M/s SPP Insolvency Professionals LLP, RP of M/s Shree Ram Cottex Industries Pvt. Ltd

a. Allow this application and to pass an order confirming the CoC decision taken in the 12th CoC meeting held on 17.01.2025 in approval of the Resolution Plan submitted by Mr. Gunvantrai Vrajlal Bhadani; and

b. To pass such other orders or further orders which may deemed to be fit and proper in the interest of justice.

FACTS

11.5

The payments proposed to be made under this Plan are as follows:

"RESOLVED THAT the Revised Resolution Plan dt: 30.12.2024 submitted by Mr. Gunvantrai Vrajlal Bhadani for the resolution process of Corporate Debtor is hereby approved and confirmed by this committee u/s. 30(4) of the Insolvency and Bankruptcy Code, 2016 and the RP is directed to take necessary steps for obtaining the approval of the Adjudicating Authority under the provisions of IBC".

"Ld. RP of the Corporate Debtor stated that the plan value is at a steep discount and is close to 16-17% of the liquidation value of the Corporate Debtor. He further stated that there are parties who are willing to purchase the land separately for a higher value. In pursuant to that he undertook to file additional affidavits. On the other hand, Proxy Counsel appearing for the State Tax Department, states that a sick note has been circulated by the main counsel, requesting adjournment in the matter.

a. It is necessary to submits that in furtherance of the resolution process, we have received enquiries on publication of Form-G (Expression of Interest for CD) dated 07^th Oct 2024 from 10 parties. The list of the parties are as follows:

S. No.	Parties
1	Resurgent Property Ventures Private Limited
2	Paresh M. Vyas
3	CS Preeti Jain
4	Santosh Dubey - Rohstoffe International Pvt Ltd
5	Parth Modi - M G Threads
6	Gunvantrai Vrajlal Bhadani
7	Parth Dhami
8	Madhuvan Securities Pvt Ltd.
9	Real Value Infotech Projects Private Limited
10	Kundan Group

b. Subsequently, out of the 10 parties, EOIs have been received from 5 PRAs who were listed in the Final PRAs published by the Resolution Professional on 7^th November, 2024. The list of Final PRA's are as follow:

S. No.	Prospective Resolution Applicants
1	Gunvantrai Vrajlal Bhadani (Rajkot)
2	Mis M G Threads (Ahmedabad)
3	Consortium of Resurgent Property Ventures Private Ltd. and Sanjay Lodha (Gurugram)
4	Rohstoffe International Pvt Ltd (Mumbai)
5	Real Value Infotech Projects Pvt Ltd (Kolkata)

c. Out of the Five PRAs, only two have submitted resolution plans and such was verified by the Resolution Professional and placed before the COC members in the 11^th COC meeting on 23^rd Dec 2024 for their comments. In the meeting, the COC members suggested that the plan value was very low compared to the valuation of the CD and informed the parties who has submitted resolution plan to improve their plans and also directed the Resolution Professional to follow up with the parties for improved resolution plan. Out of 2 plans, one party has improved their plan and other party did not chose to modify his resolution plan.

d. The Resolution Professional even though understanding that the Resolution Plan is significantly lower than the liquidation Value i.e. wherein PRAs proposing to pay Rs.1.5 crores and Rs. 2 crores respectively have placed both the plans before the COC members for their comments, the COC members has decided to vote upon the resolution plan received and directed the Resolution Professional to place the Resolution plan for voting. However, the CoC after detailed discussions, has approved the resolution plan submitted for 1.5 crores. Hence the voted resolution plan was placed before this Hon'ble Tribunal for their consideration on approval of the said plan.

e. During the course of the EOI and Plan submission process, the RP had detailed discussions with all the PRA's. One of the PRA has mentioned that the Fair value of Rs.12,42,36,559/- is very high and it will work out for them only at the range of 6-7 Crs for the land & building. In Further discussion with various land brokers in the region, we understand the market going rate in the region is around 8-9 Crs, which may involve unauthorized on-money transactions. All these indicative numbers are oral estimates shared by the prospects and brokers and do not have concrete recorded evidences.

f. The Guideline value of the said land & building is around Rs.6,47,30,000/- (Land - Rs.59,15,000/- & Building Rs. 5,88,15,000/-). We understand from the valuers and other analysis that, none of the assets in the locality are transacted for a value less than the guideline value in recent times.

I. The Advocate of RP has mailed the present resolution plan application to the State Tax Officer on 28.03.2025. On 21.01.2025, IA No. 104 of 2024 was listed and counsel for the RP stated that the State Tax Department has been considered as Secured Operational Creditor.

II. In the said plan application at paragraph no. 3 the list of creditors is been mentioned, wherein, the claim of the department is shown as Operational Creditor and amount claimed is for Rs.10,41,41,618/- and the amount being admitted by the RP is Rs.8,19,00,574/-.

