Mohit Chawla vs Compact Capital Limited & Anr.

The Company Petition CP(IB) No.46/Chd/Pb/2018 was filed by the Financial Creditor, Oriental Bank of Commerce (hereinafter referred to as the “OBC”), against the Corporate Debtor, which was admitted into the Corporate Insolvency Resolution Process (hereinafter referred to as the “CIRP”) vide this Adjudicating Authority Order dated 27.07.2018 (copy attached as Annexure-1 of the CA) and Mr. Dinesh Seth was appointed as the Interim Resolution Professional (hereinafter referred to as the “IRP”) vide this Adjudicating Authority Order dated 02.08.2018 (copy attached as Annexure-2 of the CA).

The IRP made a public announcement in Form A on 04.08.2018 in Indian Express (English) and Rozana Spokesman (Hindi) edition (copy attached as Annexure-3 of the CA) for intimation of the commencement of CIRP of the Corporate Debtor and for calling the creditors to submit their claims along with the proof in the prescribed format.

Till the last date for the submission of claims i.e. 19.08.2018, the IRP received claims from six financial creditors namely, OBC, Union Bank of India (hereinafter referred to as the “UBI”), Canara Bank, IDBI, UCO Bank and State Bank of India (hereinafter referred to as the “SBI”). Based on the collated claims, the IRP constituted the CoC on 23.08.2018 and submitted the report to this Adjudicating Authority on 23.08.2018 (copy attached as Annexure-4 of the CA). Total six claims from the Financial Creditors (secured and unsecured) and twenty-one claims from the Operational Creditors (other than Workmen & Employees) were received till filing of the CA.

The IRP called for the 1st meeting of the CoC on 29.08.2018 (copy of the minutes of the meeting as circulated enclosed as Annexure-5 of the CA). During the meeting, it was discussed that the IRP will not be converted to RP till the fee was negotiated and ratified. The CoC, however, extended the period of IRP by the time, the decision on these matters were pending.

The IRP called for the 2nd meeting of the CoC on 17.09.2018 (copy of the minutes of the meeting as circulated enclosed as Annexure-6 of the CA. The notice was sent to the Financial Creditors and Promoter- Manager of the Corporate Debtor. The following matters were discussed in the meeting:

Discussions took place on the ratification of the fee quoted by the IRP and the conversion of IRP into RP. Replacement of IRP was considered by the CoC due to high quotation of fee by the IRP.

The CoC members resolved that the reimbursement of expenses incurred by IRP and OBC for CIRP of Rs.101,791/, apart from IRP remuneration were approved and ratified.

The CoC decided to appoint Mr. Abhay Kumar & Mr. Ankit Goel with all-inclusive fee of Rs.65000/- each for the valuation of plant & machinery and Mr. Sachin Goel & Mr. Anil K. Sexena (SCS Consultants) with all-Inclusive fee of Rs.32500/- & Rs.35000/- respectively for valuation of land and building (copy of valuation reports attached as Annexure-7 of the CA).

The CoC extended the period of IRP on the same consideration as paid to IRP earlier till the appointment of Mr. Mohit Chawla by this Adjudicating Authority.

The IRP requested the members of CoC to provide the necessary information for starting the process of appointing Mr. Mohit Chawla as the new RP through filing an application with this Adjudicating Authority and SBI provided the same.

The IRP called and convened the 3rd meeting of the CoC on 09.10.20180 (copy of the minutes of the meeting as circulated enclosed as Annexure- 8 of the CA). The notice was sent to the Financial Creditors and directors of the Corporate Debtor. The following matters were discussed in the meeting:

Resolved that the remuneration of Rs.5 Lakh (plus applicable taxes) per month on proportionate basis along with out-of-pocket expenses incurred by the IRP till the date of handing over the charge to the new RP was approved for deduction out of the cash accruals of the Corporate Debtor as a part of CIRP cost. The expenses incurred by the OBC that have already been ratified in the last meeting would become part of CIRP cost and will have preferential payment in the waterfall mechanism.

