ICICI Bank vs K V Aromatics Private Limited

“1)

Declare the process of approval of Resolution Plan by the COC wholly capricious, arbitrary, irrational and de hors the provisions of the statutes.

2)

Direct the COC and the RP to invite fresh financial proposals and consider them in a fair and transparent manner keeping in mind the basic purpose of IBC for Maximization of the Value of Corporate Debtor.

3)

Pass such other directions as this honourable Tribunal may deem necessary to meet ends of justice.”

“3.

To consider, discuss and negotiate on Resolution plan(s) received from Resolution Applicants.

The RP re-encapsulated that as discussed and decided in the previous COC meeting held on 28.10.2022, the vetting of compliance was to be conducted for all the revised documents received, following which the RP appointed M/s Chiramrit Legal LLP at the professional fee of Rs. 25,000 per resolution plan/revised document. Pursuant to which, all the due- diligence reports pertaining to the revised documents of RAs, have been duly received and have been circulated with respective RA and the members of CoC. The appointment and fee payable to M/s Chiramrit Legal LLP is to be ratified by the CoC for its inclusion in CIRP cost thereof. However the CoC requested to defer the voting on the agenda for the next meeting post their consideration of the reports.

The RP further apprised that the resolution applicants will be called in the meeting individually for CoC to discuss and negotiate on the plans. It was deliberated that the highest offer among all received will be disclosed to all RAs and RA would be asked to improve their offers in plan as a challenge mechanism since the CoC is guided by the objective of O Maximization of value for all stakeholders within four corners of the Code and has to exercise its commercial wisdom. Further the law has also recognized this fact and has incorporated a provision in the regulation 39 of CIRP regulation providing for a challenge mechanism to improve the plans. Under the challenge mechanism, the highest offer is disclosed to the RAs and they are asked to improve their offers. A provision to this effect i.e. challenge has also been specified in the Request for resolution plan (RFRP). They would be requested to submit their final offers in a password protected document which would then be opened in the CoC. The final documents will be vetted for compliance if any pending and post that final signed plans will be obtained. All compliant plans will then be submitted before CoC for approval in terms of provisions of Sec 30(3). It was further decided strictly by CoC that this would be the last round of negotiation. The resolution applicants were then invited to the meeting in seriatim and informed all the above process descriptively in detail.

The discussion/negotiation with Resolution Applicants held in the meeting are annexed with the minutes and are marked as Annexure-A.”

Source of funds

The RA has a Net Worth of Rs.20.20 crores as on 31.03.2022. In addition to the above Glentech Ventures Pte Ltd which is a Singapore based company and is a venture of her son Mr. Sidhant Agarwal (who is also proposed to be part of the Reconstituted Board), is ready to give business loan to Mrs. Payal Agarwal to the extent of Rs.25 crores. Apart from this RA is a respectable name in the industry and society and is fully capable of arranging funds as and when required.

- It was enquired from RA that what Rationale and the base was the consideration reduced from what was offered earlier. The RA clarified that the present consideration is based on the following observations of RA:

i. One property of Corporate Debtor has been sold and does not form part of assets of the Corporate Debtor. ii. There may be the cost of stamp duty and transfer fee to be paid to the Authority and the RA will have to bear the same. - Provision regarding treatment of Personal Guarantee: The RA proposed that the Resolution Plans will in no way affect the validity & enforceability of personal guarantees. - Treatment of proceeds received from Insurance claim: The RA proposed that the proceeds from the insurance claim form part of Corporate Debtor. - Treatment of proceeds received from Avoidance transaction application: The RA proposed complete pass over of the proceeds from litigation pertaining to Avoidance Application to the Secured Financial Creditors. - RA clarified that the revised financial proposal is based on his assessment of value of assets (which includes the proceeds from insurance claim) and timeline of payment. The further requested the CoC to clarify their stand on how they want the RAs to treat the proceeds from Insurance Claim so that it becomes an equal/level playing field for all the RAs. To this, the RP clarified that it is only a preference of the CoC that the proceed of insurance proceeds be passed on to them however, there no such mandatory condition that can be imposed on the RAs. - The RP further apprised that list of creditors with respect to Government dues have been updated and circulated with the Resolution applicants and requested him to incorporate provisions for the same in the final resolution plan accordingly.

RA took note of the same.

To consider and discuss on Resolution plan(s) received from Resolution Applicants.

The RP re-encapsulated that the last round of negotiation was conducted in the last meeting and all the RAs were requested to share their final signed financial offers in password protected format and the document incorporating curings suggested via various mails. Accordingly, the RP apprised that the final signed financial proposal and cured document have been received by the RAs which shall be discussed by inviting the RAs one-by-one to the meeting.

The discussion with Resolution Applicants held in the meeting are annexed with the minutes and are marked as Annexure-A.

iv.

RA- MRS. PAYAL AGARWAL [Representative: Mr. Sidhant Agarwal was present through Video Conferencing]

Effective date:	date of receipt of Certified order by AA
CIRP Cost	Rs. 0.75 Cr
Consideration offered to Secured Creditors	Rs. 24.26 Cr.
Consideration offered to Operational Creditors	Rs. 0.25 Cr
Total Consideration offered to Creditors	Rs. 24.51 Cr
Terms of Payment for Secured Creditors	* Rs. 24.26 Cr within 60 days of effective date
Terms of Payment for Operational Creditors	within 60 days of effective date
Treatment of Proceeds from Insurance Litigation	100% Pass over to FC
Treatment of proceeds from Avoidance litigation'	100% Pass over to FC

iv.