III. The RP has submitted in the plan application that in the 11th COC meeting held on 23.12.2024, it was been informed that final list of PRA's was issued and out of the 4 resolution applicants, two, namely Gunvantrai Vrajlal Bhadani and consortium of Resurgent Ventures Private Limited and Sanjay Lodha submitted their resolution plans on 14.12.2024 and 16.12.2024 respectively. It is submitted that two resolution plans were opened by the RP before the COC for their comments and views. That additional claim and details regarding pending claims were received from the Financial Creditor and other Stake Holders after the submission of list of creditors before this Adjudicating Authority and thereafter second revised list of creditors and constitution of the committee of creditors along with amount claimed, claims admitted, security interest in respect of claim was prepared and filed on 07.12.2024 before this Adjudicating Authority. That in para 12 of the application, the updated list of creditors is mentioned and the department has been mentioned in the category of operational creditor and the amount claimed by the department is Rs.12,18,13,414/- and the amount admitted by the RP is Rs.10,16,87,567/-

IV. It is submitted that the corporate debtor has purchased the land bearing survey no 39/7, 39/12 and 39/15 situated at Gondal, bn. The said land of the corporate debtor is nonagricultural land and the RP has taken into consideration the assets of the corporate debtor in the plan. It is submitted that the RP has consider the claim of the department as operational creditor in the resolution plan.

V. In the said application, the RP has stated that after negotiating the resolution plans with the PRAs and 1) Gunvantrai Vrajlal Bhadani submitted a revised resolution plan on 30.12.2024 for Rs.1.5 crores, and Resolution Applicant- 2) Consortium of Resurgent Property Ventures Private Limited and Sanjay Lodha for Rs.2crores on 16.12.2024. That the plan value is less than 20% of liquidation value which was been informed by the RP to COC and thereafter the Resolution Applicant submitted revised resolution plan on 17.01.2025 in the 12th COC meeting. That at paragraph no. 16 of the plan application, the RP has mentioned the payments proposed to be made under the plan. In the said tabular chart, the payment to be made towards statutory dues are mentioned. That the proposed amount in the plan which the State Tax Department will receive is amounting to Rs.1,05,11,333.00/-. It is pertinent to mention here that the value of liquidation of the CD is calculated amounting to Rs.9.68 crores which is more than the proportionate value proposed by the resolution applicant in its plan. The fair value of the CD is been calculated to an amount of Rs.12.42crores. That it is surprising, that the COC member, sole financial creditor has agreed upon the proposal of the revised resolution plan submitted by Mr. Gunvantrai Vrajlal Bhadani (RA- 1) on 30.12.2024 for Rs.1.5 crores.

VI. It is further submitted that, the State Tax Officer has objected to the approval of revised resolution plan submitted by Resolution Applicant No. 1, Mr. Gunvantrai Vrajlal Bhadani as the proposed amount provided by the Applicant does not offer the statutory dues of the State Tax Department and in less than the liquidation value.

VII. It is submitted herein, by the State Tax Officer that they have objection to the approval of resolution plan approved by the COC in the 12th COC meeting held on 17.01.2025 as well as objection to the said application ie., IA (Plan) 5 of 2025 submitted before this Adjudicating Authority.

VIII. That it would be pertinent to bring into the notice of this Hon'ble Court, the conduct of the suspended management as well as the conduct of financial creditor Raj Radhe Finance Ltd. That the sole financial creditor, Raj Radhe Finance Ltd. has given 100% voting for the approval of resolution plan submitted by RA No. 1, Mr. Gunvantrai Vrajlal Bhadani. That this Hon'ble Court may kindly take into observation the order passed by this Hon'ble Court on 30.09.2024, in IA (Plan) 12 of 2024 was rejected as disposed of with certain directions. That the attention of the RP was also drawn by this Adjudicating Authority that the dues of the Respondent, State Tax Department shall be considered in view of the judgment delivered by the Hon'ble Supreme Court in the case of Rainbow Papers Ltd. Copy of the order dated 30.09.2024 passed order in IA (Plan) 12 of 2024 is annexed herewith and marked as ANNEXURE-R4.

IX. That it is submitted that an IA 104/2024 is also filed by the Resolution professional of the corporate debtor for necessary direction from this Adjudicating Authority directing the respondent no.1 to release the lien on the bank account BOB Account no. 93990500001014 in the name of Shree Ram Cottex Industries Private Ltd., the corporate debtor undergoing CIRP process which is pending for adjudication.

