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Judgment
ORDER
PER: SH. L. N. GUPTA, MEMBER (T)
The present IA No. 537 of 2021 has been preferred by Mr. Pawan Kumar Singal, Resolution Professional (hereinafter referred to as, the “Applicant”) of M/s H.L. Tech Fabrics Limited (hereinafter referred to as, the “Corporate Debtor”) under Section 30(6) read with Section 31 and Section 60(5) of IBC 2016 seeking the following reliefs:
“a)allow the present Application;
b)pass necessary order(s)/direction(s) under Section 31 of the Code, approving the Resolution Plan submitted by the Resolution Applicant Shree Varun Infratech (formerly known as M/s. Varun Scrap Suppliers), which has been duly approved by the Committee of Creditors of M/s H.L Tech Fabrics Ltd. with 100% voting share;
c)pass necessary order(s)/direction(s) declaring that upon approval of the Resolution Plan by this Hon’ble Tribunal, the provisions of the Resolution Plan shall be binding on the Corporate Debtor, its creditors, guarantors, members, employees, workmen, statutory authorities and other stakeholders in accordance with Section 31 of the Code and shall be given effect to and implemented, without any deviation, pursuant to the order of this Hon’ble Tribunal;
d)pass necessary order(s)/direction(s) in favour of the Resolution Applicant absolving him from/of all/any financial/statutory liabilities of the M/s. H.L Tech Fabrics Ltd. accrued prior to the commencement of the CIRP except whatever stated in the Resolution Plan;
e)pass necessary order(s)/direction(s) vacating the moratorium on M/s. H.L. Tech Fabrics Ltd. imposed under Section 14 of the Code;
f)pass necessary order(s)/direction(s) approving the appointment of the monitoring agency as stipulated in the Resolution Plan;
g)pass necessary order(s)/direction(s) discharging the Resolution Professional Mr. Pawan Kumar Singal from the duties of the resolution professional of CD;
h)pass necessary order(s)/direction(s) granting the requisite relief as sought under the Resolution Plan;
i)pass necessary order(s)/direction(s) as this Hon’ble Tribunal may deem fit and proper.”
To put the facts succinctly, the underlying main Petition CP (IB)-1617/ND/2019 was filed by M/s Sunlarge Industries Private Limited against the Corporate Debtor namely, M/s H.L. Tech Fabrics Limited under Section 9 of IBC, 2016, which was admitted vide Order dated 10.02.2020 of this Adjudicating Authority and the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor was initiated. The Corporate Debtor at present is represented through its Resolution Professional (RP) Mr. Pawan Kumar Singal.
Through this application, the RP has sought approval of the Resolution Plan submitted by one Mr. Jitendra Kumar Nagwani, Proprietor of M/s Shree Varun Infratech (formerly “Varun Scrap Suppliers”) (hereinafter termed as “Successful Resolution Applicant” or “SRA”).
It is stated by the RP that the Resolution Plan submitted by the SRA is approved by the CoC comprising of the sole member i.e., Canara Bank with 100% votes in the 7th meeting of CoC held on 15.12.2020 with voting through Ballot Paper that ended on 13.01.2021. The relevant Resolution approved by 100% votes of the CoC is reproduced below:
The Affidavit of the SRA stating that it is not disqualified under Section 29A of IBC, 2016 to submit the Resolution Plan is also placed on record by the Applicant/RP. The same is reproduced below:
The Applicant/RP has filed the Compliance Certificate in “Form H” (pages 228-235 of the Application), which reads thus:
It is further submitted by the Applicant/RP that the Fair Market Value of the Corporate Debtor is Rs.1,84,60,649/- and its Liquidation Value is Rs. 1,29,89,649/- based on the reports of Registered Valuers.
The summary of amounts provided to various stakeholders in the Resolution Plan is as given below:
| Nature of Creditor | Amount of Claim admitted (Rs.) | Amount offered in Resolution Plan (Rs.) | % of the Amount provided to Amount claimed |
|---|---|---|---|
| Secured Financial Creditor, who voted in favour of the Plan | 17,41,22,160 | 1,03,00,000 | 5.92% |
| Operational Creditors | 10,55,699 | 5,000 | 0.21% |
| Total | 17,51,77,859 | 1,03,05,000 | 5.26% |
Thus, it is observed that the total amount offered to the stakeholders in the Resolution Plan is Rs. 1,03,05,000/-, which is 5.26% of the total amount claimed, and lower than the Liquidation Value of the Corporate Debtor i.e., Rs. 1,29,89,649/-.