RA- MRS. PAYAL AGARWAL [Representative: Mr. Sidhant Agarwal was present through Video Conferencing]

Effective date:	date of receipt of Certified order by AA
CIRP Cost	Rs. 0.75 Cr
Consideration offered to Secured Creditors	Rs. 24.26 Cr.
Consideration offered to Operational Creditors	Rs. 0.25 Cr
Total Consideration offered to Creditors	Rs. 24.51 Cr
Terms of Payment for Secured Creditors	* Rs. 24.26 Cr within 60 days of effective date
Terms of Payment for Operational Creditors	within 60 days of effective date
Treatment of Proceeds from Insurance Litigation	100% Pass over to FC
Treatment of proceeds from Avoidance litigation*	100% Pass over to FC
Change of management and control as proposed by RA	Management of the Corporate Debtor will vest with the Resolution Applicant from the effective date + complete handover of all the records, assets and information, business operations, assets, claims, contingent assets, filings, on formation of Monitoring Committee
Sources of Funds	The RA has a Net Worth of Rs.20.20 crores as on 31.03.2022 + Glentech Ventures Pte. Ltd. (venture of her son) Is ready to give business loan to the RA

On due perusal of the financial proposal and document, the CoC clarified the following:

Clause	Clarification by RP	Comments of RA
Financial Proposal	Sources of funds states that Glentech Ventures Pte. Ltd. (venture of her son) is ready to give business loan to the RA The CoC clarified that RA should provide details of liquid funds available with them. The RP further enquired if there is any undertaking given by the Glentech to this effect.	The RA agreed that they shall further provide details of liquid funds as well as the undertaking.
Draft Document	The RA proposes Monitoring Committee* means a Committee to be formed for monitoring the Implementation of Resolution Plan and shall comprise of 1 (one) representative of the Financial Creditor and 1 (One) representative of Resolution Applicant. The CoC clarified that 3 members be part of the Monitoring committee comprising of 1 member of FC, 1 member of RA and the RP for effective implementation of the plan.	The RA Agreed

The RA further assured that they have incorporated all the statements and curings shared by the RP and further is agreeable on the proposition that the handover of assets and control of the Corporate Debtor shall be done on the complete payment.

General Discussion after the discussion with RAs:

Besides the individual discussions with the respective RAs, the CoC then had a discussion among themselves on other issues pertaining to the resolution plans. The CoC sought RP's opinion on the case of another company under insolvency in case of M/s. SMS Paryavaran Ltd undergoing CIRP and in consideration of the NCLT, Principal Bench, New Delhi wherein a resolution plan had been approved by CoC in the case and had filed with NCLT for approval. In the captioned case due to certain developments, some avoidance application was filed against the successful PRA and NCLT took course to referring the matter to CoC for reconsidering their options. A reference to the same was necessitated in view of the similar situations in the case at hand as two promoters / related parties namely Mr. Himanshu Agarwal (director of CD) and Mrs. Payal Agarwal (Wife of Mr Sudhanshu Agarwal who is also a director of CD) have submitted their resolution plans for the CD under exemption from rigors of Sec 29A under MSME provisions u/s 240A of the Code and avoidance applications have been filed against them in the present case along with two other group companies namely KV Developers Pvt. Ltd. and Arhan Infratech Pvt. Ltd. Further, a fact about the investigation being conducted against the directors by EOW (Economic offences wing) has also been brought to notice of the CoC by RAs recently, though no source/evidence provided. To this, the RP stated that the position of the law is clear on the same that they cannot be held to be ineligible due to either the dance applications or complaint under investigation under provisions of Sec 29A unless and until an order has been passed against them. The NCLT also in the above case has not given any clear finding. However, CoC may in their wisdom take all factors into consideration like the ones above deliberated upon along with others like release of personal guarantee as demanded in his plan by Mr. Himanshu Agarwal, consideration offered to creditors, manner of distribution, factors like sharing/pass through of benefits from insurance claim and avoidance application, terms of plans, implementation schedule etc. The CoC also has to get their views on the viability and feasibility of the resolution plans recorded, as required by law, during approval of the plan once the plans have been placed before them under Section 30(3) for their approval.

With respect to way forward for the resolution plan, it was deliberated that now that the financial proposals have been freezed, the RP shall share with the RAs the respective curings suggested to them during the meeting to make their plans comply with the Code and its regulations, removing the anomalies & errors therein and incorporating a few important things like the sources of funds being mentioned clearly, so as to make them feasible & viable and post that final signed resolution plans will be sought.

"Dear Sir

As discussed in the 9th COC held on 21.11.2022, you are requested to submit the final signed resolution plan (Not password protected) latest by 01.12.2022 after incorporating the curings discussed in the meeting and the Due Diligence report, both of which are attached herein for your kind reference.

Kindly note, the there cannot be any change in the financial figures submitted by you in the final financial offer dated 21.11.2022 and the curings from the banks, if any, shall be shared in due course for Incorporation in the final plan

Apart from the above, you are requested to provide a board resolution authorizing Mr. Sidhant Agarwal to attend the COC meetings in place of the RA along with the final resolution plan.

Further, the updated list of creditors is attached herein for your kind consideration for submission of the final resolution plan"

"To consider and discuss on Resolution plan(s) received from Resolution Applicants.

The RP apprised that the final revised plans have been received and accordingly, the RP has vetted the Resolution Plan vis-à-vis the legal compliances in order to issue Compliance certificate following which the compliant resolution plans are being placed before the COC under section 30(3) for their due consideration and voting.

The discussion on the Compliant Resolution Plans held in the meeting are annexed with the mimites and are marked as Annexure-A.

