M/s Shiva Shakti Elmech Private Limited vs M/s Drake and Scull Water & Energy India Private Limited

Per: Ajay Kumar Vatsavayi, Member(Judicial)

The instant CA has been filed by the applicant-Resolution Professional to place on record the revised Form H, dated 13.11.2019 and copy of minutes of the 14th meeting of the Committee of Creditors, dated 13.11.2019.

In the circumstances, the instant CA is allowed and the aforesaid documents are taken on record. CA No.77 of 2020 stands disposed of accordingly.

This interim application has been filed to place on record the additional affidavit of Mr. Shiv Nandan Sharma, the Applicant-Resolution Professional and Board resolution of the Resolution Applicant in compliance with the order dated 13.02.2020. A copy of confirmation of extension of Performance Bank Guarantee letter has also been annexed with this IA as Annexure A-2.

In the circumstances, the above documents are taken on record and IA No.239/2020 stands disposed of accordingly.

The present application is filed by Resolution Professional (RP) under Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the Regulations) seeking sanction of resolution plan as approved in the meeting of Committee of Creditors (CoC) held on 13.11.2019.

It has been submitted that the insolvency petition was filed by the Operational Creditor i.e. M/s Shiva Shakti Elmech Private Limited under Section 9 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP) in the case of M/s Drake and Scull Water & Energy India Private Limited (Corporate Debtor) and the same was admitted vide order dated 30.10.2018 and the CIRP of the Corporate Debtor was initiated. It is submitted that Ms. Nisha Malpani was appointed as Interim Resolution Professional (IRP) vide order dated 30.10.2018 and within three days of the appointment order, the IRP issued a public announcement as per Regulation 6 of the Regulations read with Section 15 of the Code in Form A in two newspapers i.e. Financial Express, (English) and Jansatta (Hindi), both dated 02.11.2018 thereby inviting claims from the creditors of the Corporate Debtor as envisaged in the Code.

It is submitted that till the last date for the submission of claims as per the public announcement i.e. 13.11.2018, the IRP received claims from secured Financial Creditors and Operational Creditors and basing on the collated claims, the IRP constituted the Committee of Creditors (CoC) on 26.11.2018 and subsequently re-constituted the CoC on 17.12.2018 (on account of withdrawal of claims by ICICI Bank on 17.12.2018 and AbhuDhabi Commercial Bank on 18.12.2018) and submitted the revised report with this Tribunal on 21.12.2018 and 24.12.2018. The document for constituting the CoC is attached and annexed as Annexure A-4 of the application. It is stated that in the 2nd meeting of the CoC held on 16.12.2018, the CoC resolved to replace Ms. Nisha Malpani with the proposed RP i.e. Mr. Shiv Nandan Sharma and accordingly, this Authority vide order dated 24.12.2018 in CA No.622/2018 appointed him as Resolution Professional (RP).

It is submitted that the applicant as RP has also appointed two valuers namely; Apex Valuers and Pratik Sharma & Associates to determine the fair value and liquidation value of the corporate debtor in accordance with Regulation 35 of the Regulations and the liquidation value as assessed on the basis of these reports as per unamended Regulation 35 which are as follows:-

INR in Millions

It is stated that the shares of the members of CoC after incorporating all the claims of all creditors is as follows:-

*Existing claim from Passavant Energy and Environment India Pvt. Ltd. shall continue as it is in the books of corporate debtor from the approval of the plan and no interest shall be accrued/paid for the same during the tenure of this plan.

It is further submitted that in the 4th meeting of the CoC held on 12.01.2019, the Information Memorandum (IM) prepared by the applicant-RP was shared with the CoC members after receiving undertaking of maintaining confidentiality of the IM. It was also resolved to appoint Transaction Auditors for the period ranging from 01.04.2016 to 30.10.2018, in case of Corporate Debtor.

It is also stated that CoC in its 5th meeting dated 24.01.2019, the CoC deliberated and approved the eligibility criteria for inviting Expression of Interest (EOI) from the prospective applicants. It was resolved to approve the appointment and fees of M/s K.G. Somani & Co. as Transaction Auditor of the Corporate Debtor.