Nevertheless, before considering the Resolution Plan on its merits, we would like to examine the objection raised by the Operational Creditor (on whose instance, the CIRP was commenced against the Corporate Debtor) namely, “Sunlarge Industries Private Limited” (hereinafter termed as “Objector”) against approval of the Resolution Plan.
The Objector has filed its objections to the present application vide its affidavit dated 04.03.2021. The Objector has opposed the proposed Resolution plan mainly on the ground that the Proprietor of SRA (M/s Varun Scrap Suppliers) was barred from submitting a resolution plan under Section 29A of IBC 2016 for being disqualified as a Director. As per Section 29A (e) of IBC 2016, a person is not eligible to be a resolution applicant when he is disqualified to act as a director under the Companies Act, 2013. In the present case, Mr. Jitendra Nagwani, Proprietor of the SRA has been disqualified under Section 164(2)(a) of the Companies Act, 2013 for the period from 01.01.2016 to 30.10.2021 by the Registrar of Companies ("ROC"), while holding the Directorship in “Shivam Tanks & Vessels Private Limited”. It is alleged by him that despite knowledge of the said fact, the RP and the COC (which consists of a single Financial Creditor) have approved the Resolution Plan submitted by Mr. Jitendra Nagwani.
Accordingly, taking note of the aforesaid objection, this Adjudicating Authority, during the course of the hearing on 31.08.2022, issued notice and directed ROC, Gwalior to produce the entire records in respect M/s Shivam Tanks & Vessels Private Limited and Mr. Jitendra Nagwani, Director. The said order of this Adjudicating Authority is reproduced below for immediate reference:
In compliance with the aforesaid direction, the ROC Gwalior filed its report vide letter no. 1286 dated 23.09.2022, which reads thus:
On perusal of the abovesaid report of ROC Gwalior dated 23.09.2022, it is seen that Mr. Jitendra Kumar Nagwani (DIN-01986101) was disqualified for a period of 5 years i.e., from 01.11.2016 to 30.10.2021. This Adjudicating Authority had taken the aforesaid report of ROC Gwalior on record subject to just exceptions vide its order dated 28.09.2022. Further, the Resolution Professional was given an opportunity to file a reply to the aforesaid Report of ROC Gwalior.
During the course of the hearing on 06.01.2023, the Ld. Counsel appearing for the SRA opposed the Report submitted by the ROC Gwalior espousing that the said Report was erroneous. It was further contended by him that the M/s Shivam Tanks and Vessels Pvt. Ltd. (hereinafter referred to as “Company”), of which the Proprietor of SRA was a Director, was struck off from the register of ROC on 22.03.2017 under Fast Track Exit (FTE) Scheme and subsequently, on 23.03.2017 under Section 248 of the Companies Act, the Company’s name was struck off by the ROC. Thus, ROC could not take note of the struck-off record dated 23.03.2017 and found the Director Mr. Jitendra Kumar Nagwani as disqualified. He also put forth a stand that subsequently, Mr. Jitendra Kumar Nagwani was appointed as Director of two more Companies during the period from 01.11.2016 to 30.10.2021, and therefore, the stand taken / contents of the affidavit filed by the ROC that he was disqualified from being a Director during the aforementioned period, is not beyond doubt.
In view of such contention raised by the Ld. Counsel for the SRA, this Bench considered it appropriate to call for a Report from RD, Ahmedabad (under whose jurisdiction the ROC Gwalior falls) regarding the disqualification of the Proprietor of the SRA.
Accordingly, Mr. L.R. Meena, RD Ahmedabad filed its Report vide affidavit dated 28.02.2023, which reads thus:
The RD Ahmedabad in its Report (ibid) has stated that the name of the Company M/s Shivam Tanks and Vessels Pvt. Ltd., in which the Proprietor of the SRA was a Director, was struck off by the suo motu action of ROC Gwalior vide STK-7 Notice dated 09.06.2017 under Section 248 of Companies Act, 2013 due to non-filing of annual returns and financial statements by the Company since its incorporation. The RD has further stated the submission made by the SRA is not sustainable as the E-Form FTE was not tenable in the eyes of law and the striking off action under Section 248 of the Companies Act 2013 by the ROC Gwalior was a valid action because E-Form FTE was neither filed by the Company nor pending on or before the enforcement date of Section 248 to 252 of the Companies Act 2013. RD in its report has further emphasized that the Company had deceptively filed the E-Form FTE, which stood eliminated under the new regime of the Companies Act 2013.