Further, considering that this is the final revised resolution plan and there is no scope of further modifications to the resolution plan as per the provisions of Insolvency and Bankruptcy Code, 2016, the resolution plan submitted by Mr. Pankaj Saraogi being non-compliant with the provisions of RFRP cannot be placed before the CoC for their consideration and voting.

The RP further apprised that the final revised resolution plans of the following RAs are compliant with the law and accordingly, compliance certificates have been duly issued for these resolution plans:

i.

Mr. Dinesh Parekh through BGP 11 Analytics Pvt. Ltd. ii. Mr. Himanshu Agarwal & Mr. Vikash Gupta iii. Mrs. Payal Agarwal iv. Mr. Sanjeev Singhal

v.

Mr. Saket Agarwal & Fortuna Holdings Pvt. Ltd.

Further, the RP submitted these plans under section 30(3) for approval of CoC along with a compliance certificate. The Compliance Certificates of all the RAs are annexed as A1, A2, A3, A4, AS and A6 (Colly).

Discussion on Feasibility and Viability of the Resolution Plans:

As per Section 30 (4) of the Insolvency and Bankruptcy Code, 2016, the CoC may approve a resolution plan by a vote of not less than 66% of voting share of the financial creditors, after considering its feasibility and viability and such other requirements as may be specified by the board.

Accordingly, the COC assessed the feasibility and viability of each compliant Resolution Plan by going through the experience of the RA in mentha industry and sources of funds as stated in respective Resolution Plan.”

> “5. It is essential to mention that the Resolution Applicant has no vested right that his Resolution Plan must be considered. It is settled position of law as laid down by Hon’ble Supreme Court in (2019) 2 SCC 1 in case of Arcelor Mittal India Pvt Ltd v. Satish Kumar Gupta that the resolution applicant does not have any vested right that his Resolution Plan must be considered.”

> 6. The commercial wisdom of the CoC is paramount, and it has the absolute prerogative to decide the viability and feasibility of the Resolution Plans presented before them and the same is not to be interfered even by the Adjudicating Authority”

“15.

There is no provision in the Code or regulation which provides that while exercising the power under Section 31 of the IBC, the Adjudicating authority can direct the CoC to consider the resolution plan of such person who has not been part of CIRP. Otherwise also if such procedure adopted, then the CIRP will be frustrated. Once the resolution plan has been opened and fundamentals and financials of the plan and offer made therein were disclosed to all the participants including RP. Then anyone can enhance its offer before the Adjudicating Authority in the guise of maximization of realization. Therefore, no further fresh bid or offer would have accepted or considered...

16.

This Appellate Tribunal in the case of Chhattisgarh Distilleries Ltd. v. Dushyant Dave and Ors. - Company Appeal (AT)(Ins.) No. 461 of 2019 in the light of the pronouncement of Hon’ble Supreme Court in the case of Committee of Creditors Essar Steel India Ltd. v. Satish Gupta & Ors. 2019 SCC Online SC 1478 held that:

“In the light of the above pronouncement of Hon’ble Supreme Court we have examined the issues raised in these appeals. Admittedly, the A-1 filed its Resolution Plan before the Adjudicating Authority on 13.02.2019 whereas, the last date for submission of Resolution Plan before RP was 15.10.2018. Resolution Plan of Successful Resolution Applicant ie. Dera Finvest Pvt. Ltd. (R2) was approved by 98.72% of the Committee of Creditors in e-voting conducted on 1.11.2018 and on 2.11.2018. When the Resolution Plan is filed before the Adjudicating Authority than the Authority has to satisfy that the Resolution Plan approved by the Committee of Creditors fulfils the requirements as specified in sub-section 2 of Section 30. However, the Adjudicating Authority cannot direct the CoC to consider the second Resolution Plan submitted before the Authority although the second Resolution Applicant is ready to invest more amount in comparison to the first Resolution Applicant. Ld. Adjudicating Authority has rightly held that the Adjudicating Authority cannot suo moto direct the CoC to consider new Resolution Plan and reconsider already approved Resolution Plan. The Hon’ble Supreme Court in the above referred judgement held that u/s 30(2) of I&B Code, decision of Committee of Creditor is purely commercial and cannot be adjudicated by the Authority. Thus, we are of the view that the Adjudicating Authority is well within its jurisdiction while rejecting the application of A-1."

17.

With the aforesaid, we are of the considered view that the Adjudicating Authority has erroneously entertain the application and Resolution Plan of the Respondent No. 1 and directed the RP to put up the same before CoC for consideration."

'14. In the instant case, the Adjudicating Authority has overturned the decision of the CoC regarding approval of the Resolution Plan despite being approved by 84.70 percent of the vote share of the CoC, on the pretext of maximisation of value of the corporate debtor. The provisions investing jurisdiction and authority in the NCLT has not made the commercial decision exercised by the CoC of not approving the resolution plan or rejecting the same, justiciable. In the circumstances as stated above, it is clear that the Adjudicating Authority cannot interfere with the commercial wisdom of CoC. The direction for rebidding for maximisation of the value of the corporate debtor also amounts to an interference in the business decision of the CoC, which is not permitted in law.

[...]

18.

It is pertinent to mention that the Adjudicating Authority has a very limited power of judicial scrutiny, and the statutory provision does not permit the Adjudicating Authority to interfere with the commercial wisdom of the CoC. Even for maximisation of value of the assets of the Corporate Debtor, the Adjudicating Authority is not entitled to overturn the business decisions of the Corporate Debtor."

