M/s Pragati Impex India Private Limited vs M/s Vistar Construction Private Limited

PER: SH. L. N. GUPTA, MEMBER (T)

The present IA No. 3636 of 2023 has been filed by Mr. Amit Agrawal (hereinafter referred to as, the ‘Applicant/RP’) under Section 30(6) of IBC, 2016, seeking the following reliefs:

To put the facts concisely, the underlying main Petition CP (IB)-662/(ND)/2021 was filed by M/s Pragati Impex India Private Limited against the Corporate Debtor namely, M/s Vistar Construction Private Limited under Section 7 of IBC, 2016, which was admitted vide Order dated 05.08.2022 of this Adjudicating Authority and Mr. Ankit Agrawal was appointed as the IRP of the Corporate Debtor. He was replaced by Mr. Amit Agrawal, on being confirmed as RP by the CoC in the 1^st CoC meeting dated 29.08.2022 and by this Adjudicating Authority vide order dated 08.09.2022.

It is submitted by the Applicant that in terms of Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the IRP made a Public Announcement in Form-A on 06.08.2022, which was published in Business Standard Delhi (Hindi & English Edition) on 08.08.2022 to invite claims. Pursuant to the receipt of claims qua the Corporate Debtor, the IRP constituted a Committee of Creditors (CoC) comprising the sole Financial Creditor viz, Pragati Impex India Pvt Limited.

It is stated by the Applicant that ‘Form-G’ was published on 07.10.2022 and 06.01.2023 in the daily newspapers, namely, Financial Express (English), and Jansatta (Hindi). It is added that as per the second Form G, the last date for submission of EOI was 21.01.2023. Pursuant to the said publication, the Applicant/RP received the following 5 EOIs -

On 15.03.2023, the last date for submission of Resolution Plans, the RP received only 2 Resolution Plans from 2 PRA’s namely, - M/s Masatya Technologies Private Limited and M/s Evalina Powertec Systems Private Limited. After some negotiations, the CoC asked both the PRAs to revise their plans.

As a result, M/s Masatya Technologies Private Limited, in supersession of its Resolution Plan dated 20.03.2023, submitted the Revised Resolution Plan dated 05.06.2023 to the RP. The RP forwarded the Revised Resolution Plan to the COC for its consideration. On 09.06.2023, the RP convened the Seventh Meeting of COC to discuss and consider the Revised Plan submitted by M/s Masatya Technologies Private Limited. After detailed negotiations and deliberations, it was decided that the Resolution Applicant shall again revise and increase the amount offered in his plan and shall issue an addendum note for same, thereafter the COC shall vote for the resolution plan. It is pertinent to mention that M/s Evalina Powertec Systems Private Limited neither submitted any revised resolution plan nor made any representation before the COC.

The RP, after examining the Revised Resolution Plan in accordance with Section 30 (2) of IBC, placed the same along with the clarificatory letter 10.06.2023 before COC for its consideration and voting. The voting sheet along with the Resolution placed before the CoC reads thus:

Thus, it is observed that the Resolution Plan submitted by M/s Masatya Technologies Private Limited was approved by the CoC with 100% votes.

The details of the CIRP, fair and liquidation value of the CD, the distribution of the resolution plan amount amongst the stakeholders, and compliances are given in the “Compliance Certificate” filed by the RP in Form ‘H’, which is reproduced overleaf for the purpose of immediate reference:

As per the abovementioned Form ‘H’ filed by the Applicant on record, the Fair Market Value of the Corporate Debtor is Rs.369.93 lakhs and the Liquidation Value of the Corporate Debtor is Rs.259.49 lakhs. The total amount provided under the CoC-approved Resolution Plan is Rs.267 lakhs (including the CIRP cost of Rs. 75 lakhs), which is 60.54% of the total amount claimed and 103% of the Liquidation Value.

During the course of the hearing on 10.08.2023, RP present in person fairly submitted that he will confine his claim for the professional fee in terms of the provisions of Schedule II to IBBI (CIRP) Regulations, 2016 i.e., the minimum fee as per the slab mentioned in the schedule plus the actual expenses incurred by him while conducting the CIR Process of the Corporate Debtor. He further stated the amount earmarked as Corporate Insolvency Resolution Process cost beyond the admissible fee and expenses would be available for distribution amongst the Creditors/stakeholders. He agreed to file an affidavit to that effect.

In compliance, the Applicant/RP has filed the additional affidavit dated 11.08.2023 stating that after the voluntary reduction of his fee by Rs.28,00,000/- including GST, RP’s fee stands revised to Rs.47,00,000/-(forty-seven lakhs). The additional sum of Rs.28,00,000/- shall be available for distribution to the Financial Creditor. His affidavit dated 11.08.2023 is reproduced below, for the sake of immediate reference:

We heard the Ld. Counsel for the RP and have gone through the pleadings on record. After perusal of the application and documents on record, we felt that in the interest of justice, certain clarifications were needed from the Applicant (RP)/SRA. Accordingly, vide order dated 17.08.2023, the following clarifications were asked from the RP/and SRA:

In response, the Applicant/Resolution Professional filed an additional affidavit dated 23.08.2023, stating the following:

