Luhariwala Finance & Investment Private Limited vs Slogan Infotech Private Limited

Per: Kuldip Kumar Kareer, Member (Judicial)

This is an application being IA No. 1131/MB-V/2023 filed by Mr. Shreyansh Jain, the Applicant, under Section 30 (6) & 31 of IBC, 2016

(hereinafter called as “the Code”), for approval of the Resolution Plan submitted by consortium of MKS Flexituff Limited and Anamika Infracon Private Limited (hereinafter called as the “Resolution Applicant”) for an amount of Rs.1,02,69,429/-, for the Corporate Debtor, Slogan Infotech Private Limited (hereinafter called as the “Corporate Debtor”) and approved by 100% voting shares of the Committee of Creditors (hereinafter “the CoC”) members.

The brief submissions on behalf of the Applicant are as under:

This Tribunal vide its order dated 15.07.2022 admitted the Petition filed by the Financial Creditor under section 7 of the Code against the Corporate Debtor and Mr. Shreyansh Jain, (hereinafter referred to as “the Applicant”) was appointed as an Insolvency Resolution Professional (hereinafter “IRP”) in the matter.

Thereafter, in compliance of Regulation 6 (1) (b) (i) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter called as the “CIRP Regulations”), the Applicant carried out the public announcement in Form A on the IBBI website on 20.07.2022 and published the same on 21.07.2022 in the newspapers i.e. Financial Express and Navarashtra, covering the region where the registered office of the Corporate Debtor was located, thereby calling upon the creditors to submit their claims on or before 02.08.2022.

Pursuant to public announcement, the Applicant received only one claim from Luhariwala Finance and Investment Private Limited i.e. the Financial Creditor in CP No. 648 of 2021 and constituted the Committee of Creditors (hereinafter called as the “CoC”) and convened the first meeting on 18.08.2022. In the said meeting, the CoC approved the appointment of the Applicant as the Resolution Professional of the Corporate Debtor with 100% votes and further ratified the expenses and fees of the Applicant during the CIRP.

Thereafter, in the 2nd CoC meeting dated 15.09.2022, the Applicant informed the CoC members that he had requested the suspended Board of Directors for provisional financials, financials of companies, list of debtors/customers containing contact details, details of corporate guarantees etc. Furthermore, it was also discussed that since the Corporate Debtor did not have any Land and Building and Plant and Machinery, the Applicant had called for quotation from registered Valuers only in respect of Securities and Financial Assets. The CoC had also approved the appointment of Mr. Ashutosh Dwivedi and Mr. S.P Das as registered Valuers for conducting valuation. Similarly, Ms. Namrata Randeri from Chaturvedi & Chaturvedi was appointed as the Transaction Auditor for conducting audit covering the transactions under Sections 43, 45, 50 and 66 of the Code.

In the 3rd CoC meeting dated 19.11.2022, the Applicant informed the CoC members that on 01.10.2022, the Applicant had published Form G (Inviting Expression of Interest (hereinafter called as the “EOI”) for submission of Resolution Plan in Business Line (English) and Pratahkal (Marathi) newspapers and had also uploaded the same on the IBBI website. Pertinently, as per the published Form G, the last date for submission of EOI was 15.10.2022. However, after receiving requests from the interested parties for extension of last date of submission of EOI, the Applicant with the approval of the CoC and in view of maximizing the value of assets of the Corporate Debtor had published the 1st Corrigendum to Form G wherein the last date for submission of EOI was 28.10.2022.

Consequently, the Applicant was in receipt of one EOI from Nakshatra Corporate Advisors Limited along with Earnest Money Deposit (hereinafter called as the “EMD”) of Rs.10,00,000/- (Rupees ten lakh only). However, with a view to maximize the value of the assets of the Corporate Debtor and with the approval of the CoC, the Applicant once again published the 2nd Corrigendum to Form G wherein the last date for submission of EOI was 15.11.2022.

Pursuant thereto, the Applicant received a total of 3 EOIs along with EMD amount of Rs. 10 lakhs from each of the following Prospective Resolution Applicants (hereinafter called as the “PRA”):

Subsequently, on 16.11.2022, the Applicant shared the Provisional List of PRAs and had further requested for a list of pending documents and queries from all the PRAs. Thereafter, on 24.11.2022, the Applicant also shared the Final List of PRAs wherein the following PRAs were mentioned:

a. Nakshatra Corporate Advisors Limited; and

b. Anamika Infracon Pvt. Ltd. and its consortium member.

In the 4th CoC meeting dated 26.12.2022, the Applicant informed the members that Request for Resolution Plan (hereinafter called as the “RFRP”) and revised Information Memorandum was shared with all the PRAs. The Applicant further discussed that the last date of submission of Resolution Plan was 24.12.2022 and till then, the Applicant was in receipt of only one Resolution Plan from Consortium of MKS Flexituff Limited and Anamika Infracon Private Limited. Hence, with approval of the CoC members, the said Resolution Plan was opened.