X. It is submitted that the brief facts pertaining to the dues of the corporate debtor are to be brought on record which are as under:

XI. On 29.11.2006 the corporate debtor i.e. Shree Ram Cotex Industries Pvt. Ltd. has been registered under the GVAT Act, 2003. vide registration no. 24092702800. It is submitted that the respondent had issued Assessment order for the year 2014-15, 2015- 16, 2016-17, 2017-18 under the VAT Act and for 2017-18 under the CST, GST Act. Copy of the FORM-102, Certificate of Registration is marked hereto and annexed as ANNEXURE-R5.

XII. That it is submitted that the state tax department had addressed a letter on 10.03.2023 to the Bank of Baroda for creating lien on the bank account of the corporate debtor. In view of the above letter, it is in itself, self-explanatory that the respondent no.1 has created a charge on the bank account of the corporate debtor at the relevant point of time. That on 21^st July 2023, Public Announcement was been made by the IRP. Copy of the letter dated 10.3.2023 addressed by the department to Bank of Baroda is marked and annexed to as ANNEXURE-R6.

XIII. It is further submitted that the corporate debtor company had turnover in crores of rupees and had maintained a strong balance sheet. From the records it reflects that the corporate debtor had sought loan from the financial creditor i.e. Raj Radhe Finance Ltd. The company of the corporate debtor chose to avail loan from Ahmedabad at the exorbitant rate of 18%. The corporate debtor failed to make payment within 1 and 1/2 year from availing the said loan. That in the 12th COC meeting the sole financial creditor, Raj Radhe Finance Ltd. has agreed upon the resolution plan submitted by RA 1, wherein the financial creditor will receive an amount proposed to Rs.14,85,657/- whereas RA 2 has proposed to pay an amount of Rs.1,43,72,379/- to the Financial Creditor. This act of accepting the proposed amount in the plan itself creates suspicious conduct of the financial creditor.

XIV. That the resolution professional has failed to consider that an application which is been filed before the Adjudicating Authority under section 31 of the Code has to meet with the requirements as referred to in sub section (2) of 30. That the Adjudicating Authority shall, before passing an order for approval of resolution plan under section 31, satisfy that the resolution plan has provisions for its affective implementation. That the section 30 of the Code is read as under:

Section 30- Submission of resolution plan

(1)

A resolution applicant may submit a resolution plan {along with an affidavit stating that he is eligible under section 29A} to the resolution professional prepared on the basis of the information memorandum.

(2)

The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan.

(a)

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;

(b)

Provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-

(i)

the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or

(ii)

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, and provides for the payment of debts of financial creditors, who do not vote in favor of the resolution plan, 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 a liquidation of the corporate debtor.

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-

(i)

where a resolution plan has not been approved or rejected by the Adjudication Authority;

(ii)

Where an appeal has been preferred under section 61 or not time barred under any provision of law for the time being in force; or

(iii)

Where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan,

(C provides for the management of the affairs of the Corporate Debtor after approval of the resolution plan;

(D)

The implementation and supervision of the resolution plan;

(e)

does not contravene any of the provisions of the law for the time being in force (f) confirms to such other requirements as may be specified by the Board.

Explanation.—For the purposes of clauses (e), if any approval: of shareholders is required under Companies Act, 2013(18 of 2013) or any other law for the time being in forces for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.

(3)

The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the condition referred to in sub-section(2),

(4)

The committee of creditors may approve a resolution plan by a vote of not less that (sixty-six) percent of voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor and such other requirements as may be specified by the Board:

Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy code (Amendment) Ordinance, 2017 (ord. 7 of 2017) where the resolution applicant is in eligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it

Provided further that where the resolution applicant referred to in the first provision is ineligible under clause(c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the provisions to clause (c) of section 29A.

Provided also that nothing in the second provision shall be construed as extension of period for the purposes of the provision to sub-section (3) of section 12, and the corporate insolvency resolution process shall be completed within the period specified in that subsection). Provided also that the eligibility criteria in section 29A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2618 shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.

(5)

The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor,

The resolution professional shall submit the resolution plan as approved by the committee of creditors to the adjudicating authority. From the above said proviso, the learned Resolution Professional ought to have considered that section 238 of the Code cannot be interpreted to make any other laws redundant, the resolution professional has erred by giving overriding effect to the Code by considering section 238 of Code ignoring the provisions of section 30(2)(e) of the Code itself which clearly provides that the resolution plan does not contravene any of the provisions of law for the time being in force.

XV. The respondent submits that it is a matter of record that the corporate debtor has failed to pay the statutory dues and that because of such default on the part of corporate debtor proceedings for recovery of dues have been initiated by the department. The respondents submits that the dues relate to a period much prior to the commencement of Insolvency proceedings against the debtor and recovery proceedings had been initiated by the department much before the commencement of Insolvency resolution process i.e. 17.07.2023 under the code. The charge on the bank account appears to have been completely overlooked by the Resolution Professional which actually suggest that the RP has failed to discharge his duties as envisaged under the code and thereby erred in not including the claim of the department as a secured creditor in the debt of the corporate debt. The respondent submits that the claim of the department therefore, ought to have been considered by the RP irrespective of submissions of claim form by the department.

