Enn Tee International Limited vs Ritu Rastogi

Preliminary

The present interlocutory application bearing IA No.4313 (PB) 2023 was filed on 30.05.2023; however, it was lying in defect which were removed by applicant on 11.08.2023 and thereafter it was registered on 11.08.2023. There was thus a delay of 51 days in removing the defects and only thereafter it could be listed for hearing adjudication. The application was filed by Ms. Ritu Rastogi, Resolution Professional (“RP”) of ENN TEE International Limited (CIN: U18101DL1999PLC098394), under the provisions of Sections 54 K of the Insolvency & Bankruptcy Code,2016 [hereinafter referred to as “the Code” or “IBC”] read with Regulation 44 and 45 of the IBBI ( Pre Packed Insolvency Resolution Process) Regulations, 2021 (“PPIRP Regulations”) for approval of the Resolution Plan submitted by Enn Tee International Limited through its Promoter in respect of Enn Tee International Limited (“Corporate Debtor”) and for seeking the following relief:

Plan dated 07.02.2023 alongwith its Addendum;

It is stated that the corporate debtor is engaged in the business of manufacturing and supplying of Polyester and Polypropylene Dope Dyed Yarn and narrow fabric. The products of Enn Tee International Limited are sold under the brand name “Minklene” and the unit is partially operational. Enn Tee International Limited is a registered MSME.

The underlying Company Petition CP (IBPP) No.01(PB)2022 filed by Enn Tee International Limited under Section 54C of the Code for initiation of Pre Packed Insolvency Resolution Process (“PPIRP”) of the Corporate Debtor was admitted by this Adjudicating Authority vide its order dated 10.10.2022 and Ms. Ritu Rastogi (IBBI Reg No. IBBI/IP-P00204/2017-18/10393) was appointed as RP.

Collation of claims by RP

The Applicant submits that the public announcement was made on 13.10.2022 in Form P9 for inviting claims from the creditors/ stakeholders. A copy of Public Announcement made by the RP is annexed as Annexure B of the application.

The RP submits that the COC was constituted on 18.10.2022 consisting of sole Financial Creditor i.e. State Bank of India (SBI) and COC has only one voting member with 100% voting right and a total of five CoC meetings have been held during PPIRP period as follows:

Evaluation and voting

The Applicant submits that in the first COC meeting on 28.10.2022, the RP deliberated about Form-P10 containing the list of all the creditors and also placed before the COC the claims submitted by the Creditors of the Corporate Debtor, further the sole financial creditor State Bank of India filed a claim amount of Rs. 11,95,99,960/-.

It is further submitted that the 2^nd COC meeting was held on 17.12.2022 where it was discussed that the Information Memorandum had been prepared by the applicant and that the valuation report had been received from the valuers so appointed, further a transaction auditor was also appointed to check for avoidable transactions.

The applicant submits that the liquidation value of the Corporate Debtor is Rs. 10.20 Cr. and fair value of the Corporate Debtor is Rs. 14.57 Cr.

It is further submitted that the 3^rd meeting of the COC was held on 06.02.2023 in which COC members suggested some improvements in the already submitted plan, the CD after making required changes as negotiated submitted the revised plan. During the 3^rd COC meeting the revised plan was discussed in detail and the financial creditors requested further amendments to the resolution plan. The Directors of the CD agreed to further revise the plan and it was agreed that the CD would provide performance guarantee to the tune of Rs. 20 lakhs based on the commercial and other aspects.

The applicant submits that the revised plan was submitted on 07.02.2023 and the financial creditor took some time to assess the plan, further at this stage due to certain further discussions with the COC regarding the interest rate and conversion of cash credit limit, the Resolution Applicant was asked to submit an addendum to incorporate the changes.

The applicant submits that the 4^th COC meeting was held on 17.03.2023 in which the Sole Member of COC i.e. SBI approved the resolution for seeking extension of time from this Adjudicating Authority. The applicant also submits that the 5^th COC meeting was called in which the Resolution Plan dated 07.02.2023 alongwith addendum was put to vote and following Resolution was passed:

Cause of default and provision to meet the cause of default

It is stated in the resolution Plan as submitted by Mr. Harish Chander, the promoter of ETIL that in the year 2013-14 due to the dumping of yarn from China, the domestic market was disturbed and to match up the prices of China, the CD decreased the sale price of the yarn which also led to big setback to the operations of the CD. Further clause 3.1 (i) and (ii) of the Resolution Plan read as under:

It is further stated that the demand of polypropylene yarn was declining continuously as the consumers of this type of yarn started to use other cheaper yarns. The Company has decided to convert partial capacity of the plant into polyester yarn and accordingly has installed essential equipment’s with an investment of about Rs. 1.61 Crore. The Company has also upgraded its other machines, the production capacity of the machines has been increased to double and is helping to reduce the operational cost. After modification and upgradation of the plant, now the plant can manufacture various products catering to various segments of the market demand.

Details of Resolution Plan/Payment Schedule

The amount claimed and the amount proposed in the Resolution Plan are tabulated below:

differential payment from their own funds.

The Applicant has submitted the details of various compliances as envisaged by the Code and the PPIRP Regulations which a Resolution Plan is required to adhere to, as follows:

Regulation (i) Whether the In Clause 1.3 of the 45 (1) Resolution Resolution plan, the Applicant or any resolution Applicant declares of its related that neither the Resolution parties has failed Applicant nor any of its to implement or related parties have failed to contributed to implement or contributed to the failure of the failure of implementation implementation of any resolution plan of any resolution approved by the Adjudicating plan approved Authority at any time in past. under the Code.