Thereafter, in the 5th CoC meeting dated 29.12.2022, the Resolution Plan submitted by the Consortium of MKS Flexituff Limited and Anamika Infracon Private Limited was discussed. After discussions and deliberation, the CoC requested the PRA to revise its Resolution Plan and increase the amount proposed in the said Plan. Further, the Applicant also informed the CoC regarding the expenses incurred by him during CIRP.

Subsequently, in the 6th CoC meeting dated 06.01.2023, the Applicant discussed and informed the members about the Valuation and Transaction Audit Reports received from the Valuers and Auditor respectively. The members were further informed about the status of the Resolution Plan wherein it was observed that based on the discussion and negotiations held in the 5^th CoC meeting, the PRA had revised the Resolution Plan and had made certain changes. Hence, on recommendation of the CoC members, the agenda for approval of the Resolution Plan was put to vote. Pursuant to that, the CoC via voting through electronic means resolved to approve the Resolution Plan submitted by the Consortium of MKS Flexituff Limited and Anamika Infracon Private Limited with 100% votes. The relevant extract from the meeting is reproduced hereunder for ease of reference:

The Applicant submits that MKS Flexituff Limited is a multi-product, multi-market, multi-location enterprise. With four manufacturing plants across India, a wholly-owned distribution company in United Kingdom, and a dedicated warehousing supply and technical services network in all continents, export to over 60 countries and employing over 7000 global citizens, MKS Flexituff Limited is an Indian multi-national company that has come of age. Anamika Infracon Private Limited is involved in Building completion (including activities contributing to completion or finishing of a construction), has undertaken many projects, out of which major successful project is Bhagwat Vatika located in Rajasthan.

The Consortium of MKS Flexituff Limited and Anamika Infracon Private Limited (hereinafter called as the “Successful Resolution Applicant”) has signed an Undertaking/Declaration dated 06.12.2022 and 14.11.2022 respectively while submitting the EOI documents in compliance with Section 29A of the Code evidencing that they are eligible to submit the Resolution Plan.

The Applicant submits as per the Information Memorandum, there are no pending dues of Operational Creditors, Employees and Workmen and there are no dues pending on account of Statutory Dues. Hence, there is only one unsecured Financial Creditor in the list of creditors of the Corporate Debtor. The Applicant, therefore, submits that the salient terms and conditions of the Financial Proposal laid down in Resolution Plan are as follows:

The Applicant submits that the Resolution Applicant proposes the total resolution amount of Rs. 1,02,69,429/- (Rupees one crore two lakhs sixty-nine thousand four hundred twenty-nine only) towards resolution of the Corporate Debtor. The details for the same are reproduced hereunder for the ease of reference:

Further, the details of the Resolution Plan proposals and the source of funding are as under:

The Applicant submits that the Resolution Applicant, in its Resolution Plan has, inter alia sought some concessions/reliefs in order to conduct the business operations smoothly after implementation of the Resolution Plan and has also laid down mandatory contents as per Section 30(2) of the Code read with Regulation 38 of CIRP Regulations. 2.18 The Applicant further submits that in compliance with Section 30(2) of the Code and Regulation 39(4) of CIRP Regulations, 2016, Compliance Certificate in Form H has also been submitted before the Insolvency and Bankruptcy Board of India.

The Resolution Applicant proposes to pay the unpaid CIRP costs of Rs.2,69,429 as of 29^th December 2022 under this Resolution Plan within 30 Days from the NCLT Approval Date. The payment towards unpaid CIRP costs shall be out of the upfront payment of Rs.32,69,429 (“Upfront Payment”) proposed under this Resolution Plan.

The Applicant submits that, CIRP cost may go above estimation of Rs.2,69,429 as on NCLT approval date and hence Resolution Applicant undertakes to pay any of increased cost towards the same upto Rs.5,00,000. If the CIRP cost goes above Rs.5,00,000 the same would be adjusted against the payment proposed to be made to the Financial Creditor.

In the event there is any litigation against Resolution Professional ("RP") and/ or Committee of Creditors ("CoC") in relation to any matter pertaining to Corporate Insolvency Resolution Process ("CIRP") of Slogan Infotech Private Limited ("Corporate Debtor") after conclusion of CIRP, all legal expenses and any other incidental expenses related thereto will be borne out of operational cash flows of the Corporate Debtor or by the Resolution Applicant.

There is no claim for employees and workmen as per Information Memorandum.

C. Proposal for Operational Creditors other than statutory dues and dues to employees and workmen

There are no claims for Operational Creditors (other than statutory dues and dues to employees and workmen)

There are no dues pending on account of statutory dues of the corporate debtor.

The Resolution Applicant proposes pay out to Financial Creditor (excluding related parties) a sum of Rs.1,00,00,000/- against their aggregate admitted claims of INR 1,24,03,688 as per payment and other terms as per their voting share/ percentage detailed below:

The Resolution Applicant proposes payment of settlement amount of INR 1,00,00,000 to financial creditors as under:

The overall Resolution Plan is for a total amount of INR 1,02,69,429 (involving Upfront Payment of INR 32,69,429) by below manner:

Shares shall be issued by the CD to the RA within 15 days from the NCLT Approval Date.