ANALYSIS:

Evaluation Matrix

Quantitative parameters

Particulars	Range	Max Score
Consideration for creditors (upfront payment = NAV of the deferred payments) (Scores will be awarded on a scale of 0 – 70 in proportion of above consideration offered to the admitted claims for e.g. PRA offering consideration of 100% claims to get 70, 10% to get 7 and so on)	0-70	70
Rate of discounting for calculating NPV of deferred payments 0 - 12 months - 12% per annum 0 - 24 months - 20% per annum (Payment up to 2 months will be considered in upfront payment)
Incentive for upfront payment within 60 days (Upfront payment offered by respective PRAs in proportion to the highest consideration calculated above i.e. Cash upfront + NAV of the deferred payments, among all PRAs, will be awarded marks out of 20)	0-20	20
Qualitative parameters	0 - 10	10
Total	-	100

Qualitative parameters

Experience in manufacturer, exporter and supplier of Mint Products and activities similar in nature to the Corporate Debtor	0 - 4
Experience in taking over stressed asset or company under IBC / SARFAESI / RDDBor by way of merger / acquisition etc.	0 - 2
Capability to honour the financial commitments under the plan	0 - 2
Credit rating / CIBIL Profile score of the applicant	0 - 2

Notes:

- Payment above 2 years will not be considered for scoring. - Deferred payments to be made only in form of money and not by way of any equity / debt / instrument. - Scoring on the qualitative parameters is only for the purpose of the resolution plan and is in no way the comparison of one with other. Further scoring on the qualitative parameters would be done keeping in view the objective of judging the capability of the resolution applicant in context of implementing resolution plan of the corporate debtor and is the prerogative of CoC and shall not be open to challenge.

“the role of the CoC in accepting or rejecting the Resolution Plan as well as the role of the Adjudicating Authority while considering the Application from approval or rejection of the Resolution Plan. There is an intrinsic assumption that the ‘Financial Creditors’ are fully informed about the viability of the ‘Corporate Debtor’ and the feasibility of the Resolution Plan. The opinion expressed after due deliberations in the CoC meeting through voting, is a collective business decision. The legislature, consciously, has provided only limited grounds to challenge the commercial wisdom or their collective decision by the Adjudicating Authority.” (Emphasis Supplied)

“57.

...Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions investing jurisdiction and authority in NCLT or NCLAT as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order “approving a resolution plan” Under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers “by the resolution professional” during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds--be it Under Section 30(2) or Under Section 61(3) of the I&B Code--are regarding testing the validity of the “approved” resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by CoC in exercise of its business decision.” [...]

“149.

It will therefore be clear, that this Court, in unequivocal terms, held, that the appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same.

150.

The position is clarified by the following observations in paragraph 59 of the judgment in the case of K. Sashidhar (supra), which reads thus:

“59.

In our view, neither the adjudicating authority (NCLT) nor the appellate authority (NCLAT) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors...”

151.

This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory after reproducing certain paragraphs in K. Sashidhar (supra) observed thus:

“Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar”

152.

It can thus be seen, that this Court has clarified, that the limited judicial review, which is available, can in no circumstance trespass upon a business decision arrived at by the majority of CoC.”

“28.

The Appellate Authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Such is the scheme of the Code. Section 31(1) of the Code lays down in clear terms that Company Appeal (AT) (Ins) No. 143 of 2020 23 of 26 for final approval of a resolution plan, the Adjudicating Authority has to be satisfied that the requirement of sub- section (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an Adjudicating Authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the Adjudicating Authority in limited judicial review has been laid down in the case of Essar Steel (supra), the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the Appellate Authority ought to have interfered with the order of the Adjudicating Authority in directing the successful Resolution Applicant to enhance their fund inflow upfront." (Emphasis Supplied)

In view of the decisions of the Hon'ble Supreme Court, it is the settled proposition of law that the commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan is essentially based on a business decision which involves evaluation of resolution plan based on its feasibility besides the Committee of Creditors being fully informed about the viability of the Corporate Debtor. The Committee of Creditors invariably examine the Resolution Plan and an assessment is made through their team of experts in that regard.

39.

Further, there is no such mechanism under the Code that gives the right to the Unsuccessful Resolution Applicant to challenge the score granted as per the evaluation matrix prepared by the CoC and the Resolution Professional as per the provisions of CIRP Regulations. Though, Section 61 of the Code provides Appeals against the orders of the Adjudicating Authority and Sub-section (3) thereof provides an Appeal against an order approving a Resolution Plan under Section 31 which may be filed on the following grounds namely

(i)

The approval resolution plan is in contravention of the provisions of any law for the time being enforce.

(ii)

There has been material irregularity in exercise of the powers by the Resolution Professional during the Corporate Insolvency Resolution Period.

[...]

2.

To consider and approve compliant Resolution Plan as submitted by by Mrs. Payal Agarwal and authorize RP to file CoC approved Resolution Plan before Hon’ble NCLT in terms of Section 30(6) of the Code.

The matter was decided to be resolved as under:

“RESOLVED THAT in accordance with sections 30(4) and 30(6) of the Code read with regulations made thereunder, the approval of the members of the CoC be and is hereby accorded to the cured/amended/revised Resolution Plan submitted by Mrs. Payal Agarwal (RA) and RP is authorised to issue LOI to RA.

RESOLVED FURTHER THAT Resolution Professional is authorised to file the CoC approved resolution plan with the Hon’ble Adjudicating Authority i.e. NCLT.”

S. No.	Name of Financial creditor	Voting Share (%)	Voted in Favour (%)	Voted Against (%)	Abstained from Voting (%)	Remarks
1	State Bank of India	79.82	-	79.82	-	Rejected
2	ICICI Bank	10.79	10.79	-	-
3	Bank of Baroda	9.39	-	9.39	-
	Total	100	10.79	89.21	0

5.