It is submitted that the Expression of Interest (EOI) has been called from eligible resolution applicants on 25.01.2019 as prescribed in Regulation 36 (A) of the Regulations by publishing Form G in 'Financial Express (English), Mumbai and Delhi Edition and Jansatta (Hindi), Delhi Edition.'

It is submitted that CoC in its 6th meeting took note of invocation of non-fund based instruments and effect of such invocation on the reconstitution of CoC and pursuant to the reconstruction, the shareholding is as under :-

It is also submitted that the CoC in its 6th meeting was informed that after publication of Form G, since six persons have shown interest, but none of the parties have submitted EOI till the last date of submission i.e. 10.02.2019, it was resolved to publish revised Form G to enable the above parties and any other potential party to submit the EOI. Accordingly, revised Form G was published on 25.02.2019, wherein the last date of submission of EOI was extended to 03.03.2019.

It is further stated that CoC in its 7th meeting dated 04.04.2019, approved the eligibility criteria for inviting fresh Expression of Interest and also the request for resolution plan (RFRP) & evaluation matrix prepared by the RP in CIRP of the Corporate Debtor. It was also resolved to publish the revised Form G on 05.04.2019 in the same newspapers wherein the earlier Form G was published.

It is further submitted that CoC in its 7th meeting resolved and directed the applicant-RP to file an application before the Adjudicating Authority seeking an extension of the CIRP by 180 days. This Tribunal vide its order dated 29.10.2019 was pleased to extend the period of CIRP in respect of Corporate Debtor by 90 days.

It is submitted that revised Form G was again published on 05.04.2019 wherein the last date for receipt of Expression of Interest was extended to 20.04.2019. It is further mentioned that in the meanwhile an email request from the prospective resolution applicants was received to extend the date of EOI from 20.04.2019 to 26.04.2019 without any changes in the timeline. Accordingly, a corrigendum was published in newspapers 'Financial Express', Mumbai & Delhi English Edition and 'Jansatta' Hindi extending the last date of EOI to 26.04.2019.

It is further stated that the CoC in its 8th meeting ratified the approvals taken via email by the RP in relation to the extension of EOI and timeline to submit the resolution plan.

It is stated that the CoC in its 8th meeting was informed that two resolution applicants i.e. (i) Passavant Energy & Environment GmbH (R1) and (ii) Maa Pahari Mercantiles Private Limited (R2) have submitted their proposal on 02.07.2019 by hand in sealed envelopes and the resolution plans were opened in front of CoC in its 8th meeting. It is further submitted that both the resolution applicants were advised for removal of deficiencies in plans and to clarify observations of Process Advisors on Section 29A qualification in the 9th meeting of CoC held on 12.07.2019.

The resolution plans submitted by R1 & R2 were further reconsidered & reviewed in 10th, 11th, 12th and 13th meeting of the CoC held on 20.07.2019, 30.10.2019, 05.11.2019 and 09.11.2019 respectively. The CoC has also advised both R1 & R2 to revise their resolution plans to their satisfaction in the meetings.

It is further stated that in the 13th meeting of CoC dated 09.11.2019, the Resolution Plan submitted by R2 was found deficient under Section 30(2) (a) of the code. It is stated that the Plan submitted by R2 does not propose full payment of CIRP costs that may be incurred till the approval of the plan by this Tribunal which is in contravention to the statutory provision under Section 30 (2) (a) of the Code. It is stated that the plan of R2 was found to be deficient in terms of Section 30 of the Code and the financial proposal is also stated to be inferior in comparison to the plan submitted by R1.

It is mentioned that both R1 & R2 were given time to submit final revised and compliant plans based on the negotiations/discussions with the CoC but only R1 submitted the revised plan within the timeframe and therefore, only one plan submitted by R1 remained in contention then.

It is submitted in the (14^{\text{th}}) meeting of CoC held on 13.11.2019, the resolution plan by Passavant Energy & Environment GmbH (R1) was approved with (100%) voting in its favour. Copy of the complete resolution plan is at Annexure A-25 (Colly) of the application.

