Ericsson India Private Limited vs Reliance Infratel Limited

Per: Janab Mohammed Ajmal, Member (Judicial)

This is an Application under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (the Code) by the Resolution Professional seeking approval of the Resolution Plan submitted by the Resolution Applicant, Reliance Projects & Property Management Services Limited (formerly known as Reliance Digital Platform & Project Services Limited).

The facts leading to the Application are as under.

i. Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Bench by an order dated 15.05.2018 (Admission Order) and Manish Dhirajlal Kaneria was appointed as Interim Resolution Professional (IRP) on 18.05.2018. The IRP published a public announcement on 21.05.2018 inviting claims from the creditors of the Corporate Debtor.

Certain shareholders of the Corporate Debtor challenged the Admission Order before the Hon’ble National Company Law Appellate Tribunal (NCLAT) in CA (AT) (Insolvency) Nos. 255-256 & 257-258 & 259-260 of 2018, inter alia, Hon’ble NCLAT by an order dated 30.05.2018 inter alia stayed the Admission Order. However, in view of the subsequent developments, the Appellants withdrew the Appeal. The Hon’ble NCLAT by Order dated 30.04.2019, permitted the withdrawal of the Appeal and directed this Tribunal to proceed with the matter in accordance with law. iii. Accordingly, the CIRP of the Corporate Debtor was resumed and by order dated 07.05.2019 this Tribunal directed the IRP to proceed in the matter. The IRP issued a fresh public announcement on 07.05.2019 inviting claims from creditors. After receipt of claims the IRP constituted the Committee of Creditors (CoC) of the Corporate Debtor on 24.05.2019. iv. The CoC in its first meeting held on 30.05.2019 decided to replace the IRP with Anish Niranjan Nanavaty (the present Applicant) as the Resolution Professional (RP). This Tribunal by order dated 21.06.2019 confirmed the appointment of the Applicant as the RP.

Thereafter, new claims/revision of claims were made by certain creditors. The RP upon verification of the same, reconstituted the CoC. The claims have been dealt with in accordance with the provisions of the Public Announcement and 7th May, 2019 has been considered as the cut-off date for claim verification. vi. The Applicant in compliance of the provisions of the Code and Rules framed there under conducted the CIRP of the Corporate Debtor.

During the period of CIRP the RP issued Form-G on 15.07.2019 inviting expressions of interest (EOI) from prospective resolution applicants (PRAs). The Applicant received EOIs from 15 PRAs. Provisional list of eligible PRAs was issued to the CoC on 16.08.2019. Request for the resolution plan (RFRP) along with information memorandum, evaluation matrix was issued to the PRAs on 21.08.2019. The Applicant issued the final list of PRAs to the CoC on 31.08.2019. Further, with the consent of the CoC the last date for submission of resolution plan was extended till 25.11.2019. The Applicant received resolution plans from the following prospective resolution applicants:

Bharti Airtel Ltd.;

Reliance Digital Platform & Project Services Limited, through its division Infrastructure Projects;

VFSI Holdings Pte. Ltd.; and

UV Asset Construction Company Ltd.

The CoC (including advisors to the CoC and RP) in the meetings held between 02.01.2020 to 02.03.2020, discussed and actively engaged with the resolution applicants to make the resolution plans more robust and to improve the same from a legal and commercial perspective. Accordingly, the resolution applicants revised their resolution plans. At the 16th meeting of the CoC held on 09.01.2020 and reconvened on 13.01.2020, detailed deliberations and discussions were carried out on the resolution plans. The resolution plan submitted by Reliance Digital Platform & Project Services Limited (Resolution Applicant) was taken forward as the preferred resolution plan having regard to the feasibility and viability of the plan and its implementability. Pursuant thereto, the Resolution Applicant submitted the revised resolution plan on 13.01.2020. After due verification of the eligibility of the successful Resolution Applicant in terms of Section 29(A) of the Code, the CoC in its 19th meeting held on 02.03.2020 considered the revised and final Resolution Plan of Reliance Digital Platform & Project Services Limited and approved the Plan with the voting share of 100%. Accordingly, a Letter of Intent (LOI) dated 04.03.2020 was issued by the Applicant on behalf of the CoC to the Successful Resolution Applicant (RA) which was unconditionally accepted by the RA on 06.03.2020.