I. The CD was admitted in CIRP by order of this Adjudicating Authority passed in CP(IB)/91/(AHM)/2023 on 17.07.2023 wherein, Mr. Keyur Jagdishbhai Shah, was appointed as Interim Resolution Professional. Pursuant which, the public announcement about initiation of the CIRP and the calling for the claims was published by the IRP on 22.07.2023 in English Daily, "The Times of India", and in Gujarati, "Jai Hind". Thereafter, claims were filed with the IRP. The IRP on analysis of the claims has constituted the CoC by M/s. Raj Radhe Finance Limited as the Major Financial Creditor of the CD in the CoC and the 1st Respondent as the Operational Creditor.

II. Further, in September 2023, the Erstwhile RP issued Form G, inviting Expressions of Interest (EOI) from potential resolution applicants, marking the commencement of the resolution plan solicitation process Thereafter, on 04.04.2024, the erstwhile RP has submitted that the Resolution Plan submitted by Mr. Sureshbhai Govindhbhai Lunagariya has been duly approved by the CoC with 100% voting share. However, the resolution plan was subsequently rejected by this Adjudicating Authority on September 30, 2024. In response to the rejection, the undersigned M/s. SPP Insolvency Professional LLP, IPE was appointed as the new Resolution Professional to continue the resolution process.

III. The Applicant respectfully submits that the applicant has taken possession of the CD from the erstwhile RP on 30.09.2024 and visited the factory on 03.10.2024. On 10.10.2024, Form G was re-issued to invite fresh Expressions of Interest from prospective resolution applicants.

IV. It is significant to observe that under Section 3(30) and Section 3(31) of the IBC defines secured creditor and security interest. Extract of the same is stated as follows:-

3 (30) "secured creditor" means a creditor in favour of whom security interest is created;

3(31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person:

The Applicant respectfully submits that, in light of the relevant provisions and the Rainbow Papers judgment, while the State Tax Officer qualifies as a secured creditor due to the security interest created by operation of law, they continue to be categorized as an Operational Creditor, as the underlying dues pertain to statutory tax obligations, which fall under the definition of operational debt. The classification of the State Tax Officer as an Operational Creditor in the Resolution Plan is, therefore, accurate. Furthermore, the Plan duly acknowledges the security interest and provides for priority of payment in accordance with such interest. Hence, the objections raised in paragraphs 3 to 6 of the claim are misconceived and erroneous.

V. The Applicant further submits that the State Tax Officer did not raise any specific objection regarding the value of the Resolution Plan during the COC meetings. Their representation was limited to insisting on being treated as a "secured operational creditor" in line with the Rainbow Papers judgment.

VI. Additionally, the Applicant submits that, despite conducting two rounds of Expression of Interest (EOI), only plans of relatively lower value were received. Out of the two plans submitted, the CoC approved one plan after due consideration. There is no element of any procedural impropriety in the conduct of the process. The Resolution Professional (RP) is obligated to place only those Resolution Plans before the CoC that are compliant with the provisions of the IBC and the applicable regulations. The decision regarding the approval of any compliant plan lies solely within the commercial wisdom of the CoC. The RP has no authority to override or influence such commercial decisions.

“the Applicant / RP undertook to file a revised Form-H in terms of the instructions issued by the IBBI to all the IPs and RPs in the revised format provided by the IBBI by way of additional affidavit. He further undertook to obtain an affidavit of declaration from the SRA to the effect that the SRA will honour and implement the resolution plan in case approved by this Tribunal irrespective of any terms and condition of the resolution plan therein.

At this stage, RP should filed the copy of audited accounts of the Corporate Debtor for the Financial Year 2019-2020 and onwards, if not, filed earlier. Copy of claims received from the Financial Creditor and Operational Creditor to verify the records and stated whether the communication as per Regulation for CIRP for the Corporate Debtor were issued by the erstwhile IRP.”

UNCONDITIONAL AND IRREVOCABLE UNDERTAKING:

a. I hereby unconditionally and irrevocably undertake to this Hon'ble Tribunal that I shall honour, abide by and implement the Resolution Plan in its entirety, as approved by the CoC and may be finally approved by this Hon'ble Tribunal in letter and spirit and within the timelines stipulated therein.

b. It is further solemnly affirm and undertake that the implementation of the Resolution Plan by me is not subject to or contingent upon any event, condition, or circumstance. This undertaking is absolute and shall remain binding upon me irrespective of any perceived or actual changes in economic conditions, market scenarios, financial positions, or any other terms or conditions that may rise post the approval of the Resolution Plan.

c. I am fully aware of the legal consequences of the approval of a Resolution Plan under the Code. I understand that as per Section 31(1) of the Code, once the Resolution Plan is approved by the Adjudicating Authority, it becomes legally binding on the Corporate Debtor and all its stakeholders, including members, creditors, employees, guarantors, and the Central and State Government. I unequivocally submit to the binding nature of the Resolution Plan.

d. I affirm that I have the necessary financial resources, capabilities, and the firm intention to implement the Resolution Plan. As a token of my commitment, I have already submitted the Performance Guarantee of Rs.30,00,000/- (Rupees Thirty Lakhs Only) in accordance with the terms of the Letter of intent dated 28th January 2025 and the Resolution Plan.

e. I state that the Resolution Plan submitted by me is fair, feasible and viable, and its implementation will result in the revival of the Corporate Debtor, thereby achieving the objectives of the Insolvency and Bankruptcy Code, 2016.

“..4. Two plans were received, one of the RA submitted plan for Rs.2.00 Cr and the other one submitted for Rs.1.50 Crore.

5.

On what basis the CoC accepted the plan submitted by the other Resolution Applicant, who submitted the plan for Rs.1.50 Cr. The basis of the commercial wisdom used by the CoC needs to be submitted in the form of an affidavit.

6.

Further, the RP has submitted an additional affidavit filed on 06.03.2025 through Inward No.D-1472, the relevant para no.7 & 8 of the same is reproduced as under:

7.

During the course of the EOI and plan submission process, the RP had detailed discussions with all the PRA’s. One of the PRA has mentioned that the Fair Value of Rs. 12,42,36,559/- is very high and it will work out for them only at the range of 6-7 Crs for the land & building. In further discussion with various land brokers in the region, we understand the market going rate in the region is around 8-9 Crs, which may involve unauthorized on-money transactions. All these indicative numbers are oral estimates shared by the prospects and brokers and do not have concrete recordical evidences.

8.

The Guideline value of the said land & building is around Rs.6,47,30,000/- (Land Rs.59,15,000/- & Building Rs.5,88, 15,000/-) We understand from the valuers and other analysis that, none of the assets in the locality are transacted for a value less than the guidelines value in the recent times."

7.

The response of the CoC is also sought in the form of an affidavit.

"In compliance of order dated 08.07.2025, it has been apprised by the Ld. Counsel for the Applicant / RP as well as RP that meeting of the CoC on 14.07.2025 was convened, wherein orders of this Tribunal dated 08.07.2025 was placed and after discussion, the CoC informed that it is appointing a legal counsel in the matter and it will file an affidavit before this Tribunal on the basis issue involved herein.

Today, Mr. Nipun Singhvi, Adv. has appeared for the CoC and seeks time to file affidavit. The same is allowed. Ld. Counsel for the CoC is directed to file the same within a period of 10 days.

I. It is stated that on 15.09.2023, the erstwhile Resolution Professional (RP), Mr. Keyur Jagdishbhai Shah, issued Form G inviting Expressions of Interest (EOIs) from potential resolution applicants, thereby initiating the resolution plan solicitation process.

II. That in response to the invitation, only two parties submitted EOIs. This list of parties submitted their EoI's are as follows:

S. No.	Name of Parties	Date
1	Resurgent Property Ventures Private Limited	28.09.2023
2	Sureshbhai Govindbhai Lungariya	30.09.2023

III. However, the erstwhile Interim Resolution Professional (IRP) declared only one of them eligible to submit a resolution plan, as the other applicant's documents were found to be inadequate. The eligible resolution Applicant to submit the resolution Plan:

S.No.	Name of Parties	Plan Value
1	Sureshbhai Govindbhai Lungariya	Rs.50,00,000

IV. That on 11^th April 2024, the erstwhile Resolution Professional has duly filed the Committee of Creditors (CoC) approved resolution plan with the Adjudicating Authority, which was submitted by Mr. Sureshbhai Govindhbhai Lunagariya.

V. However, the resolution plan was later rejected by this Hon'ble Adjudicating Authority (AA) on 30th September 2024. Following this rejection, M/s. SPP Insolvency Professional LLP (IPE), the Applicant herein, was appointed as the new Resolution Professional to continue the resolution process, with a 90-day extension of the Corporate Insolvency Resolution Process (CIRP) timeline.

The COC representative mention that their legal team opined that the higher-valued plan lacked compliance with several critical regulatory requirements. Specifically, it failed to provide for the payment of CIRP costs and did not treat statutory creditors, including the State Tax department, in accordance with prevailing legal provisions. Additionally, the plan did not propose a distribution framework as per Section 30 of the IBC, which could have resulted in post-approval litigation, especially in view of the Hon'ble Supreme Court's ruling in the Rainbow Papers case, which recognized G-VAT as a secured creditor.