It is also submitted that CoC while accepting the bid had taken care of all the provisions and Regulations. It is prayed that the application may be allowed and resolution as approved by the CoC in the CIRP of the Corporate Debtor be approved.

The learned counsel for the RP submitted that as per the Amended Form H (Annexure A-1 of Diary No.7388, dated 24.12.2019), all the provisions of the Code and Regulations were complied with and that the approval of the resolution plan was made by (100%) voting share of the financial creditors in the meeting of the CoC held on 13.11.2019 and therefore, resolution plan submitted by Passavant Energy & Environment GmbH be approved.

We have carefully considered the submissions of the learned counsel for the RP and the learned Counsel for the resolution applicant and have also perused the record.

The corporate debtor was incorporated on 16.12.2011 and the CIRP proceedings were initiated against the corporate debtor by order delivered on 30.10.2018. The present application is filed for approval of the resolution plan submitted by M/s Passavant Energy & Environment GmbH (Resolution Applicant). The approval has been sought under the provisions of Section 31 (1) of the Code.

We may first of all state that after receipt, verification and collation of claims as discussed above, the IRP constituted the CoC as per the provisions of Section 21 of the Code. The details of the financial creditors, the distribution of voting share among them and the position of voting for the resolution plan is as under (para No.5 of Revised Form H):-

The details of stakeholders under the resolution plan are given in Para 7 of Revised Form H (Diary No. 7388 dated 24.12.2019) :-

(Amount in Rs. Crores)

The compliance of the resolution plan has been given in Para No. 9 of Revised Form H are as follows:-

The approval of the resolution plan has been sought under Section 31 (1) of the Code, reading as follows:-

The conditions provided for in Section 31(1) of the Code for approval of resolution plan are therefore:-

The satisfaction of the conditions is discussed below.

It is submitted by the RP that the resolution plan has been approved by a vote of 100% of voting share of the financial creditors and therefore, the conditions provided for by Section 30(4) of the Code are satisfied.

The provisions of Section 30(2) of the Code are as follows:-

The compliance of Section 30(2) of the Code is given in para No.9 of Form H (supra). The same is being further examined as under:-

- (a) Section 30(2)(a): The resolution plan (page 187 of the application and Clause 1 of Part II of the Resolution Plan) states that payment of insolvency resolution process cost estimated as on 30.06.2019 is ₹5.70 Crores and the Resolution Applicant proposes to pay ₹2 Crores within 30 days from the date of approval of resolution plan by the Adjudicating Authority. The Resolution Plan proposes to pay the total cost in full by the Resolution Applicant within 270 days from the approval of the plan by the Adjudicating Authority. It is also stated in the plan that the CIRP Costs (to the extent unpaid) shall be paid in priority to any other creditors of the Corporate Debtor in the manner and from the source of funds as set forth in this Plan.

We are now examining the compliance of the proviso to Section 31(1) of the Code that the resolution plan has provisions for its effective implementation. Part VII (Revival Plan, Implementation and Management Control) of the resolution plan discusses that an appropriate supervisory committee shall be appointed within 10 Business Days of the approval of the plan by this Adjudicating Authority for the effective implementation of the resolution plan. It is also stated that the CoC shall constitute the supervisory committee, which may comprise one representative of the Resolution Applicant, representative of the COC and a qualified Insolvency Resolution professional (which may or may not be RP) to be appointed by CoC in consultation with the resolution applicant, which shall monitor the implementation of the plan after the Effective Date and until closing date. It is also submitted that the monitoring committee so appointed shall provide regular updates to the financial creditors, until the financial creditors receive the amounts payable to them as proposed in this Resolution Plan, would also ensure that all the assets of the Company remain vested in the Company on an as is basis & free from all encumbrances. The Monitoring Committee, as stated in the plan, would issue an certificate that the Resolution Plan has been duly implemented and the payments contemplated in this Resolution Plan have been duly completed. It is also stated that the issuance of certificate by this committee shall be a discharge of the Resolution Applicant from their obligation to implement this Resolution Plan in accordance with its term.