To consider and approve compliant Resolution Plan as submitted by Mr. Saket Agarwal & Fortuna Holdings Pvt. Ltd. and authorize RP to file CoC approved Resolution Plan before Hon'ble NCLT in terms of Section 30(6) of the Code.

The matter was decided to be resolved as under:

“RESOLVED THAT in accordance with sections 30(4) and 30(6) of the Code read with regulations made thereunder, the approval of the members of the CoC be and is hereby accorded to the cured/amended/revised Resolution Plan submitted by Mr. Saket Agarwal & Fortuna Holdings Pvt. Ltd. (RA) and RP is authorised to issue LOI to RA.

RESOLVED FURTHER THAT Resolution Professional is authorised to file the CoC approved resolution plan with the Hon'ble Adjudicating Authority i.e. NCLT.”

14. Moratorium:

[...]

Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;

(Emphasis supplied)

Section 5(12) of IBC:

(12)

“insolvency commencement date” means the date of admission of an application for initiating corporate insolvency resolution process by the Adjudicating Authority under sections 7, 9 or section 10, as the case may be:

(Emphasis supplied)

'10. A cursory look at Section 14(1) makes it clear that subject to the exceptions contained in sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall mandatorily, by order, declare a moratorium to prohibit what follows in clauses (a) to (d). Importantly, under sub-section (4), this order of moratorium does not continue indefinitely, but has effect only from the date of the order declaring moratorium till the completion of the corporate insolvency resolution process which is time bound, either culminating in the order of the Adjudicating Authority approving a resolution plan or in liquidation"

"the mandate of the Code is that the moratorium comes into effect the moment the insolvency petition is admitted which expressly bars the intuition or continuation of pending suits or proceedings against Corporate Debtors."

“31. Approval of resolution plan. –

[...]

(4)

The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later:

Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.”

(Emphasis supplied)

ANALYSIS:

“238.

Provisions of this Code to override other laws. - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

“it is expected from you that from the issuance of the notice dated (25.03.2022 till 25.03.2022) i.e. within one year as per conditions specified in the allocation/transfer letter/lease deed by constructing in minimum area of the land and operating the unit as per rule of Authority and if not make it useable, the information is not provided to the office after the completion of the period of one year from the date of issuance of notice dated 25.03.2022 then the allocation and lease deed shall consider to be cancelled.”

“a. Allow the present Application;

b Allow the present application and approve the Resolution Plan dated 02.12.2022 submitted by Saket Agarwal and Fortuna Holdings Private Limited which was presented before the Committee of Creditors in its 10th CoC meeting convened on 05.12.2022 and the plan was unanimously approved by the Committee of Creditors vide E-Voting dated 02.01.2023;

c. Declare that upon approval of the Resolution Plan by this Hon'ble Adjudicating Authority, the provisions of the Resolution Plan shall be binding on the Company, its creditors, guarantors, members, employees, Statutory Authorities and other stakeholders in accordance with Section 31 of the Code, and shall be given effect to and implemented pursuant to the order of this Hon'ble Adjudicating Authority;

d. Approve the appointment of the monitoring agency as stated in the Resolution Plan and approved by the Committee of Creditors;

e. Approve and grant reliefs and directions sought under the Resolution Plan by the Resolution Applicant;

f. Any other relief as this Hon'ble Adjudicating Authority may deem fit and proper in the facts and circumstances of the case.”

2. PRELIMINARY

3. COLLATION OF CLAIMS BY RP

4. EVALUATION AND VOTING

5.

To consider and approve compliant Resolution Plan as submitted by Mr. Saket Agarwal & Fortuna Holdings Pvt. Ltd. and authorize RP to file CoC approved Resolution Plan before Hon'ble NCLT in terms of Section 30(6) of the Code.

The matter was decided to be resolved as under:

“RESOLVED THAT in accordance with sections 30(4) and 30(6) of the Code read with regulations made thereunder, the approval of the members of the CoC be and is hereby accorded to the cured/amended/revised Resolution Plan submitted by Mr. Saket Agarwal & Fortuna Holdings Pvt. Ltd. (RA) and RP is authorised to issue LOI to RA.

RESOLVED FURTHER THAT Resolution Professional is authorised to file the CoC approved resolution plan with the Hon'ble Adjudicating Authority i.e. NCLT.”

5. DETAILS OF RESOLUTION PLAN/PAYMENT SCHEDULE

a) Financial Creditors (Secured):-

The total claims filed by the Financial Creditors i.e., State bank of India, ICICI Bank and Bank of Baroda in respect of the Corporate Debtor is to the tune of Rs. 2,16,38,71,131/- which has been admitted in full by the Applicant/ Resolution Professional. The Resolution Applicant proposes a sum of Rs. 25,75,00,000/- to the Financial Creditors as a full and final settlement within a period of 60 days from the Resolution Plan approval date by this Adjudicating Authority.

b) Operational Creditors (Employees/Workmen)

The total as per the Information Memorandum and List of Creditors of the Corporate Debtor no claim was received from the Operational Creditors (Employees/ Workmen) therefore, the amount proposed by the Resolution Applicant is NIL.

c) Operational Creditor (including statutory dues)

The total claims filed by the Operational Creditor i.e., Dy Collector, Khand 3, Commercial Tax, G.B. Nagar, UP in respect of the Corporate Debtor is to the tune of Rs. 97,03,38,864/- which has been admitted in full by the Applicant/Resolution Professional. The Resolution Applicant proposes a sum of Rs. 20,00,000/- to the Operational Creditors as a full and final settlement within a period of 15 days from the approval of the Resolution Plan by this Adjudicating Authority.