Regulation Whether the 45(3) Resolution plan

Section/ Requirement How dealt with in the Plan Regulation demonstrates that- Clause 3.2 @ page 108 of the

At Clause 4 (viii) @ page 116 of

Resolution Plan includes implementation details for supervision, implementation of the resolution plan and regulatory approvals. It is stated that from the Effective Date and until the Closing Date, the Monitoring Committee shall be constituted which shall supervise the implementation of the Plan.

The Applicant RP submits that the successful resolution applicant has submitted an affidavit in regard to the eligibility under section 29A of the Code, as required under the Code.

The Applicant RP has filed a Compliance Certificate dated 21.02.2023 in prescribed Form, i.e Form ‘P12’ in compliance with Regulation 49(1) of the PPIRP Regulations.

The Resolution Plan envisages a total fund requirement of Rs. 10.19 crore over the period of 3 years towards payment of interest bearing loan, working capital term loan, capital expenditure, payment to the operational creditors and working capital. The resolution applicant is proposing to infuse Rs. 0.90 crore by disposing the obsolete machineries etc. The capital expenditure towards overhauling, replacement of machineries and starting up the operations of the closed machines is estimated at Rs. 1.25 Crores. Further the funds proposed in the resolution plan and its utilization is detailed below:

The total value of the Resolution plan is of Rs. 17,19,00,000/-(Rupees Seventeen Crores Nineteen Lakhs only). The Resolution Plan defines “Effective Date” as the date on which this Adjudicating Authority approves the Resolution Plan.

It is stated that the total plan value is more than total infusion since some payout is by guarantor under the ECLGS scheme (Rs. 2.50 Cr) and cash credit limit (Rs. 3.65 Cr.) will be renewed every year on existing terms and conditions, working capital term loan (Rs. 2.31 Cr) to be continued on same terms and conditions.

Post Effective Date and prior to the Closing Date: On and from the effective Date, and until the Closing Date, a monitoring committee shall be constituted for the Company. The Monitoring Committee shall consist of the Resolution Professional, one representative of the COC and one representative of the resolution applicant/ CD, further the Monitoring committee shall supervise the implementation of the plan.

It is stated in the Resolution Plan that the date on which the implementation of the resolution plan is completed shall be the “Closing Date” and the term of the Plan shall be from the Effective Date until fulfilment of the actions set out in this Plan. From the Implementation schedule at para 5 ibid, it is seen that all payments to secured financial and operational creditors will be made in 3 years, hence it is inferred that the term of the plan is 3 years.

It is stated in the affidavit dated 29.08.2023 as filed by the Resolution Professional that no transactions were found by the RP under Section 43, 45, 50 and 66 of the Code.

The SRA has prayed for the reliefs, waivers and concessions as enumerated under the Resolution Plan approved by the CoC, namely, that from the plan approval date all inquiries, investigations and proceedings, whether civil or criminal, suits, claims, disputes, interests and damages in connection with the Corporate Debtor or the affairs of the Corporate Debtor, pending or threatened, present or future in relation to any period prior to the plan approval date, or arising on account of implementation of this Resolution Plan, shall stand withdrawn, satisfied and discharged, from the date of approval of the ‘Resolution Plan’. In this regard, the SRA shall be legally authorized to seek appropriate orders from respective authorities/ courts/ tribunals for renewal of licenses/ withdrawal/ dismissal or abatement of the proceedings as the case may be, as per law.

The Pre Package Insolvency Resolution Process (PPIRP) is a time-bound procedure and all stakeholders have to stick to the timelines. This case was admitted on 10.10.2022 and the moratorium came into effect immediately. The CoC took 5 rounds from 28.10.2022 to 18.05.2023 and Section 29A affidavit was filed on 29.08.2023. This application was registered on 11.08.2023 and we are inclined to allow this application after verification of compliance as required by the code.

We have called upon the counsels representing the corporate debtor and counsel for the RP as well as the officer of the Bank as to why there is delay in this matter for which extension was sought and granted by this Tribunal.

It was pointed out that immediately on admission, the matter should have gone to the Stressed Assets Wing of the concerned Bank, whereas it went to the Branch, and it took some time before it got transferred to the Stressed Assets Wing of the Bank. The issue also consumed sometime in the negotiation process, which was held at the Stressed Assets Branch and with its superior authority which is situated in Mumbai. The inter-branch discussion on the proposal consumed a lot of time.

Keeping this in mind, we would like to suggest that the moment an application under Section 54(C) is filed, the Stressed Assets Wing of the concerned Bank should take over the case for further negotiation to avoid delay and keep up the timelines.

We also impress upon the Stressed Assets Wing of the Bank to ensure speedy negotiations of the proposal so that valuable time is not lost. We observe above, to enable the MSME, to seek early resolution of the Stressed Assets under Chapter III-A proposals.

Subject to the observations made in this Order, the Resolution Plan in question is hereby approved. 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 Resolution Professional shall submit the records collected during the proceedings to the Insolvency & Bankruptcy Board of India for their record.

IA (IB) No.4313(PB) 2023 and the main Company Petition, i.e., CP (IBPP) No.01(PB)/2022 shall stand disposed of accordingly.

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

A copy of this Order shall be filed by the Resolution Professional with the Registrar of Companies, NCT of Delhi & Haryana.

The Resolution Professional shall stand discharged from his duties with effect from the date of this Order, save and except those duties that are enjoined upon him for implementation of the approved Resolution Plan.

The Resolution Professional is further directed to hand over all records, premises/ factories/documents available with it 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 and premises through the Resolution Professional to finalise the further course of action required for starting of operations of the Corporate Debtor.

The Registry is directed to send copies of the order to the IBBI and MCA to take into consideration our observation at paras 12.1, 12.2, 12.3, 12.4,12.5 and ensure that all the Banks comply with this and may also take appropriate steps in this regard and do the needful so that the Pre-Pack becomes effective method of resolution.

The Registry is directed to send 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.