We have discussed above that the requirements under Section 31(1) of the Code are satisfied in the present case. In para 4 of Form H the RP has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force. The RP has also certified that Mr. Mokhtar Haddad, Acting Managing Director of the resolution applicant M/s Passavant Energy & Environment GmbH submitted an affidavit pursuant to Section 30(1) of the Code confirming their eligibility under Section 29A of the Code to submit the resolution plan and the contents of the said affidavit are in order. The aforesaid affidavit is a part of Diary No.846, dated 30.01.2020. The RP has submitted that the resolution plan has been approved by the CoC with 100% voting share in accordance with the provisions of the Code and CIRP Regulations made there under and after considering the feasibility and viability and other requirements specified by the CIRP Regulations.

We shall now discuss the requirements of Regulation 39(4) of the Regulations. An Copy of Letter of Intent (LOI) dated 13.11.2019, duly accepted by M/s Passavant Energy & Environment GmbH, has been found attached with the application wherein it is stated that the resolution applicant shall furnish an unconditional & irrevocable performance bank guarantee in India for an amount equivalent to 10 % of the total bid amount within 1 day of approval of plan by CoC for implementation of the resolution plan (Annexure A-28 of application). As per the requirement of performance security, a Bank Guarantee covering letter dated 10.12.2019 issued by RBL Bank for an amount of Rs.1,32,40,000/- as Bank Guarantee (Bank Guarantee No.PBGI00701900863) is placed on record and is a part of Diary No. 846 dated 30.01.2020. The copy of Bank Guarantee Amendment covering letter (dated 12.05.2020) confirming the extension of the Performance Bank Guarantee is also placed on record vide Spl. Diary No.68, dated 01.06.2020. The RP should ensure that the performance security is received as per the decision of the CoC.

It is also stated that the Resolution Professional have formed an opinion on the basis of Transaction Audit Report of M/s K G Somani & Co. that no transaction has been discovered or determined in the case of the Corporate Debtor under Sections 43,45,50, and 66 of the Code (Para 15 of the Resolution Plan).

When the matter was listed on 27.01.2020, the Resolution Professional was directed to file Form H with appropriate page numbers referring the plan and copy of the Bank Guarantee by day after tomorrow and the orders were reserved in CA No.1192/2019 and 77/2020. During the perusal of record, some clarifications were sought for and the following order was passed on 12.02.2020 :-

IA 239 of 2020 was filed by the Applicant-Resolution Professional in order to clarify the above observations made by this Bench in the order dated 13.02.2020. The Resolution Professional enclosed the certified true copy of the Board Resolution dated 06.03.2020 of the Resolution Applicant and its affidavit dated 06.03.2020. The affidavit of the Resolution Professional dated 22.05.2020 is also appended to the said IA. The Resolution Applicant in its board meeting dated 06.03.2020 passes the following resolutions:-

The Resolution Applicant has filed affidavit dated 06.03.2020 confirming the said Board resolution. The Resolution Professional in its affidavit dated 22.05.2020 also confirmed the Board Resolution and affidavit of the Resolution Applicant to the effect that the claim of Passavant Energy and Environment India Pvt. Ltd. has also extinguished on approval of the Scheme and that the reliefs and concessions which was specifically granted only by this authority forms part of the Scheme.

As per part V of the resolution plan (page 218 of the application), the Resolution Applicant has prayed for various reliefs and concessions. It is observed that these reliefs and concessions cannot be granted as a matter of right to the Successful Resolution Applicant and would only be allowed if they are in accordance with the subsisting law on the present subject. Hence, it is clarified that only the reliefs and concessions, which are permissible under the Code pursuant to the approval of resolution plan by this Adjudicating Authority can be granted and the rest cannot be considered.

In view of the above discussion, the resolution plan submitted by M/s Passavant Energy & Environment GmbH as approved by the CoC under Section 30 (4) of the Code is hereby approved subject to comments in para No. 35 to 39 regarding performance security and reliefs and concessions as provided in the plan. The resolution, plan so approved shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.

Under the provisions of Section 31 (3) of the Code, we also direct as under:-

CA No.1192/2019 is disposed of.