The Equity Shares shall be issued by the Corporate Debtor and subscribed by the RA as per Applicable Laws.

The amount aggregating to Rs.25,00,000/- received from the RA towards subscription of units as mention above shall be treated as Upfront Capital Infusion/Upfront Payment for the purposes of this Resolution Plan.

The Upfront Capital Infusion shall be funded by the Resolution Applicant through themselves, their Group Companies, their Financial Sponsors includes business contacts, friends, and relatives (in case of Individuals) and through persons forming part of the special purpose vehicle to be floated by the RA. The Resolution Applicant has undertaken that all the parties mentioned will be compliant of section 29A of Insolvency and Bankruptcy Code, 2016 & RFRP.

The shareholder’s approval required for said purpose shall be deemed to have been given as contemplated under explanation to Section 30 (2) (f) of the IBC.

The Corporate Debtor will continue to be managed and controlled by an Interim Monitoring Committee, comprising of 2 Independent Members one is appointed by the Secured Financial Creditor and one by the Resolution Applicant.

The Monitoring Committee shall continue to be in existence after the 30^th day from NCLT Approval Date till the Term of this Resolution Plan or payment to Financial Creditors in full as proposed in this Resolution Plan.

The CIRP has been conducted as per the timeline indicated as under:

i. As per IBC Code 30(2)(a) – A Resolution Plan provides for the payment of Insolvency Resolution Process Costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor.

ii. As per Section 30(2)(b), the RA has agreed to pay Operational Creditors (including workmen and employees) on priority basis to all other debts.

iii. The Resolution Applicant has agreed to meet the cost of project from existing resources including infusion of equity/debt from the Resolution Applicant's own sources.

- iv. The Resolution Applicant has also agreed that dissenting financial creditors shall be paid in priority and not less than the value they would have been paid in the event of liquidation of the Corporate Debtor. - v. The plan provides for the management of the affairs of the Corporate Debtor after approval of the Resolution Plan under Section 30(2)(c). - vi. The plan provides for a term of the plan, implementation schedule and supervision of the Resolution Plan under Section 30 (2) (d) & Regulation 38(2)(c). - vii. The Resolution Plan does not contravene any of the provisions of the law for the time being in force - Resolution Plan provides for the implementation and supervision of the resolution plan as per Section 30(2) (e) - viii. 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 as per Section 30(2)(f). - ix. As per IBBI Guidelines 38(1)(b) - the amount payable under a Resolution Plan -to the Financial Creditors, who have a right to vote under sub-section (2) of section 21 and did not vote in favour of the Resolution Plan, shall be paid in priority over Financial Creditors who voted in favour of the plan. - x. The Resolution Plan is in compliance of the Regulation 38 of the Regulations in terms of Section 30(2)(f) as under:

- a. There is no Operational Creditors under the Resolution Plan. Therefore, no possibility of non-compliance of the Regulation 38 (1) exists in this case. - b. The Resolution Plan has all the adequate means of supervising of the implementation of the Plan as required under Regulation 38(2) (c), of the IBBI, Insolvency resolution process for corporate persons, Regulation 2016. - c. Provides for the payment of CIRP Costs in priority to the repayment of any other debts of the Company (Regulation 38(1)(a)). - d. Provides for the manner of implementation and supervision of the Resolution Plan and adequate means for implementation and supervision of the Resolution Plan. - e. The Resolution Applicant confirms that to the best of the knowledge of the Resolution Applicant, the Resolution Plan is not in contravention of the provisions of Applicable Law and is in compliance with the Code and the CIRP Regulations. - f. The Resolution Applicant confirms that the Resolution Applicant and its connected persons are not disqualified from submitting a Resolution Plan under Section 29A of the Code and other provisions of the Code and any other Applicable Law. - g. The plan provides for the management and control of the business of the Corporate Debtor during its term.

- h. All the above factors demonstrate that the plan addresses the cause of default and the Resolution Applicant has the capacity to implement the Resolution Plan. - i. That the Resolution Applicant or any of its related parties has never failed to implement or contributed to the failure of implementation of any other Resolution Plan approved by the Adjudicating Authority at any time in the past. This is in compliance of Regulation 38(1)(b) of the Regulations. - j. The interests of all stakeholders (including Financial Creditors, Operational Creditors and other creditors, guarantors, members, employees and other stakeholders of the Company, have been taken care of keeping in view the objectives of the Code (Regulation 38(1A)).4. **The Resolution Plan has been approved with 100% voting in accordance with the provisions of the Code.**5. 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.

The Hon’ble Apex Court at para 42 in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.: (2019) SCC Online, 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 view of the above ruling of the Apex Court, the legislature has given paramount importance to the commercial wisdom of committee of creditors (CoC) and the scope of judicial review by the Adjudicating Authority (AA) is limited to the extent provided under section 31 of Code and of the Appellate Authority is limited to the extent provided under sub-section (3) of section 61 of the Code, is no more an untouched-matter.

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. Therefore, the Plan deserves to be approved. It is ordered accordingly in the following terms: