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Judgment
25.09.2024: Heard Counsel for the Appellant and Ld. Counsel appearing for the Respondent No. 2 and liquidator Mr. Jigar Bhatt, who is appearing in person.
This appeal has been filed against the order dated 21.08.2024 passed by National Company Law Tribunal Ahmedabad Bench, Court-1 in IA/844(AHM)/2023. The CIRP against M/s. Steelera Engineers Pvt. Ltd. commenced on 16.11.2022 in pursuance of the Form-G issued Resolution plan was submitted by Appellant. On 15.05.2023 Resolution Plan was approved. The Resolution Professional filed the IA/844(AHM)/2023 for approving the Resolution Plan. The Appellant was Resolution Applicant as well as one of the Secured Financial Creditor. The RP in the CIRP process had valued the Corporate Debtor and more than two valuation reports were CA (AT) (Ins) No. 1030, 917 of 2023 obtained. However, in Form- H the Resolution Professional has mentioned liquidation value was Rs. 3,19,30,306/- and fair value as Rs. 5,47,59,454/-.
Appellant and Respondent No. 2 were only two Financial Creditors. Appellant’s due as a Financial Creditor was Rs. 6,28,89,923/- and the other Financial Creditor has claim of Rs. 82,541/-. The Appellant has submitted a Resolution Plan valuing Rs. Six Crores and Fifty Lakhs. The application claim for consideration before the Adjudicating Authority and Adjudicating Authority by impugned order has rejected the application for approval of the plan aggrieved by the said order the appellant has come up in this appeal.
Adjudicating Authority in the impugned order has Principally given three reasons for rejecting the plan which are contained in paragraph 41,43,44 & 45 which are as follows:
“41. In our view, no fixed repayment of the secured/ unsecured loan is specified by the SRA/RP in the present application despite giving ample opportunity more particularly vide order dated 02.07.2024. It is seen that the RP has not placed before us the financial projections of the Corporate Debtor to establish that the Corporate Debtor has the ability to service the secured and unsecured loans relating to Rs.6.49 crores and the interest thereon.
ANALYSIS AND FINDINGS OF THIS TRIBUNAL
I. Further, The Term of the Plan and its implementation schedule as laid down in Part B, Section IV of the plan which is elaborated in point 38 of this order, provides that this plan was valid for consideration and approval by this tribunal only till 19.10.2023 and any extension given in this deadline by the Resolution Applicant is neither pressed before us by the counsel nor any document stating that any extension beyond 19.10.2023 is given by the Resolution Applicant is produced before us.
Further, it is stated that any changes directed by This Tribunal in the plan while approving it, is subject to the approval of the CoC and the Resolution applicant and in our opinion due to this clause this plan results in a conditional plan.
II. In this case where the SRA and the Financial Creditor entrusted with 99.87% voting power in the decision of CoC are the same entity and in addition to that when this entity being both the SRA and a Financial Creditor with 99.87% voting power is the only attendee of the CoC meetings in which all the important decisions were been taken, by availing shelter u/s 30(5) of the Insolvency and Bankruptcy Code, 2016.
ORDER
In our view, the present Resolution Plan is not passing the muster of Regulation 38(2) and 38(3) of the CIRP Regulations as the same is not addressing the cause of default and debt on the book of the Corporate Debtor Post the approval, a debt of Rs. 6,49,00,000/- is proposed to be continued in the book of the Corporate Debtor with no definite repayment schedule. And as such the Cause of Default is not addressed.
Further in our opinion the plan is a conditional plan for the reasons which are enumerated in Paragraph No. 37 of this order”.
Shri Banerjee, Ld. Counsel for the Appellant challenging the order contents that the reasons given by Adjudicating Authority for rejecting the plan were all unsustainable. With regard to reasons given in paragraph 41,Counsel for the Appellant submitted that the appellant was secured creditor and his dues admitted were more than Rs. Six Crores TwentyEight Lakhs and the Resolution Plan itself provided that the said amount be adjusted and hence the Resolution Applicant was not to make any payment to himself and the others Financial Creditor was being paid the full amount i.e. Rs. 82,541/- to which there is no dispute.
Ld. Counsel for Respondent No. 2 also submits that the Respondent No. 2 is also receiving the full amount under the plan.
Ld. Counsel for the Appellant has submitted that as per the Resolution Plan Proposal for payment to secured creditors is contained in paragraph 6.5.1. and 6.5.2. of the plan which has also been extracted by the Resolution Professional in the application following is the proposal:
“6.5.1. Amount- Secured Financial Creditors shall be paid an amount of Rs. 6,25,00,000/- against full and final settlement of their admitted claim of Rs. 6,28,89,923/-, Unsecured Financial Creditors shall be paid an amount of Rs. 82,029/- against full and final settlement of their admitted claim of Rs. 82,541/- as more particularly described in Para 6.3.6.
6.5.2. Source of Funds- The amount shall be paid upfront within a period of 30 days from the effective date from the of initial fund infusion by the RA. However, RA being, the sole secured creditor, will adjust the settlement amount payable against the admitted claims payable to itself in capacity of sole Secured Financial Creditor. Further, the RA shall make payment to the Unsecured Financial Creditors amounting to Rs 82,029/- out of their admitted claim of Rs. 82,541/- from the upfront cash infused by the RA”.
When this, Appellant is Secured Financial Creditor as well as Resolution Applicant and has proposed in the plan itself providing that RA being secured creditor will adjust the settlement amount payable against the admitted claim, we do not find that above is a sufficient ground for interfering with the Resolution Plan which has been approved by the CoC. It is also relevant to notice that appellant has 99.87% vote share in the committee of creditors which has been captured by Adjudicating Authority in paragraph 34 of the Judgment Para 34 is as follows:
Sr.No.
NameoftheFinancialCreditors
VotingShare(%)
1.
MidpointCommodealPvt.Ltd.
99.87
2.
GDSKJewelsPvt.Ltd.
0.13%
Though the Committee of Creditor of the Corporate Debtor is having Two Financial Creditors in its constitution, it is pertinent to note that all the meetings of which the minutes are attached with this Application and in which all the important decisions in relation to this CIRP process is attended and voted by the Successful Resolution Applicant i.e, Midpoint Commodeal Private Limited only”.
Now, we come to the other reasons given by the Adjudicating Authority for rejecting the resolution plan i.e. paragraph 44. Adjudicating Authority has observed that plan does not address the cause of default and the date on the book of the corporate debtor post the approval. With regard to cause of default, Ld. Counsel for the Appellant has referred to clause 10 of the Resolution Plan which provides as follows:
“10. Cause of Default by Corporate Debtor: As per the information available in the information Memorandum and the Data Room provided by the RP, the reasons for default by the Corporate Debtor and subsequent commencement of CIRP is a result of purported collusion between some of the erstwhile employees and/or past director of the Corporate Debtor with third parties thereby causing financial/business losses to the Corporate Debtor”.
Thus, the cause of default was already mentioned in the plan. As far as the debt the Counsel for the Appellant has submitted that the plan itself has referred to the adjustment of debt hence the debt of the appellant was satisfied by the Resolution Plan and no exception can be taken to such satisfaction of the debt. Coming to paragraph 45 which says that the plan is conditional, the appellant submits that in the plan itself that plan stated that it is valid for consideration till 19.10.2023 whereas the bank guarantee which was submitted by the appellant were extended till 31.12.2024 which is captured by Adjudicating Authority in paragraph 14 of the Judgment in following words:
“14. The applicant received the Bank Guarantee dated 20th June 2023 amounting to Rs. 50,00,000 (Rupees Fifty Lakhs Only) on 23.06.2023. A copy of Bank Guarantee issued by Federal Bank Limited is annexed hereto as “Annexure-A9”. Further the Bank Guarantee dated 20.06.2023 was valid only till 19.12.2023 and hence a Bank Guarantee issued by Federal Bank Limited with extended period till 31.12.2024 is submitted through an additional affidavit filed on 31.07.2024 vide diary no. D 6083. The copy of Extended Bank Guarantee issued by Federal Bank Limited is annexed hereto at “Annexure F” of the additional affidavit”.
The plan was approved on 15.05.2023 by CoC and thereafter the application was filed in the year 2023 itself for approval and which remained pending hence above could not be any reason for reject the plan treating to be conditional plan. In fact, application was filed for approval of the plan much before 07.08.2023.
Ld. Counsel for the Respondent No. 2 who is another financial Creditor has no objection because Respondent No. 2 was also proposed the entire amount. It is well settled principle of IBC that all efforts should be made to resolve the corporate debtor and the liquidation is the last resort. In the present case the plan value which was offered by the Appellant was much more than liquidation value and also more than the fair value.
We do not find that there were sufficient reasons to reject the plan and direct the Corporate Debtor for liquidation. The liquidator having already been appointed we direct the appellant to make the payment of Rs. 2 Lakhs towards all expenses and professional fee within a period of two weeks to the Liquidator.
In result, we allow the appeal, set aside the impugned order passed by Adjudicating Authority. Allow the IA/844 (AHM) 2023 and approve the resolution plan.
Adjudicating Authority may pass consequential orders, consequent to the approval of the plan within a period of one month from the date. Copy of the order is produced before the Adjudicating Authority.
The parties shall bear their own cost.