Manohar Lal Vij vs Siddheshwar Industries Private Limited

The present Application has been filed on 09.08.2023 by Mr. Manohar Lal Vij, the Applicant Resolution Professional (‘RP’) of Siddheshwar Industries Pvt. Ltd. (‘Corporate Debtor’), under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘IBC, 2016’) on behalf of the Committee of Creditors seeking approval of the Resolution Plan submitted by Mr. Vikas Bapurao Takwane & Ors. (the ‘Successful Resolution Applicant’) and approved by 98.77% (ninety-eight point seven-seven percent) of the voting share of the members of the Committee of Creditors (hereinafter referred to as ‘CoC’) of the Corporate Debtor for a resolution amount of INR 33.93Cr.

The brief facts of the Application are as follows:

Corporate Insolvency Resolution Process (‘CIRP’) of the Corporate Debtor was initiated vide an order dated 14.05.2018 of this Tribunal in C.P.(IB)-37(MB)/2018, on an application filed by Gandhar Oil Refinery Limited (‘Operational Creditor’) under Section 9 of the IBC, 2016. In furtherance thereof, Mr. Shrikant Zawar (IBBI Reg. No.: IBBI/IPA-001/IP-P00156/2017-18/10325 was appointed as Interim Resolution Professional (‘IRP’). The IRP made a public announcement informing the commencement of CIRP of the Corporate Debtor and invited claims from creditors, by way of publication in two newspapers dated 24.05.2018. Once the claims received from the Creditors were duly collated and verified, the IRP prepared a report on the constitution of CoC and filed the same along with list of creditors before this Tribunal.

The IRP conducted the first meeting of CoC on 18.06.2018, wherein it was informed to the members of the CoC that the Hon’ble High Court of Bombay vide its order dated 19.04.2018 in C.P. No. 1305 of 2015 and C.P. No. 725 of 2016, had appointed the Official Liquidator of the Corporate Debtor. Thereafter, the IRP convened the second meeting of CoC on 04.07.2018 wherein the proposed resolution for confirmation of IRP as the RP was rejected by members of CoC holding 93.11% (ninety-three point one-one percent) of voting share. Subsequently, the IRP convened the third meeting of CoC on 11.07.2018, wherein the resolution for the appointment of RP (other than erstwhile IRP) was proposed and thereafter put to vote. The members of the COC representing 75.56% (seventy-five point five-six percent) voting share voted in favour of appointing one Mr. Dipak Panpaliya as the RP.

Accordingly, members of the CoC filed an Application bearing M.A. No. 745/2018 with this Tribunal seeking confirmation for appointment of one Mr. Dipak Panpaliya as Resolution Professional, pursuant to Section 22(3)(b) of IBC, 2016. However, the said application was subsequently withdrawn on 11.05.2022 on account of withdrawal of consent of Mr. Panpaliya via email dated 25.08.2021.

Pursuant to appointment of the Official Liquidator by Hon’ble Bombay High Court, this Tribunal vide order dated 13.07.2018 directed the IRP to maintain status-quo on the CIRP proceedings without interfering with any proceedings of the Hon’ble High Court of Bombay. Accordingly, the CIRP Process against the Corporate Debtor was stayed by this Tribunal. Thereafter, the Hon’ble High Court of Bombay vide Order dated 12.08.2021 passed in C.P. No. 723 of 2016 and C.P. No 1305 OF 2015, closed the liquidation proceeding against the Corporate Debtor and the matter was sent back to this Tribunal. Vide order dated 21.03.2022, this Tribunal was pleased to vacate the stay order dated 13.07.2018 and listed the main petition for review on 13.06.2022.

In the fourth CoC meeting convened by IRP on 19.04.2022, owing to the withdrawal of consent of Mr. Panpaliya, the members of the CoC approved the resolution for appointment of Mr. Manohar Lal Vij as the Resolution Professional with 94% (ninety-four percent) voting share. Accordingly, an Application on behalf of the members of the CoC bearing IA No. 1229/2022 was filed with this Tribunal, seeking confirmation for the appointment of Mr Manohar Lal Vij, as the Resolution Professional of the company. During the pendency of the aforesaid Application, the erstwhile IRP convened fifth CoC meeting on 06.05.2022, wherein the members of the CoC were pleased to approve appointment and fees of the registered valuers for carrying out the valuation of all the assets of the Corporate Debtor including the enterprise valuation, in terms of Regulation 27 of the IBBI (CIRP) Regulations, 2016.

The afore-mentioned Application bearing IA No. 1229/2022 seeking appointment of the RP was allowed by this Tribunal, vide order dated 11.05.2022 and Mr. Manohar Lal Vij, the Applicant herein, was appointed as Resolution Professional (hereinafter ‘RP’) of the Corporate Debtor.