The approved resolution plan, although lower in monetary value, offered a compliant structure that ensured the proper treatment of all stakeholders and minimized the risk of future legal disputes. The COC, exercising its commercial wisdom, considered the long-term feasibility and sustainability of the resolution and opted for a plan that avoided potential litigation and aligned with statutory requirements. It was emphasized that the decision was taken after careful deliberation and in the interest of preserving the Corporate Debtor as a going concern.

Feasibility and viability of resolution plan

The Resolution Applicant will manage the entire spectrum of business of the Corporate Debtor from determining scope and goals for the businesses and will undertake an analysis of existing customer and markets. The Resolution Applicant, being a strategic investor shall drive the operations with concentrated focus on areas like widening customer base, efficient Working Capital management and product wise/item wise profitability.

The Resolution Applicant shall also undertake a systematic overhaul program its existing machinery, which will result in better quality, lower rejections and will enable the Corporate Debtor to enter new markets and different lines of business. It will further bring number of operating and financial synergies, since both the company and the applicant are engaged in the same industry in the same region and in which both, the Corporate Debtor and Resolution Applicant are indulged.

Provisions for effective implementation of resolution plan

The Resolution Applicant shall induct new professionals in the management team in the future. Furthermore, the Resolution Applicant shall undertake suitable augmentation of human resources to implement this Resolution Plan. The Resolution Applicant may replace/remove existing employees to bring in operational efficiencies in the operations. The Resolution Applicant may also enter into appropriate agreements with the employees of the Corporate Debtor in respect of their terms of employment.

Financial Strategy, source of fund and revival strategy

Cause of default addressed by Resolution Applicant

Other Reasons

26.

No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in the case of Essar Steel (supra). We have quoted above the relevant passages from this judgment.

27.

It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said provisions in the order of the Adjudicating Authority in approving the resolution plan.

28...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 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.

146.

The view taken in the case of K. Sashidhar (supra) and Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) has been reiterated by another three Judges Bench of this Court in the case of Maharashtra Seamless Limited (supra).

147.

In all the aforesaid three judgments of this Court, the scope of jurisdiction of the Adjudicating Authority (NCLT) and the Appellate Authority (NCLAT) has also been elaborately considered. It will be relevant to refer to paragraph 55 of the judgment in the case of K. Sashidhar (supra), which reads thus:

'55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan "as approved" by the requisite per cent 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. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established Under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not-16- to exercise their commercial wisdom during the voting on the resolution plan Under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan Under Section 30(4) of the I&B Code.

148.

It has been held, that in an enquiry Under Section 31, the limited enquiry that the Adjudicating Authority is permitted is, as to whether the resolution plan provides: (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) the plan does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board.

149.

It will be further relevant to refer to the following observations of this Court in K. Sashidhar (supra):

'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."

150.

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.

151.

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..."

152.

This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) 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."

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.

XVIII. That in the humble submission of CoC, the resolution plan presented before this Hon'ble Adjudicating Authority is compliant in accordance with law. The COC reserves its right to file further affidavit if required in accordance with law.

"Final Minutes of 15th meeting of the CoC has been filed by the Applicant/RP on 12.08.2025, vide inward diary No.D-5406. The same is taken on record. ...Meanwhile, the Applicant/RP is directed to file the chronology of dates and events of three days before the next date of hearing".

The particulars of directors of the Corporate Debtor as per the details provided in the updated Information Memorandum are set-out below. Pursuant to Sec 17 and 23 of the Code, the powers of the board of directors of the Corporate Debtor are suspended with effect from the IC Date.

The payments proposed to be made under this Plan are as follow:

Sr. No.	Particulars	Amount	Timeline
1.	Payment of CIRP Costs	Rs.25,00,000/- (As on date of submission of Resolution Plan) The Amount shall be paid at actuals on the date of	T+60 days from the date of approval of the Resolution Plan by Hon'ble NCLT

		approval of Resolution Plan with a cap of Rs. of 25 lakhs*
2	Payments towards claims of Financial Creditors	Rs.14,85,657/- minus proportionate unpaid CIRP cost	T+90 days from the date of approval of the Resolution Plan by Hon'ble NCLT
3	Payments towards claims of Operational Creditor (Statutory Dues)	Rs.1,05,14,343/- minus proportionate unpaid CIRP cost	T+90 days from the date of approval of the Resolution Plan by Hon'ble NCLT
4	Payments towards claims of Workmen and Employees	NIL	-
5	Payments towards any other Debts	NIL	-
6	Contingent Liability / Infusion of Working Capital	Rs.5,00,000/-
Total		Rs.1,50,00,000

*If the CIRP cost is more than as proposed, above will be deducted proportionally from the FC and OC's payment as proposed in the plan. Note: This plan follows judgment of the Supreme Court in the case of State Tax officer v. Rainbow Papers Ltd.

