Kamineni Steels & Power India Pvt Ltd

PER: BENCH

This application is filed under Section 54 of the Insolvency & Bankruptcy Code, 2016 (herein after referred to as “CODE”) r/w Regulation 45 of Insolvency & Bankruptcy Board of India (Liquidation Process) by the Liquidator appointed for M/s KAMINENI STEEL & POWER INDIA PVT LTD^, seeking dissolution of the Corporate Person/ M/s KAMINENI STEEL & POWER INDIA PVT LTD.

The averments in brief of the Application are that;

This Tribunal vide order dated 10.02.2017 admitted the petition filed U/S 10 of the Code and Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Person.

Subsequently on 26.10.2018, when the Resolution Plan submitted by Corporate Applicant was declared as not approved with requisite majority by the Hon’ble Apex Court, this Hon’ble AA ordered for Liquidation of the Corporate Person and appointed, Mr Racharla Ramakrishna Gupta as the Liquidator.

Period of Liquidation Process: The Liquidation process commenced on 26.10.2018 and the final report was filed on 08.03.2024. The necessary approvals for extension of the liquidation period from time to time accorded by this Adjudicating Authority are tabled as below:

Later, this Adjudicating Authority vide orders in IA# 1637/2023 dated 08.11.2023 appointed Mr Kallat Vatsa Kumar (Regn# IBBI/IPA-002/IP-N00922/2019-2020/12980), the applicant herein as the Liquidator, who filed his consent in Form AA on 10.11.2023.

Upon assuming the role of Liquidator, the Applicant/Liquidator on 16.11.2023, officially took custody of the Corporate Person's assets through execution of a Panchnama. Subsequently, on 17.11.2023, the Liquidator received possession of the original title deeds, along with link documents provided by Indian Bank, from the Erstwhile Liquidator. Physical files pertaining to the liquidation process were also transferred into the custody of the Liquidator on 20.11.2023,.

It is stated that the Applicant/Liquidator convened 21st meeting of the SCC, which comprised of the following members:

Brief overview of the liquidation process and how the assets of Corporate Person were liquidated including subsequent distribution of the liquidation proceeds

^2.7.1 Invitation of Claims in Form B: The liquidator notified the stakeholders about commencement of the liquidation of the Corporate person by issuing a Public Announcement on 30.10.2018 in “The Hindu” (English) and “Sakshi” (Telugu-Vernacular language) newspapers, as per Section 33(1)(a)(ii) of the Code and Regulation 12 of the IBBI (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”), and invited claims from the stakeholders on or before 25.11.2018.

^2.7.2 Constitution of SCC/ List of Stakeholders: The Liquidator verified the claims received in accordance with Regulation 30 of the Liquidation Process Regulations and compiled the list of stakeholders. The same was filed with this Tribunal on 05.01.2019. Subsequently the list of stakeholders was modified three times i.e. on 27.05.2020, 12.08.2021, and 07.09.2023.

^2.7.3 Valuation of the Corporate Person’s Assets: Pursuant to Regulation 35 of Liquidation Regulations, the Erstwhile Liquidator appointed the IBBI registered valuers in January 2019 to ascertain the values of the assets of the Corporate Person. As the sale of assets could not be completed until recently, a revaluation of the Corporate Person's assets was conducted by the Erstwhile Liquidator in June 2022. Subsequently, in November 2023, with the knowledge of this Adjudicating Authority, the valuation was redone by the SCC. Details of the asset values derived from these three valuations taken on average of valuation done by 2 valuers for each category are tabulated below:

^2.7.4 Asset Memorandum: The erstwhile Liquidator prepared the Asset Memorandum which was filed with this Tribunal on 05.09.2019. The indicated value of the assets in the Asset Memorandum is Rs. 403.79 cr.