In the meantime, the following Applications were filed for Exclusion and Extension during the CIRP period, and have been tabulated hereinafter:

The RP convened sixth CoC meeting on 14.06.2022 in which the members of the COC were appraised about the ongoing business operations of the Corporate Debtor during the period of stay granted by the Hon'ble High Court of Bombay i.e. from 13.07.2018 to 31.03.2022 and informed that admitted claims of most of the operational creditors had become invalid due to payment of part/full amount during the stay period. Accordingly, CoC approved a resolution for updation of claims as on 19.05.2022 through suitable public advertisement with 67.84% (sixty-seven point eight-four percent) voting share. Accordingly, the Applicant RP filed an Application bearing IA No. 1782/2022 seeking updation of claims as on 19.05.2022 which was allowed by this Tribunal vide order dated 06.07.2022. Pursuant to this, the RP published fresh Form A dated 06.07.2022, inviting claims from the creditors outstanding as on 19.05.2022, in three Newspapers (at Pune) and verified the claims in pursuance thereof.

Form G was published by the Applicant on 03.07.2022 for inviting Expression of Interest (‘EOI’) from the Prospective Resolution Applicants (‘PRAs’) on or before 29.07.2022 via three newspapers at Pune. This deadline was further extended by one week in eighth CoC meeting held on 28.07.2022, and the notice for the same was accordingly published on 29.07.2022.

Based on publication of the amended Form G, the Applicant received EOIs from Two (2) PRAs and conducted due diligence of the EOIs in terms of Regulation 36A (8) of the CIRP Regulations. Upon such verification, the Applicant issued the provisional list comprising of One (1) PRA which was duly noted by the members of the COC in the ninth COC meeting held on 18.08.2022, and the final list of the PRAs consisting of the aforementioned One (1) PRA was issued on 20.08.2022.

The Applicant received Resolution Plan from the one PRA only i.e. Mr. Vikas Bapurao Takawane along with his two immediate family members upto the last date of submission of Resolution Plan i.e. 29.09.2022. After having received the feasibility and viability report on the revised Resolution Plan, the members of the COC in the 17th COC meeting held on 08.06.2023, sought to approve the Resolution Plan with 98.77% voting share in its favor. The resolution is reproduced below:

Pursuant to the approval of the Resolution Plan by the COC, the RP issued a Letter of Intent dated 07.07.2023 to the Successful Resolution Applicant (“SRA”), which was unconditionally accepted by the SRA on 10.07.2023. The SRA, due to certain unavoidable reasons, could not deposit a part of the Performance Security amount of INR 5 crore (Rupee five crore only) upto 22.07.2023, being the last date of deposit, in the CIRP account of the Corporate Debtor. Consequently, the members of the COC in the 18^th COC meeting held on 25.07.2023 were sought to extend the last date of depositing the remaining performance security upto 31.07.2023 by approving the extension resolution with 85.04% votes casted in favour. Accordingly the remaining Performance Security amount was deposited upto 31.07.2023 and thereafter converted into FDR by the Applicant. Therefore, RP states that the Resolution Plan approved by the CoC is in compliance with the requirements of Section 30(2) of the Code.

In compliance of Section 30(2) of IBC, 2016, the Resolution Professional has examined the Resolution plan of the Successful Resolution Applicant and confirms that this Resolution Plan:

a. Provides for payment of Insolvency Resolution Process cost in a manner specified by the Board in the priority to the payment of other debts of the corporate debtor;

b. Provides for management of the affairs of the Corporate Debtor after approval of Resolution Plan;

c. The implementation and supervision of Resolution Plan;

d. Does not prima facie contravene any of the provisions of the law for time being in force;

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

f. As per the Affidavit received and the further documents submitted, the Resolution applicants are not covered under 29A.

In compliance of Regulation 38 of CIRP Regulations, the Resolution Professional confirms that the Resolution plan provides that:

a. The cause of the Default

b. It is feasible and viable

c. Provision for effective implementation

d. Provisions for approvals required and the time lines for the same.

e. Capability to Implement the Resolution Plan

The Resolution Applicant viz Mr. Vikas Bapurao Takawane & Ors. are promoters of the Corporate Debtor, being an MSME entity with Udyog Aadhar Registration Certificate bearing Udhyam Registration No. UDHYAM-MH-26-0252578. The Resolution Applicant confirmed that it is eligible to submit Resolution Plan as per Section 29A of Insolvency and Bankruptcy Code, 2016.

The Resolution Applicant has confirmed that –

As per the RP the Fair Value and Liquidation Value determined by the registered Valuer are as follows:

Fair Value: INR 42,87,49,900/-(Rupees Forty-two crores, eighty-seven lakhs, forty-nine thousand and nine- hundred only)

Liquidation Value: INR 31,57,65,070/-(Rupees Thirty-one crores, fifty-seven lakhs, sixty-five thousand and seventy only)

The key features of the Resolution Plan for Corporate Debtor submitted by Mr. Vikas Bapurao Takawane & Ors. is summarized below:

The Learned Counsel for the Applicant Resolution Professional has annexed a certificate of the Form-H to the Application, under Regulation 39(4) In Form-H of the CIRP Regulations, 2016 to certify that the Resolution Plan has approved by the CoC meets all the requirements of the IBC and its Regulations.