CIRP Cost

(a)

The Resolution Applicant assumes that the CIRP Cost is being paid by the applicant on the actual basis with a cap of 25 lakh. In view of the same and in accordance with the Section 53 of the IB Code, 2016, we are proposing to pay the CIRP cost on priority which included paid/unpaid till the approval of the Plan, which will be deposited into the CIRP account after the approval of the plan.

(b)

In case the CIRP costs exceeds the sum of Rs. 25,00,000 (Rupees Twenty-five Lakh Only) provided as aforesaid, then the increase shall be first made from the receivables/cash/bank balances or any operational revenues of the corporate debtor and balance if any shall be adjusted from the creditors to keep proposed plan amount intact. Similarly, any decrease in the CIRP cost, the remaining Bank/cash balances, receivables from operations of the Corporate Debtor shall be property of the Resolution Applicant.

(c)

It is hereby clarified that the Resolution Applicant has proposed the above payment structure and mechanism so as to ensure that overall financial obligation of the Resolution Applicant remains unchanged. The Resolution Applicant confirms that all such CIRP Costs over and above the cost incurred through the balances of Corporate Debtor will be paid in full and in priority to the payment of all the other creditors/stakeholders or will be back deposited into the companies account and will be used as Working capital.

(d)

Resolution Applicant proposes to meet any shortfall in the CIRP Cost, in priority over other payments to other Stakeholders in accordance to Section 30 (2)(a) of the code. The payments towards the shortfall in CIRP Cost shall be met out of the proposed Total Bid Value.

Proposal for Secured Financial Creditors:

(a)

According to the updated IM, the total claims filed by Financial Creditors is Rs. 1,46,72,378.32/- (Rupees One Crore Forty-six Lakhs Seventy-two Thousand Three Hundred and seventy-eight and thirty-two paisa Only), and the total admitted claim is 1,43,72,378.32/- (Rupees One Crore Forty-three Lakhs Seventy-two Thousand Three Hundred and seventy-eight and thirty-two paisa Only) Bifurcation of the claims is provided below:

Sr No.	Bank	Amount Claimed (Rs. In INR)	Admitted Claim (Rs. In INR)	Proposed Amount (Rs. In INR)
1	Raj Radhe Finance Limited	1,46,72,378.32	1,43,72,378.32	14,85,657.00/- *
	TOTAL	1,43,72,378.32	1,43,72,378.32	14,85,657.00

*if the CIRP cost is more then as proposed above will be deducted proportionally from the FC and OC's payment as proposed in the plan.

Proposal for Operational Creditors (Government Dues)

a)

The Resolution Applicant believes that the Operational Creditors are very crucial stakeholders for any business organization and they should be reciprocated properly for the support and assistance provided by them for running the Corporate Debtor. Hence, the Resolution Applicant is desirous to consider the interest of all the Operational Creditors, to ensure the long term association with them for smooth functioning going forward.

b)

It is understood that list of claims of Operational Creditors also include claims against the Corporate Debtor, which may be pending or sub-judice before a competent forum. Such claims are treated as "sub-judice claims" or "contingent claims". Each such sub-judice or contingent claim is a "claim" as defined under the IB Code.

c)

As per the updated list of creditors, the total admitted Claims of the Operational Creditors amounts to Rs. 10,17,16,689.00 /- (Rupees Ten Crores Seventeen Lakhs Sixteen Thousand Six Hundred and eighty-nine Only). Bifurcation of the claims is as below:

Sr No.	Name of Creditors	Claim Amount (Rs.)	Claim admitted (Rs.)	Proposed amount (Rs.)
1	State Tax Officer	12,17,84,292.00	10,16,87,567.00	1,05,11,333.00/-
2	Employee's Provident Fund Organisation	29,122.00	29,122.00	3010.00/-
	Total	12,17,84,292.00	10,17,16,689.00	1,05,14,343.00/-

*if the CIRP cost is more then as proposed above will be deducted proportionally from the FC and OC's payment as proposed in the plan.