5.2. TERM OF THE RESOLUTION PLAN

IMPLEMENTATION SCHEDULE

The Term of the Plan/ implementation schedule shall be 60 days from the effective date. The Implementation Period shall be the period from the Effective date till the date of making payment to all stakeholders be made as per the Plan.

The Resolution Plan shall be implemented in the following manner, as per the timelines stated below or as per applicable laws:

6.

The Resolution Plan includes a statement under regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interests of all stakeholders in compliance with the Code and regulations made thereunder.

7.

The amounts provided for the stakeholders under the Resolution Plan is as under: (Amount in Rs. lakh)

Explanation 1. — For removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors.

Explanation 2. — For the purpose of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor where a resolution plan has not been approved or rejected by the Adjudicating Authority; where an appeal has been preferred under section 61 or section 62 or such an appeal is not time barred under any provision of law for the time being in force; or where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] XXXX

"Ras proposed lump sum amount of INR 20 lacs upfront (including provision) to all the Operational Creditors i.e., Creditors other than workmen, employees and Statutory dues in proportion to their admitted claim amount as on the date of order of Hon'ble NCLT approving the Resolution Plan."

In respect of dissenting Financial Creditors, the Resolution applicants have stated as under:

"Further, in case of any dissenting Financial Creditors, the RA as required under the provision of Section 30(2)(b) of the IBC, 2016 wherein payments of Debts of Financial Creditors, who do not vote in favour of the plan, will be in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub section (1) of Section 53 in the event of Liquidation of Corporate Debtor."

COMPLIANCE IN TERMS OF REGULATION 37 OF CIRP REGULATIONS:

PARTICULARS	RELEVANT PAGE OF THE RESOLUTION PLAN DEALING AFORESAID COMPLIANCE WITH REGULATION
A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximisation of value of its assets, including but not limited to the following: -
(a) transfer of all or part of the assets of the corporate debtor to one or more persons;	The Resolution Applicant will have the liberty to transfer all or part of the Assets of the Corporate Debtor after implementation and complete payment as envisaged in the plan.
(b) sale of all or part of the assets whether subject to any security interest or not;	The Resolution Applicant will have the liberty to sale any part of the Asset of the Corporate Debtor after implementation and complete payment as envisaged in the plan. Charge/security created on the Corporate Debtor's assets will be deemed satisfied/ relinquished upon entire payment which is proposed to be made within 60 days of the effective date on completion of implementation of Resolution Plan.
(c) restructuring of the corporate debtor, by way of merger, amalgamation and demerger;	No, the RA proposed to restructure the Corporate Debtor by change in shareholding and directors of the Corporate Debtor
(d) the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons;	Restructuring by way cancellation of existing shares and issue of fresh equity share capital to the tune of Rs. 2 Crores comprising of 20,00,000 equity shares of Rs 10 each after complete payment under the plan
(e) cancellation or delisting of any shares of the corporate debtor, if applicable;	NA

(f) satisfaction or modification of any security interest;	RA purposes that upon entire payment, which is proposed to be made within 60 days, there shall be release of all the security interest including mortgages, charges or any other interest, created. Further all the original documents related to the Corporate Debtor and its assets whether mortgaged or not either in possession to the secured financial creditors or with the Corporate Debtor shall be handed over to the Resolution Applicant upon the complete payment under the Resolution Plan.
(g) curing or waiving of any breach of the terms of any debt due from the corporate debtor;	The RA does not propose to cure or waive any breach of the terms of any debt due from the Corporate Debtor.
(h) reduction in the amount payable to the creditors;	As per para 2.1 of the Plan mentioned on page 7 of the Resolution Plan
(i) extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor;	As per para 2.1 of the plan mentioned on page 7 of the Resolution Plan
(j) amendment of the constitutional documents of the corporate debtor;	The constitutional documents will get changes because of the restructuring as the Resolution Applicant proposes to acquire the entire shareholding of the Corporate Debtor causing change in promoters and members shareholding. Eventually, the business of the Corporate Debtor will be taken over by the Resolution Applicant.
(k) issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose;	NA
(l) change in portfolio of goods or services produced or rendered by the corporate debtor;	NO
(m) change in technology used by the corporate debtor; and	NA
(n) obtaining necessary approvals from the Central and State Governments and other authorities.	Yes

MANDATORY CONTENTS OF RESOLUTION PLAN IN TERMS OF REGULATION 38 OF CIRP REGULATIONS:

“When the entire claim which was filed under 7A and 7Q was paid to the appellant, we fail to see any error in the order of the Adjudicating Authority in rejecting the application. It has been noticed by the Adjudicating Authority that claim under Section 14B was assessed by an order dated 16.6.2021 passed after initiation of CIRP proceedings. Adjudicating Authority has noted the judgment of this Tribunal in Regional Provident Fund Commissioner, Vatwa, Employees Provident Fund Organisation vs. Manish Kumar Bhagat in Company Appeal (AT) (Ins) No. 808 of 2022 which has rightly been relied upon for not accepting the claim which was subsequent to the initiation of CIRP.” [Emphasis supplied]

"In the event, any transaction is avoided, set aside by the Hon'ble NCLT in terms of Section 43, 45, 47, 49, 50 or 66 of the IBC, 2016 and any amount is received by the Resolution Professional or the Corporate Debtor in furtherance thereof, such sum shall be deemed to have been received for the benefit of the Financial Creditors and shall be paid to the Financial Creditors ("Pass-Through Amount") net of taxes, if any. These cases shall be pursued by the Financial Creditors in proportion to their admitted claims."