The Resolution Plan includes a statement under regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interests of all stakeholders in compliance with the Code and regulations made thereunder.

The amounts provided for the stakeholders under the Resolution Plan is as under: (Amount in Rs. lakh)

*If there are sub-categories in a category, please add rows for each sub-category. Amount provided over time under the Resolution Plan and includes estimated value of non-cash components. It is not NPV.]

The interests of existing shareholders have been altered by the Resolution plan as under:

The compliance of the Resolution Plan is as under:

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

*Hon’ble NCLT allowed exclusion of 78 and 1358 days vide its order dated 28.07.2022 & 11.08.2022 respectively, due to suspension of CIRP on account of initiation of Liquidation process on the Order of Hon’ble High Court vide order dated 13^th July 2018.

The time frame proposed for obtaining relevant approvals is as under:

The Resolution Plan is not subject to any contingency. Yes

Following are the deviations / non-compliances of the provisions of the Insolvency and Bankruptcy Code, 2016, regulations made or circulars issued thereunder (If any deviation/ non-compliances were observed, please state the details and reasons for the same):

The Resolution Plan is being filed __________ days before the expiry of the period of CIRP provided in section 12 of the Code.

14A. Whether the resolution professional has, in accordance with regulation 35A,-

applied to the Adjudicating Authority on or before the one hundred and thirty-fifth day of the insolvency commencement date: Not required

filed Form CIRP 8 with the Board on or before the one hundred and fortieth day of the insolvency commencement date: Yes, on 15.12.2023

Provide details of section 66 or avoidance application filed / pending.

In the circumstances mentioned hereinabove, the Applicant has filed Application seeking approval of this Tribunal on the Resolution Plan, submitted by the Resolution Applicant i.e. Mr. Vikas Bapurao Takawane & Ors. stating that the plan is in accordance with the Section 30(2) and other provisions laid down under the code.

On perusal of the Resolution Plan, it is observed that the Resolution Plan provides for the following:

The RP has complied with the requirement of the Code in terms of Section 30(2)(a) to 30(2)(f) and Regulations 38(1), 38(1)(a), 38(2)(a), 38(2)(b), 38(2)(c) & 38(3) of the Regulations.

The RP has filed Compliance Certificate in Form-H along with the plan. On perusal the same is found to be in order. The Resolution Plan has been approved by the CoC in the 17th COC meeting held on 08.06.2023, with 98.77%. (Ninety-eight point seven-seven percent)

There is no such pending proceedings u/s 66(1) r/w 43(1) and 44(1) of the Code.

In the case of K Sashidhar v. Indian Overseas Bank & Others (in Civil Appeal No.10673/2018 decided on 05.02.2019) the Hon’ble Apex Court held that if the CoC had approved the Resolution Plan by requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2). The Hon’ble Court observed that the role of the NCLT is ‘no more and no less’. The Hon’ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 and is limited to scrutiny of the Resolution Plan “as approved” by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the Adjudicating Authority can reject the Resolution Plan is in reference to matters specified in Section 30(2) when the Resolution Plan does not conform to the stated requirements.

In CoC of Essar Steel (Civil Appeal No. 8766-67 of 2019 decided on 15.11.2019) the Hon’ble Apex Court clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved. In para 42 Hon’ble Court observed as under:

In view of the discussions and the law thus settled, the instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37, 38, 38 (1A) and 39 (4) of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. The same needs to be approved. Hence ordered.

The Application IA-3461/2023 in CP(IB)/37/(MBIV)/2018 is allowed. The Resolution Plan annexed to the Application is hereby approved. It shall become effective from this date and shall form part of this order.

It shall be binding on the Corporate Debtor, 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 is due, guarantors and other stakeholders involved in the Resolution Plan.

The approval of the resolution plan shall not be construed as waiver of any statutory obligations of the Corporate Debtor and shall be dealt by the appropriate authorities in accordance with law. Further in terms of the judgment of Hon’ble Supreme Court in the matter of Ghanshyam Mishra And Sons Private Limited V/S Edelweiss Asset Reconstruction Company Limited, on the date of approval of the Resolution Plan by the adjudicating authority, all such claims which are not a part of the Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim which is not a part of the Resolution Plan.

The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the Registrar of Companies (RoC), Mumbai, Maharashtra for information and record. The Resolution Applicant, for effective implementation of the Plan, shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed.

The moratorium under Section 14 of the Code shall cease to have effect from this date.

The Applicant shall supervise the implementation of the Resolution Plan and file status of its implementation before this Authority from time to time, preferably every quarter.

The Applicant shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the IBBI along with copy of this Order for information.

The Applicant shall forthwith send a certified copy of this Order to the CoC and the Resolution Applicant, respectively for necessary compliance.

The Interlocutory Application i.e. IA No. 3461 of 2023 in CP(IB)/37(MB)/2018 is accordingly allowed and disposed of.