^2.7.5 SCC Meetings during Liquidation: The Liquidators conducted 22 meetings with the SCC members as tabled below:

Complying with Regulations 13 & 15 of Liquidation Regulations, the Liquidator regularly filed the Progress Reports and this Adjudicating Authority took them on record; as tabulated below:

^2.7.7 Sale Notices issued during the Liquidation Process: The erstwhile Liquidator, Mr Racharla Ramakrishna Gupta, issued sale notices 1 -5 and announced 11 e-auctions during the Liquidation process while the applicant/Liquidator, Mr Vatsa Kumar issued the 6th sale notice, details are as tabulated below:

Except for the 4^th Auction Notice, all the other eAuction notices issued by the erstwhile liquidator failed due to non-participation of interested bidders. Under the 4^th sale notice M/s Nimmagadda Surya Pradeep Biotech P Ltd participated in eAuction and was declared as successful bidder to acquire the Corporate Person as a going concern for a bid amount of Rs.351 Cr and paid EMD of Rs. 5 Crores. However, as the successful bidder failed to honour its commitments, this Adjudicating Authority vide orders in IA#727/2022 and IA#114/2022 directed the erstwhile Liquidator to forfeit the EMD of Rs.5Cr paid and to start the bidding process afresh.

^2.7.8 Reason for increasing the Reserve Price from 330 Crores to 450 Crores in the 6^th Sale Notice: According to the Liquidator/Applicant herein, during its 21^st meeting, the SCC clarified that this Adjudicating Authority recognized its intention to revaluate the Corporate Person’s Assets in the order dated 16.10.2023 passed in IA#1476/2023. Accordingly, the SCC decided to conduct valuations for Land & Building and Plant & Machinery and the valuation for Securities and Financial Assets was then underway. Thus, the Liquidator, as per the valuation determined by the SCC and as per the directions of this Tribunal vide the order dated 07.12.2023 in IA#1907/2023, had got issued the 6^th sale notice at a reserve price of Rs. 450 crores.

^2.7.9 Details of the Corporate Person’s properties and Sale Process:

^2.7.9.1 The Corporate Person possesses the following properties: Land admeasuring 143.825 acres located at Survey Nos.115, 117, 118, 119, 120, 121, 174, 175, 176, 177, 178, 179 of Yellareddigudem Village and 46, 47, 48, 49, 50, 796 of Cheruvugattu Village, Narketpally Mandal, Nalgonda District with building thereon along with Plant & Machinery of 350,000 MTPA Steel Billet Plant including vehicles.

^2.7.9.2 According to the Liquidator, the 6th Sale Notice, issued on 09.12.2023 was for sale of assets in 3 parcels (i) all assets together (ii) Factory assets (iii) Non-core vacant land, keeping the reserve price equivalent to the forced sale value as per the valuation undertaken by SCC. He further stated that Parcel 1 included Parcel 2 and Parcel 3. The Reserve Price of the 3 Parcels was Rs. 450 cr, Rs. 422 cr and Rs. 28 cr respectively. Further, it was indicated that eAuction of Parcel 2 and 3 will commence only if there are no bidders for Parcel 1.

^2.7.9.3 In response to the 6^th sale notice, 2 EOIs were received i.e (i) EOI for Parcel 1 from Kalyani Steels Ltd and (ii) EOI for Parcel 3 from Mahidhara Projects Ltd. Both qualified as eligible bidders. Though Kalyani Steel Ltd submitted the EMD on time, the Mahidhara Projects submitted EMD after stipulated timeline and hence, was not considered. The eAuction took place on 05.01.2024, and Kalyani Steels Ltd with a Bid amount of Rs. 450 cr, was declared as the successful bidder. The Liquidator issued the LOI on 08.01.2024 which was duly accepted by the successful bidder on 10.01.2024.

