliance of Section 30(2) of IBC, 2016, the Resolution Professional has examined the Resolution plan of the Successful Resolution Applicant and confirms that this Resolution Plan:

The Resolution Professional as per Regulation 37 of the CIRP Regulations, confirms that the Resolution Plan provides:

ca) cancellation delisting of any shares of the corporate debtor, if applicable

In compliance of Regulation 38(1) of CIRP Regulations, the Resolution Professional confirms that the Resolution plan provides that

(1A) A resolution plan includes a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors of the Corporate debtor

(1B) A resolution plan includes a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the adjudicating authority at any time in the past.

In compliance of Regulation 38(2) of CIRP Regulations, the Resolution Professional confirms that the Resolution plan provides that

The Resolution Professional has submitted Form-H under Regulation 39(4) of the CIRP Regulations to certify that the Resolution Plan as approved by the CoC meets all the requirements of the IBC and its Regulations, the relevant parts of which are reproduced below:

On perusal of the Resolution Plan, we find that the Resolution Plan provides for the following:

The RP has complied with the requirement of the Code in terms of Section 30(2)(a) to 30(2)(f) and Regulation 37(ca), 37(d), 37(e), 37(f), 37 (h), 37(i), Regulations 38(1), 38(1)(a), 38(1)(b), 38(1A), 38(1B), 38(2)(a), 38(2)(b), 38(2)(c), 38(2)(d) & 38(3) of the Regulations.

The RP has filed Compliance Certificate in Form-H along with the Plan. On perusal the same is found to be in order. The Resolution Plan has been approved by the CoC by majority of 100%.

The Resolution Applicant has sought certain reliefs and concessions, under Clause 10 of the Resolution Plan. Reliefs sought vide Clause No. 10.2, 10.3(a) & 10.3(d) to 10.3(o) are allowed. Reliefs claimed vide Clause 10.3 (b) and 10.3(c) shall be considered by respective authorities in accordance with the provisions of relevant statute and shall be subject to adherence of procedure and compliances stipulated under the respective law. It is further clarified that the waivers or reliefs shall be available subject to filing of requisite application and/or prescribed forms upon payment of applicable fees, however no late fees or penal charges shall be leviable from the Corporate Debtor in relation to such filing.

In K Sashidhar v. Indian Overseas Bank & Others (in Civil Appeal No.10673/2018 decided on 05.02.2019) 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 (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 further 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.

In view of the discussions and the law thus settled, the instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37, 38, 38 (1A), 38 (1B), 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 same needs to be approved. Hence, ordered.

The Resolution Plan along with the Addendum thereto annexed to the Application is hereby approved. It shall become effective from this date and shall form part of this order with the following directions:

The Interlocutory Application No.77/2024 in C.P.(IB)/895(MB)2022 is accordingly allowed and disposed of.