It is worthwhile to mention that this Tribunal, in respect of the timelines of the CIRP of the Corporate Debtor, has passed following orders:

i. The period of stay between 30.05.2018 and 30.04.2019 was excluded from the calculation of the CIRP vide order dated 09.05.2019. ii. Extension of 90 days was granted vide order dated 29.09.2019. The CIRP thus stood extended from 12.10.2019 to 10.01.2020. iii. Further exclusion of 24 days was granted from the CIRP period vide order dated 07.01.2020, owing to time spent in litigation from the date of approval of the Applicant as RP till the date of publication of order confirming the said appointment. iv. It was clarified by order dated 24.01.2020 that the RP and the CoC were at liberty to complete CIRP within 330 days, which was expiring on 10.03.2020.

The salient features of the Resolution Plan are as under: A. The Resolution Applicant is a part of the Reliance Industries Group. Reliance Industries Group has a robust and stable business portfolio ranging from energy to materials, retail to digital services and entertainment. Reliance Industries Limited (RIL) is the flagship company of the Reliance Industries Group and is India’s largest and most profitable private sector company. It has demonstrated exceptional performance in FY 2018-19 including consolidated turnover of INR 6,22,809 crore, consolidated PAT of INR 39,588 crore and market capitalisation of INR 8,63,996 crore.

The Resolution Plan envisages that upon the fulfilment of the conditions precedent, set out therein, to the satisfaction of the monitoring committee and the communication of the fulfilment of the conditions precedent to the Resolution Applicant by the monitoring committee, the Resolution Applicant shall issue a notice within 5 (five) Business Days (“Closing Action Notice”) to the erstwhile CoC in writing confirming the date on which it proposes to implement the Resolution Plan. In the event the Closing Action Notice is not issued within 5 (five) Business Days as aforesaid, it shall be deemed to be issued provided each of the conditions precedent have been satisfied. The Closing Action Notice shall identify the “Effective Date” when the action pertaining to the implementation of the Resolution Plan shall take place.

The Resolution Plan envisages the business plan for maintaining the Corporate Debtor as a going concern. The RA will leverage the proven track record of the Reliance Industries Group of “best in class project execution” to ensure upgradation of the infrastructure. The Corporate Debtor will also benefit from, the scale and the efficiency that the RA already enjoys, as one of the leading companies in India. The RA proposes that the existing employees and workmen of the Corporate Debtor would continue to be employed by the Corporate Debtor. Suitable augmentation of human resources will be undertaken by the RA post the Effective Date. The RA also reserves the right to assess the competence and alignment of the employees and accordingly embark upon a manpower restructuring plan. The RA proposes to undertake fund infusion for an amount up to INR 450 Crore in one or more tranches from the Effective Date which shall be utilized for (i) meeting the working capital and/or capital expenditure requirements and/or (ii) funding other operational improvements to enable the Corporate Debtor to make such payments towards certain urgent expenses for repair and upkeep of its tower and fibre assets and to avoid deterioration in the value of the assets.

The existing pre-CIRP shareholding of the promoters / promoter group and all other existing shareholders in the Corporate Debtor shall stand cancelled without any further act or deed pursuant to the Resolution Plan. The Resolution Applicant and/or its affiliate or nominee would subscribe to the equity shares of the Corporate Debtor by way of upfront equity infusion of INR 5 crores. Pursuant to the same, the Resolution Applicant (along with its affiliates/nominees) shall hold 100% of the share capital of the Corporate Debtor and acquire control of the Corporate Debtor.