It is further stated by the RD Ahmedabad that the appointment of Mr. Jitendra Kumar Nagwani, the proprietor of SRA in the other two Companies on 08.10.2018 and 25.11.2021 happened due to some technical error and those appointments were bad in law as they chanced during the period of Mr. Jitendra Kumar Nagwani’s disqualification as Director, which is not removed by the competent Court of law.
We heard the submissions of the Objector, SRA, RP, ROC Gwalior, and RD Ahmedabad. The Objector has opposed the Resolution Plan on the ground that Mr. Jitendra Kumar Nagwani Proprietor of the SRA was barred under Section 29A(e) of IBC, 2016 to submit the Resolution Plan, on account of his disqualification being a Director under the Companies Act, 2013.
As noted above, both the ROC Gwalior and RD Ahmedabad have separately confirmed the fact that Mr. Jitendra Kumar Nagwani, Proprietor of the SRA was disqualified as Director of M/s Shivam Tanks and Vessels Pvt. Ltd. for a period of 5 years from 01.11.2016 to 30.10.2021, which means that he was disqualified on the date of the submission of the Resolution Plan to RP as well as its consideration for voting by COC on 13.01.2021, which fell within the period of his disqualification from 01.11.2016 to 30.10.2021 as a director under the Companies Act, 2013.
What transpires, from the above, is that on the date on which the Resolution Plan was submitted by SRA, considered and approved by the CoC (i.e., on 13.01.2021), and the date on which the present application has been preferred by the RP seeking approval of Resolution Plan (i.e., 29.01.2021), Mr. Jitendra Kumar Nagwani Proprietor of the SRA was disqualified to act as Director, which in other words signifies that the CoC has approved the Resolution Plan of the SRA, whose Proprietor was disqualified to act as a Director and therefore, ineligible to submit the Resolution Plan to RP/CoC of the Corporate Debtor.
We also observe that there is nothing placed or produced on record by the RP or the SRA that the disqualification of Mr. Jitendra Kumar Nagwani was removed by the competent court of law, prior to the date of submission of the present Resolution Plan to RP or its consideration by the COC.
In view of the above, we find that the Affidavit dated 07.09.2021 sworn by Mr. Jitendra Kumar Nagwani, Proprietor of the SRA, reproduced in para 5 of this order, affirming at point no. 3 “…..that neither the (i) Resolution Applicant nor (ii) any person acting jointly or in concert with the Resolution Applicant nor (iii) any person who is a connected person (as defined under the provisions of the Code of (a) the Resolution Applicant or (b) any person acting jointly or in concert with the Resolution Applicant)……..“has been disqualified to act as a Director under the Companies Act, 2013” ……is erroneous and bad in law.
Hence, in view of the aforesaid findings, we agree with the objection raised by the Operational Creditor and declare that Mr. Jitendra Kumar Nagwani, Proprietor of the SRA (M/s Varun Scrap Suppliers/now, Shree Varun Infratech) was disqualified to act as a Director under the Companies Act 2013 on the date of submission of the Resolution Plan and therefore, ineligible to submit a Resolution Plan under Section 29A (e) of IBC, 2016.
In view of the above, we reject the Resolution Plan submitted by the RP, the same being in violation of Section 29A(e) of IBC read with Section 30(2)(e) of IBC 2016, and dismiss the present Application i.e., IA No. 537 of 2021.
Since the maximum permissible period of 330 days for the CIRP has already elapsed, we have no other option but to order the Liquidation of the Corporate Debtor. Ordered accordingly. Further, in terms of the provisions of Section 34(4)(a) of IBC, 2016, the current Resolution Professional, Mr. Pawan Kumar Singal IP is replaced by Mr. Vijender Sharma having registration no. IBBI/IPA-003/IP-N00003/ 2016-2017/10022 (email id: [email protected]) Mobile No. 9810166877 as the Liquidator of the Corporate Debtor, who shall take steps for Liquidation of the Corporate Debtor in accordance with the law.
The Applicant/RP is directed to hand over all the records/ assets/information relating to the Corporate Debtor to Mr. Vijender Sharma, Liquidator within 03 days from the date of this order.
Let a copy of this order be immediately sent by the Registry/Court Officer to Mr. Pawan Kumar Singal - the Applicant/RP, newly appointed Liquidator Mr. Vijender Sharma having registration no. IBBI/IPA-003/IP-N00003/2016-2017/10022 (email id: [email protected]) Mobile No. 9810166877 for needful action and compliance.
Let a copy of this order be also sent by the Court Officer/Registry to IBBI for their records.