The RP in its affidavit (ibid) has stated that the property of CD namely, the basement of C-23 Greater Kailash-I, New Delhi was included in the Information Memorandum (IM). However, the properties viz., Unit Nos. 910, 923 & 923A, and 1022A situated on the 9^th floor and 10^th floor with each having a covered area of 345 sq. ft. located at Plot No. 4, Dwarka City Centre, Sector-13, Dwarka, New Delhi were subsequent discoveries in terms of the order of the Hon’ble High Court of Delhi dated 01.06.2023 and the information regarding these properties was made available to CoC. At this stage, we refer to the aforesaid order of the Hon’ble High Court of Delhi, which reads thus:

On perusal of the abovementioned order of the Hon’ble High Court of Delhi dated 01.06.2023, it is observed that the settlement with respect to properties situated at Plot No. 4, Dwarka City Centre, Sector-13, Dwarka, New Delhi was arising out of an Execution Proceedings between the CD and Divine Infracon Private Limited and the Corporate Debtor is the Decree Holder.

Further, on checking the order dated 07.10.2021 in OMP. (ENF) (COMM.)163 of 2021 available in the public domain on the website of the Hon’ble High Court of Delhi, it is noticed that the CD (prior to CIRP) had filed a petition for seeking execution of the Arbitral Award dated 23.08.2014 for a sum of Rs.3,01,07,609/- along with 9% p.a. future simple interest. The said order 07.10.2021 is reproduced below, for the purpose of immediate reference:

From the conjoint reading of the orders dated 07.10.2021 and 01.06.2023 passed by the Hon’ble High Court of Delhi (ibid), it is observed that the amount of Rs.3,01,07,609/- along with 9% p.a. future simple interest has been replaced with Properties (viz., Unit Nos. 910, 923 & 923A, and 1022A on the 9^th floor and 10^th floor with each having a covered area of 345 sq. ft.) located at Plot No. 4, Dwarka City Centre, Sector-13, Dwarka, New Delhi. This Adjudicating Authority vide order dated 17.08.2023 had, inter alia, specifically asked the following:

In response, the Applicant/RP has stated in Para 3B of his affidavit dated 23.08.2023 that these being subsequent discoveries, he had informed the CoC about these properties. However, he did not give a direct answer regarding the valuation of these properties being undertaken and the inclusion of such valuations for the purpose of calculating the liquidation and fair market value of the Corporate Debtor.

It is a settled position that the CoC is not the Competent Authority to conduct the valuation and compute the Fair Market Value and Liquidation Value of the Corporate Debtor, rather it is the RP, who is duty-bound and should have instructed the Registered Valuers to undertake valuation of the newly inducted properties i.e., unit no. 910, 923, 923A and 1022A at 10^th floor having covered area 345 Sq. Ft. forming part of the Hotel Building constructed at Plot No. 4, Dwarka City Centre, Sector-13, Dwarka, New Delhi. With the addition of the abovementioned properties of the Corporate Debtor at Dwarka, when there was a significant change in the asset pool of the Corporate Debtor, we are unable to understand what prevented the RP from conducting a re-valuation of the assets of the Corporate Debtor.

Needless to say, the Prospective Resolution Applicants (PRAs) furnish their Resolution Plans based on the Information Memorandum (IM) prepared by the Resolution Professional, where a list of all the Assets of the Corporate Debtor is given. Since the properties situated at Dwarka (ibid) were a later discovery, they were not included in the Information Memorandum. Thus, the valuation of the newly inducted properties situated at Dwarka was not conducted by the RP, and the other PRAs were not given any chance to bid for the Corporate Debtor while keeping in mind the property situated at Dwarka being part of the asset pool of the Corporate Debtor. Had the properties at Dwarka been included/added subsequently in the IM and valuation, the Fair Market Value and Liquidation Value of the Corporate Debtor would have changed significantly to attract more Prospective Resolution Applicants to submit the Resolution Plan with higher value.

Further, through the present Resolution Plan, the ownership rights of the newly-inducted Dwarka Properties (ibid), which were never part of the Information Memorandum notified by the RP, are proposed to be transferred to the SRA herein, who would be in an advantageous position vis-à-vis the prospective bidders in rem. In our considered view, this is a material irregularity in the exercise of the powers by the Resolution Professional during the CIR Process of the Corporate Debtor.

In the circumstances, we have no other option but (a) to reject the present Resolution Plan; (b) direct the Resolution Professional to conduct a fresh valuation of the Corporate Debtor’s properties, inter alia, including the Unit no. 910, 923, 923A, and 1022A at 10^th floor having covered area 345 Sq. Ft. forming part of the Hotel Building constructed at Plot No. 4, Dwarka City Centre, Sector-13, Dwarka, New Delhi and issue the Information Memorandum; (c) issue a fresh ‘Form G’ through a wide publication; and (d) complete the entire process of seeking approval of CoC, for the Resolution Plans if received, at the earliest. It is, however, made clear that the SRA of the present resolution plan will have the liberty to submit its EOI if it so wishes.

Accordingly, the IA-3636/ND/2023 is disposed of with the aforesaid directions.