The Resolution Applicant proposes to make a total payment of an amount not exceeding INR 3,720 crores (Total Resolution Amount) for resolution of the Corporate Debtor. The RA proposes that the Total Resolution Amount shall be utilised for the full and final satisfaction and discharge of all claims and debt against the Corporate Debtor of all the stakeholders (including the unpaid CIRP cost, Financial Creditors, Operational Creditors, Other creditors or any other person to whom any amount is due to be paid pursuant to this Resolution Plan, if any), whether asserted or unasserted, whether claimed or not, whether admitted or not, or contingent or otherwise, crystallized or un-crystallised, known or unknown, secured or unsecured, disputed or undisputed, whether or not set out in the information memorandum, the virtual data room, the balance sheet or the profit and loss account statements of the Corporate Debtor. RA proposes that upon payment of the Total Resolution Amount on the effective date, the Corporate Debtor or the Resolution Applicant shall have no liability to make any payment to any stakeholder of the Corporate Debtor or the group stakeholders and all liabilities of the Corporate Debtor towards all the stakeholders of the Corporate Debtor and the group stakeholder shall be extinguished and settled, on and w.e.f. the NCLT approval date. The Resolution Applicant submits that this Resolution Plan is its best proposal, and is fair and equitable to all stakeholders of the Corporate Debtor and is fully compliant with applicable laws including and without limitation to the Code and the IIBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The maximum amount payable to the stakeholders under this Resolution Plan (including pursuant to any re-allocation or re-distribution), shall not exceed the Total Resolution Amount.

The Resolution Plan proposes an upfront payment of INR 3,720 crores to creditors (including CIRP costs), in the following manner:

The Applicant submits that the Resolution Plan meets the requirement of Section 30 (2) of the Code in the following manner:

A. Plan provides for the priority payment of CIRP costs in full from the fund to be infused by the Resolution Applicant. B. To pay the Operational Creditors of the Corporate Debtor in the manner indicated supra. It is submitted that the Liquidation Value of the Corporate Debtor is INR 4,339.58 Crores and Fair Market Value is INR 11,149.11 Crores. In view of the fact that the claim of Secured Financial Creditor is INR 48,091.85 Crores, the minimum Liquidation Value to the Operational Creditors would be NIL. However, a sum of INR 25.36 Crores is provided to all the Operational Creditors.

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:

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

Since the plan has been approved by 100% voting share of the CoC, provision of dissenting financial creditor does not arise. This is in compliance of Regulation 38(1)(b) of the Regulations.

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)).

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 Applicant has sought certain reliefs, concessions, waivers. We however are not inclined to grant such concessions or waivers. The Resolution Applicant needs to approach the authorities concerned for permits, if required, and same would be considered on merits by the concerned authorities in accordance with law. During the hearing the Ld. Counsel for RP and RA submitted that the Resolution Applicant has received approval from Competition Commission of India (CCI Approval) vide its Order and letter dated 18.09.2020, to the effect that the proposed combination under the Resolution Plan is not likely to have an appreciable adverse effect on competition in India.

It is beneficial to refer to the observation of the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.: (2019) SCC OnLine SC 1478 as under:

In view of the above ruling of the Apex Court, the Resolution Applicant takes over the Corporate Debtor with all its assets and liabilities as specified in the Resolution Plan subject to orders passed herein. As already indicated the Resolution Plan has been approved by the CoC in its meeting held on 02.03.2020 with 100% votes.

In K. Sashidhar v. Indian Overseas Bank & Others: 2019 SCC Online SC 257 (= (2019) 12 SCC 150) 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 Court observed that the role of the NCLT is ‘no more and no less’. The Hon’ble 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 CoC of Essar Steel (supra) the Hon’ble Apex Court clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved. In para 42 Hon’ble Court observed as under:

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) 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.

Doha Bank one of the Financial Creditors has filed IA No. 1960 of 2019 inter alia, challenging the admission of claims of few other Creditors and IA No. 3055 of 2019 impugning the decision of the Resolution Professional recognising the Indirect Lenders of the Corporate Debtor as Financial Creditors. The Applications are pending consideration. We are of the considered opinion that pendency of these and other Applications would not come in the way of approval or otherwise of the Resolution Plan. More so, when the Resolution Plan has been unanimously approved by the CoC. The distribution of the payments to the Creditors, Financial or Operational, as the case may be, shall be subject to orders to be passed in the respective Interim Applications within the ambit of the Code. We are thus inclined to dispose of this Application in the following terms. Hence ordered.

Sd/- Janab Mohammed Ajmal MEMBER (JUDICIAL)