"All the recoveries from the Debtors of the Corporate Debtor under any proceedings including insurance claim from the TATA AIG if received, within 5 years (which can be extended with mutual consent) of effective date shall be shared with the financial creditors in the ratio of 35:65, net of taxes and all incidental expenses/ costs. This means that if any amount is recovered from insurance claims then after deducting the expense/ costs incurred and the taxes if any of them, 35% of the balance amount will be passed through to financial creditors. The costs will be borne by the Corporate Debtor. The RA will keep updating the status of proceeding from time to time to Financial Creditors."

13. SCHEME OF RESTRUCTURING

14. SOURCES OF FUNDS

“RAs undertakes to infuse the total amount of INR 26.25 Crores from their internal accruals, resources and reserves. Mr. Saket Agarwal one of the RAs is having an investment of Rs. 309 Crores as on 29.11.2022 in shares / stocks of listed companies, and he will liquidate the same to ensure the liquidity of funds for the implementation of Plan.”

15. MANAGEMENT AND CONTROL OF CD

ADEQUATE MEANS FOR SUPERVISION OF IMPLEMENTATION (REGULATION 38(2)(c))

Regulation 38(3)(a):

As per our understanding and detailed in information memorandum and information disseminated through clarificatory emails, the Corporate Debtor suffered from fire that took place in the factory premise due to which significant amount of stock got perished and the management of the Corporate Debtor approached to the Insurance Company namely TATA AIG to claim the Insurance amount which was rejected by the Insurance company and aggrieved by the rejection of insurance claim the Corporate Debtor could not maintain itself as going concern and the account of the Corporate Debtor was classified as Non- performing Asset.

Regulation 38(3) (b):

To make the Resolution Plan feasible and viable, RAs have sufficient funds to meet obligations of creditors of the Corporate Debtor, working capital requirements and capital expenditure to keep the Corporate Debtor as going concern. Moreover, Mr. Saket Agarwal one of the RAs is very accomplished person in the industry of the Corporate Debtor and his experience will add significant value to Corporate Debtor.

Further, the Resolution Plan has dealt with interest of all the stakeholders and all the endeavors have been made to maximize the wealth of the Corporate Debtor along with interest of all the stakeholders. RA has demonstrated the Cash flow and business projections to make the plan feasible & viable and annexed the same as Annexure-12.

7.

I state that this Hon'ble Adjudicating Authority on 10.12.2024 listed the matter for clarification and listed I.A. Nos. 1183 of 2023, 6131 of 2022 & 662 of 2023 on 21.01.2025. However, during the course of the hearing, this Hon'ble Adjudicating Authority had verbally directed the deponent to clarify whether the provisions in plan for contingencies would be treated as financial figure or not and that whether all the PRAs were given opportunity for revising their respective resolution plans or it was specifically allowed only for one PRA. Copy of Order dated 10.12.2024 passed by this Hon'ble Adjudicating Authority is annexed herewith and marked as ANNEXURE A-6.

8.

I state that in response to the above-mentioned queries and in addition to the documents filed as referred in the above clauses, it is submitted that as per Indian Accounting Standards-29, there is a specific bar on recognition of contingent assets in the financial statements till the said asset becomes certain. I state that the relevant portion of the Accounting Standards is reproduced hereinafter as follows: -

“Contingent Assets

30.

An enterprise should not recognise a contingent asset

31.

Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the enterprise. An example is a claim that an enterprise is pursuing through legal processes, where the outcome is uncertain.

32.

Contingent assets are not recognised in financial statements since this may result in the recognition of income that may never be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.

33.

A contingent asset is not disclosed in the financial. It is usually disclosed in the report of the approving authority (Board of Directors in the case of a company, and the corresponding approving authority in the case of any other enterprise), where an inflow of economic benefits is probable.

34.

Contingent assets are assessed continually and if it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognised in the financial statements of the period in which the change occurs.”

9.

I state that in present case the recovery from passthrough assets i.e., insurance claim pending before the Hon'ble High Court of Delhi/ Hon'ble NCDRC and the Avoidance Applications pending before this Hon'ble Adjudicating Authority are contingent in nature and are subject to orders being passed by the respective Court and the same are further subject to Appeals, if any before the Competent Courts and thus, the same being contingent in nature which are subject to judicial orders cannot form part of the assets of the Corporate Debtor.

10.

I state that emails were sent to all the PRAs on 29.11.2022 to submit their final signed Resolution Plan as agreed by the CoC in the 9th CoC meeting.

11.

I state that the SRA has duly submitted an additional affidavit detailing the sources of funds, and implementation of the resolution plan as sought by this Hon'ble Court in light of the judgement passed by Hon'ble Supreme Court in State Bank of India vs The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr. in Civil Appeal No. 5023-5024 of 2024, Copy of Additional Affidavit submitted by the SRA is annexed herewith and marked as ANNEXURE A-7.

"4.

That the Resolution Professional thereafter moved IA- 662 of 2023 u/s 30(6) of IBC, 2016 seeking approval of Resolution Plan in the present matter before this Hon'ble Adjudicating Authority.

"5.

It is submitted that the undersigned is eligible to submit the Resolution Plan as per Section 29A of the Code. That the Resolution Applicant has fulfilled the eligibility criteria as laid down in the Code read along with the Rules and Regulations made thereunder. That the Resolution Plan Approval Application is pending before the Hon'ble Adjudicating Authority and the same is numbered as IA No. 662/2023.

6.

It is submitted that the Resolution Plan as submitted by Mr. Saket Agarwal and Fortuna Holdings Private Limited has addressed the cause of default of why the account of the Corporate Debtor was classified as Non-Performing Asset on the page no. 17 of the Resolution Plan & page 212 of the resolution plan application. The relevant extract of which is reproduced herein below:

"As per our understanding and detailed in information memorandum and __ information disseminated through clarificatory emails, the Corporate Debtor suffered from fire that took place in the factory premises due to which significant amount of stock got perished and the management of the corporate Debtor approached to the Insurance Company namely TATA AIG to claim the insurance amount which was rejected by the insurance company and aggrieved by the rejection of insurance claim the corporate debtor could not maintain itself as going concern and the account of the corporate debtor was classified as Non-performing Asset."