^2.7.9.4 Pursuant thereto, Kalyani Steels Ltd remitted the entire sale consideration of Rs. 450 cr after deducting applicable TDS on 07.02.2024 (including EMD of Rs. 23 Cr). The amount received from Kalyani Steels Ltd is Rs. 4,48,23,60,000/-, (after deduction of applicable TDS of Rs. 1,76,40,000/-). Additionally, they remitted the applicable GST amount for plant and machinery on 09.02.2024, of Rs.54,72,00,000/- which has been remitted to the GST department.

^2.7.10 Sale Certificate and handing over to the Corporate Person’s Assets to M/s Kalyani Steels Limited: The sale certificate has been issued to the successful bidder, M/s Kalyani Steels Limited, on 10.02.2024, by the Liquidator which has been duly acknowledged as received by M/s Kalyani Steels Limited and on the same day they took physical possession of the Corporate Person’s assets.

^2.7.11 Details of realisation and distribution of proceeds: It is submitted that:

^2.7.11.1 During the period 26.10.2018 to 08.01.2024 (ie prior to receipt of consideration for sale of assets under 6^th E Auction) a total amount of Rs. 11,24,40,391/- recovered from the receivables and forfeited EMD under 4^th sale notice, has been distributed by the erstwhile Liquidator amongst the Financial Creditors as per Section 53 of the code. The amount has been distributed from the receipts as detailed below:

^2.7.11.2 The details of proceeds realised from sale of Corporate Person’s assets following the 6^th sale notice and their distribution are as under:

The Liquidator further submits that residual amount of Rs. 1,14,776.86/- left in the HDFC Bank account after meeting all estimated expenses (and prior to closure of account) has also been passed on to the Lead Bank i.e. Indian Bank for meeting any contingency / litigation along with the provision of Rs. 30 lakh earmarked above.

^2.7.11.3 As per Section 53 of the code, the amount received on Sale of assets has been distributed / disbursed as under:

^2.7.12 As per Regulation 15(5) audited accounts of the Liquidator’s receipts and payments for all the financial years were annexed along with the progress report for the 4^th quarter of the respective financial year and the audited accounts of the Liquidator’s receipts and payments for the period 26.10.2018 to 04.03.2024 is annexed and marked as Annexure A14.

Details of the matters pending for decision concerning the Corporate Person are submitted as below:

As seen from the records, Company Appeal (AT) (CH) (Ins) No.187/2022 which is filed by Nimmagadda Suryapradeep Biotech P Ltd (successful bidder in the 4^th E Auction) seeking not to cancel their bid and further not to forfeit EMD is pending before Hon’ble NCLAT, Chennai.

Liquidation Cost details: The total Liquidation cost of the Corporate Person incurred is Rs. 6,50,14,956 /-.

It is averred that Designated Bank Account for the Corporate Person during liquidation period i.e. from 26.10.2018 to 26.11.2019, in terms of Regulation 2A (2) of the Liquidation Regulations, was opened with State Bank of India. Thereafter, a designated liquidation account was opened with HDFC Bank on05.10.2019,which was closed on 16.03.2024 after the completion of the liquidation process. All the receipts and payments during the liquidation process of the Corporate Person have been done through these accounts and after the proceeds are distributed as per the waterfall mechanism, the account has been closed on 16.03.2024 with a zero balance. Further, an amount of Rs. 31,14,776.86 /- towards contingency was kept with the lead bank, Indian Bank. The Liquidator has filed the receipts and payments of the Corporate Person during liquidation duly audited by Dimple Agarwal and Associates. The certificate dated 05.04.2024 issued by the Auditor is annexed and marked as Annexure A14.

In the light of above facts and circumstances of the case, the only point that emerges for consideration of the Tribunal is Whether the Corporate Person can be dissolved?

We heard the Ld. Counsel for the Liquidator Ms. Manoranjani and Ld. Liquidator Mr. K. Vatsa Kumar and perused the record.