Source of Funds

- The Total Bid Value shall be funded by the Resolution Applicant from his own sources through a mix of equity, unsecured loan, etc. However, the Resolution Applicant retains the right to arrange funding from various other sources including but not limited to strategic investors, raising debt from banks and/or financial institutions, issuance of Debt Instruments, etc. or to alter the funding mix and capital structure. However, under all scenarios the Resolution Applicant shall continue to be promoted, controlled and managed by entities that meet the requirements of the Code. - The Resolution Applicant shall utilise the balance amount available in the CIRP Bank Account (including the EMD amount of Resolution Applicant) as on date of approval of the said plan for payment to the Creditors. Any excess funds if required shall be brought in by the Resolution Applicant as and when necessary. However, it is to note that, in no circumstances the total bid value exceeds Rs. 1,50,00,000/- (Rupees One Crore Fifty Lakhs only) - Moreover, the Resolution Applicant shall keep an amount of Rs. 5,00,000/- from the CIRP Bank Account of the Corporate Debtor as a fund for Contingent Liability. The said fund is kept aside for dealing with any factors affecting the Resolution Plan. If in any case the fund from contingent liability is not utilised, then the said fund shall be used for the purpose of Working capital requirements

- The Resolution Applicant confirms that it has sufficient funds/resources to make the payment of Total Bid Value as per this Resolution Plan and/or can raise such amounts from other sources also.

- The company was incorporated on 17.09.2013 and has a paid-up capital of Rs 1,00,00,000. - It was engaged in the business of ginning, pressing, spinning etc. of textile products. - 10,00,000 shares of Rs 10 each of the company are held by Shri Ramnikbhai Chakhubhai Bhalala, Shri Dineshkumar Chakubhai Bhalala, Sunitaben Dineshbhai Bhalala, Rashilaben Ramnikbhai Bhalala, and Chakubhai Ramjkbhai Bhalala.

- Shri Ramnikbhai Chakubhai Bhalala and Dineshkumar Chakubhai Bhalala were the directors of the company. - The company has land of 14568 sq m and seven buildings with constructed area of 7590 sq m. The land and buildings are located at survey no. 39, opposite Biliyala Bus Stop, NH-8B, Gondal, Gujarat. - The plant and machinery of the company are already sold, before the insolvency commencement date and the factory land and building is available. - Estimated fair value of land and building is Rs 12,13,26,005 and securities and financial assets are Rs 29,36,560. - As per the financials provided, the company had long term borrowings of Rs 11.74 crores and short-term borrowings of Rs 16.57 crores and trade receivables of Rs 17.52 crores, cash and bank balances of Rs 4.67 crores, inventories of Rs 6.67 crores as on 31.03.2023. - Inventories, trade receivables and cash and bank balances were Rs 27.76 crores, Rs 24.50 crores, and Rs 1.10 crores as on 31.03.2022.

ANALYSIS AND FINDINGS OF THIS TRIBUNAL

'31. Approval of Resolution Plan

(1)

If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub- section (2) of section 30, it shall by order approve the resolution plan which 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.

Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.

(2)

Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.

(3)

After the order of approval under sub-section (1),—

(a)

the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and

(b)

The resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.

(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.”

“30. Submission of resolution plan.

(2)

The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—

(a)

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;

(b)

provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-

(i)

the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or

(ii)

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, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, 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 a liquidation of the corporate debtor.

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-

(i)

where a resolution plan has not been approved or rejected by the Adjudicating Authority;

(ii)

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

(iii)

where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;

(c)

provides for the management of the affairs of the corporate debtor after approval of the resolution plan;

(d)

the implementation and supervision of the resolution plan;

(e)

does not contravene any of the provisions of the law for the time being in force;

(f)

conforms to such other requirements as may be specified by the Board.

Explanation. -For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law."

“ 52.3 While the legislative intent to save the corporate debtor as a going concern may be appreciable, should it be at the cost of others, more so when the IBC offers adequate space for engineering manipulation? The larger question therefore, is why should the Parliament bend backwards to protect one corporate debtor at the risk of exposing the public interest to peril? The present case, a case study merely, illustrates how IBC could be manipulated to defeat the interests of the undisclosed creditors of the corporate debtor. Some points for the Parliament to ponder, and some legislative correction for it to make, lest the long term impact of the IBC could be disastrous, if not counterproductive. Incidentally, has the Parliament taken note of the percentage of recovery generally achieved out of a successful resolution process of the Corporate Debtor?".

> “...in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of the CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and dehors the provisions of the statute or rules.”

“Regulation 38(3): The resolution plan shall demonstrate that -

(a)

it addresses the cause of default;

(b)

it is feasible and viable;

(c)

it has provisions for its effective implementation;

(d)

it has provisions for approvals required and the timeline for the same; and

(e)

the resolution applicant has the capability to implement the resolution plan.”

33. Initiation of liquidation. -

(1)

Where the Adjudicating Authority, -

(b)

rejects the resolution plan under section 31 for the non- compliance of the requirements specified therein, it shall -

- (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; - (ii) issue a public announcement stating that the corporate debtor is in liquidation; and - (iii) require such order to be sent to the authority with which the corporate debtor is registered.