7.

That the Successful Resolution Applicant has made provisions for the CIRP Cost and the same is elaborated on the page no. 07 of the Resolution Plan & page no. 202 of the resolution plan application. That the SRA has also made provisions for the dissenting financial creditors as mandated under the Section 30 (2) (b) of the Code i.e. the dissenting financial creditors will be paid in priority over the Secured Creditor/Financial Creditor who have voted in favour of the Resolution Plan. That the Resolution Plan has also provided for the payment of Operational Creditors in priority over the financial creditors on the page no. 08 of Sthe Resolution Plan / page no. 203 of the resolution plan application. The relevant extract is reproduced hereinbelow:

Insolvency Resolution Process Costs

"As per the information provided by the Resolution Professional INR 21,55,927 has been incurred as CIRP cost as on 16.08.2022 and the same is remaining unpaid. The RAs is seeking to make a provision of INR 30,00,000 as against the aforesaid CIRP as determined under Regulation 31 of the IBBI (CIRP) Regulations, 2015. The RAs will arrange the Funds from its internal accruals and its own resources/ reserves without causing any additional burden on CoC members and Corporate Debtor.

Further, as discussed in the CoC meeting, RP has published an EOI for sale of stock of Corporate Debtor and the sale proceeds will be utilized to meet the CIRP cost. We hereby proposes that after meeting CIRP cost from the sale proceeds of the stock, in case any surplus is left from the provisional amount of CIRP Cost je INS 30,00,000 then the same will be distributed to the Financial Creditors.

It is to be noted that if the CIRP cost exceeds to INR 30,00,000 then the additional CIRP cost shall be adjusted proportionately with the aforesaid payment to be made to the Financial Creditors. The CIRP costs will be paid in priority over payments to all creditors”

Operational Creditors including workmen & employees and Statutory Dues

“RA proposes lump sum amount of Rs. 20 Lacs upfront within 60 days (including provision) to the Operational Creditors (including Statutory dues) in proportion to their admitted claim amount as on the date of order of Hon'ble NCLT approving the Resolution Plan. Further, in case claim of any Operational Creditor not admitted by the RP as on the date of submission of the Plan but later on gets admitted shall be paid proportionately from the proposed amount of Rs. 20 Lacs. The payment to Operational Creditors if any shall be as per - provision of Section 30 (2) (b) of the IBC and Regulation 38 (1) (b) of the CIRP Regulations, wherein Operational Creditors are required to be paid an amount which is not less than the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53 or the amount that would have been paid to such creditors, if the amount to be distributed under the Resolution Plan had been distributed in accordance with the order of priority in sub-section (1) of Section 53, whichever is higher. In any case the liability of RA towards Operational Creditors shall not be more than Rs. 20 lacs. The RAs hereby undertakes that the Operational Creditor's shall be paid in priority over the Financial Creditors."

8.

That the Successful Resolution Applicant has also clearly indicated the source of funds for the implementation of the Resolution Plan and that the same is elaborated at page no. 10 and 11 of the Resolution Plan & page 205 of the resolution plan application. In addition, the SRA hereby submits its latest Net worth Certificate to indicate it's financial capability to successfully implement the Resolution Plan. The copy of Net worth Certificate of Rs. 4,69,21,63,626.29/- (Rupees Four Hundred sixty nine crore twenty one lakh sixty three thousand six hundred twenty six and twenty nine paisa only) (as on 31.03.2024 is attached as Annexure-2). The relevant extract of Source of funds is reproduced herein:

"RAs undertakes to infuse the total amount of INR 26.25 crores from their internal accruals, own resources and reserves. Mr. Saket Agarwal one of the Ras is having investment of Rs. 309 crores as on 29.11.2022 in shares/stocks of listed companies and he will liquidate the same to ensure the liquidity of funds for implementation of plan."

9.

That the Resolution Plan has also provided the timeline required for the implementation and management and control of the business of the CD during its term along with adequate means of its supervision on page No. 09,10 of the Resolution Plan & page 204, 205 of the resolution plan application, as mandated under the IBBI Regulation of 38(2) of the CIRP.

[...]

10.

I state that the Performance Bank Guarantee submitted by SRA has expired on 05.01.2025. Thereafter HDFC Bank Limited has renewed the Performance Bank Guarantee of Rs.2,07,50,000.00/- on 16.01.2025 with BG No. 088GT02230060004 with validity up to 05.07.2025 on behalf of the SRA. Copy of letter issued by HDFC Bank for renewal of performance bank guarantee is attached herein and marked as Annexure 3.

11.

I state that the Resolution Plan submitted by the SRA in this matter is not conditional.

12.

I state that the Resolution Plan contains the statement as mandated by Regulation 38 (1B) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 that the Successful Resolution Applicant or any of its related parties has failed to implement or contributed to the failure of the implementation of any other Resolution Plan approved by the Adjudicating Authority at any time in the past.

13.

I state that the Resolution Plan as submitted by the SRA fulfils the essentials as enumerated under Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

14.

I state that the contents of the present affidavit are true and the to be read in consonance with the Resolution Plan as submitted by the SRA, the contents of which are not repeated for the sake of brevity herein.

[...]

“14. Moratorium. –

(1)

Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: -

(a)

...

(b)

...

(c)

...

(d)

the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Explanation.- For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;”