The record reveals that six sale notices were issued by the Liquidator. Except for the 4^th Auction Notice, all other e-auction notices failed. Under the 4^th sale notice M/s Nimmagadda Surya Pradeep Biotech (P) Ltd participated in e-auction and was declared as successful bidder to acquire the Corporate Person as a going concern for a bid amount of Rs. 351 cr and paid the EMD of Rs. 5 Crores. However, the successful bidder failed to honour its commitments and this Tribunal vide order passed in IA 727/2022 and IA 114/2022 directed the erstwhile Liquidator to forfeit the EMD of Rs. 5 crores and initiate fresh bidding process.

Accordingly, the present Liquidator issued 6^th e-auction notice and as per the decision taken in the 21^st SCC meeting the reserve price was increased from Rs.330 crores to Rs. 450 crores. M/s Kalyani Steel Limited was declared as the Successful Bidder in the e-auction held on 05.01.2024 with the bid amount of Rs.450 crores.

The record further reveals that prior to 6^th e-auction notice, i.e. during the period from 26.10.2018 to 08.01.2024, and amount of Rs. 11,24,40,391/- was distributed by the erstwhile Liquidator amongst the Financial Creditors as per Section 53 of the Code. Likewise, post realization of the assets under 6^th e-auction notice, Rs. 4,48,71,55,581/- was distributed and the residual amount of Rs.1,14,776.86 left in the HDFC Bank account, after meeting all estimated expenses (prior to closure of accounts) has been transferred to the Lead Bank i.e. Indian Bank, for meeting any contingency/litigation along with Rs. 30 lakhs already earmarked towards contingency claims, as per the decision taken by the SCC in its 22^nd meeting.

Further the record reveals that a Company Appeal (AT) (CH) (Ins) No. 187/2022 filed by M/s Nimmagadda Suryapradeep Biotech P Ltd, who was the successful bidder under 4^th e-auction sale notice, challenging this Tribunal order dated 18.04.2022, is pending before Hon’ble NCLAT, Chennai. However, no stay is granted by the Hon’ble NCLAT and the matter is posted to 21.06.2024.

At the outset it may be stated that Section 54 of the IBC lays down the criteria for dissolution of the Corporate Debtor.

Regulation 45 of Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 reads as under:-

The final Compliance certificate in Form-H is filed by the Liquidator. As per Regulation 44(2) applicable then, the period for liquidation was two years. The Liquidation commenced on 26.10.2018 and the period was extended from time to time and the final extension was granted up to 12.05.2024. Further As per the final report the Liquidation value of the liquidation estate is Rs. 450.50 crores. The amount realized from sale of liquidation estate pursuant to the 6^th e-auction notice is Rs. 450 crores and the amount has been distributed to the stakeholders as per section 52 or 53 of the Code, under waterfall mechanism. The Liquidator has paid all the CIRP costs and Liquidation expenses.

In view of the above facts, we are satisfied that the criteria laid down under law has been fully complied with. As such, the Corporate Person is liable to be dissolved. Hence, we hereby order dissolution of the Corporate Person as under: -

The Corporate Person/M/s Kamineni Steel & Power India Private Limited stands dissolved from the date of this Order, in terms of Section 54(1) of IBC, 2016, and the Liquidator stands relieved.

The Liquidator is directed to send the copy of this Order within 14 days from the date of pronouncement, to the Registrar of Companies, Hyderabad.

Upon dissolution of the Corporate Person, the records of the Company which are in possession of the Liquidator, be handed over by the Liquidator to the IBBI.

The Registry is also directed to communicate this order to the Registrar of Companies, Hyderabad for updating the master data.

A copy of this order be also forwarded to the Insolvency & Bankruptcy Board of India, New Delhi.

In terms of the above, IA (Dissolution) No. 2/2024 filed by the Liquidator appointed for M/s KAMINENI STEEL & POWER INDIA PVT. LTD (Corporate Person) for dissolution of the Company under Section 54 (1) of IBC, 2016, is allowed and stands disposed of accordingly. Since the Corporate Person stood dissolved vide this order and no proceedings are now pending, therefore, the Registry is directed to consign the file to records.