Resolved that the notice of 3 days for holding 3rd meeting of CoC was approved and ratified as per Regulation 19(2) of CIRP Regulations.

The RP called 4th meeting of the CoC on 23.10.2018. (copy of the minutes of the meeting as circulated enclosed as Annexure-9 of the CA). The notice was sent to the Financial Creditor and directors of the Corporate Debtor.

Mr. Mohit Chawla, the Chairman apprised the members of the CoC that pursuant to order of this Adjudicating Authority in CA No.439 of 2018 in CP(IB) No.46/Chd/2018 dated 12.10.2018 received on 16.10.2015, his appointment as the RP of the Corporate Debtor tar by replacing the IRP, Mr. Dinesh Seth. The copy of Order was sent to Committee Members.

The Chairman informed the CoC that under Regulation 35A of the CIRP Regulations, the RP needed to form an opinion, whether the Corporate Debtor has been subject to any transaction covered under sections 43, 45, 50 or 66 of Code. For this purpose, an Individual professional was needed to be appointed and thus, it was agreed to call upon the quotations.

The Chairman informed the CoC that he had approached this Adjudicating Authority for condoning the delay of publishing the Form G for the expressions of interest (hereinafter referred to as the “EoI”), which was not published within the prescribed time i.e. 75 days from the commencement of CIRP as mentioned in the CIRP Regulations, since he was appointed as RP by this Adjudicating Authority Order dated 12.10.2018, which was received by him on 16.10.2018. The RP engaged Advocate Mr. Manish Jain, for the said matter and all the CoC members approved the cost.

Resolved that EoI process document, eligibility criteria, evaluation matrix and Form G to call Interested and eligible prospective resolution applicants (hereinafter referred to as the “PRAs”) to submit resolution plans be and hereby approved (copy of EoI and evaluation matrix attached as Annexure-10 and Annexure-11 respectively of the CA).

The CoC members requested the Chairman to share the complete Information Memorandum (hereinafter referred to as the “IM”) with them as the IM prepared by the IRP was incomplete and needed amendments as per the provisions of IBC.

The RP apprised the CoC that the complete IM, after incorporating the information as required under the Code as well as suggestions made by the CoC, was issued on 29.10.2018 to the CoC. Further, the IM was further amended on 14.11.2016 and a fresh IM was circulated to the CoC thereafter (copy of the IM attached as Annexure-28 of the CA).

The RP informed the CoC that independent professional i.e. Kansal Singla & Associates (Chartered Accountants), had been appointed as transactional auditors pursuant to Regulation 35A of the CIRP Regulations, so as to examine the transactions falling under sections 43, 45, 49, 50 and 66 of Code.

The RP put forth the transaction audit findings prepared by M/s Kansal Singla & Associates for the financial years 2016-17, 2017-18 and for the period from 01.04.2018 till the CIRP commencement date. The findings of the transaction audit were discussed at the meeting.

Mr. Kailash Chander from SBI apprised the CoC that they have classified the account as fraud and has filed a complaint with the CBI against the Corporate Debtor and the directors and promoters of the Corporate Debtor on 10.12.2018.

The RP apprised the CoC that several payments pertaining to operational expenses of the Corporate Debtors were made by him in order to keep the plant as a going concern. Further, the CoC was informed that the Corporate Debtor has regularly received payment against the bills raised for job work done by the Corporate Debtor. The receipt and payment statement for the period 16.10.2018 to 15.12.2018 was presented at the meeting.

The RP apprised the CoC that pursuant to Regulation 36A(1) & 36A(2) of the CIRP Regulations, he caused the publication of Form G (copy of Form G attached as Annexure-13 of the CA) on 25.10.2018 in Hindustan Times (English Daily) and Jag Bani (Regional Daily) and received three EoI from the PRAs. The RP issued the provisional list of eligible PRAs on 14.11.2018.

Further, the RP informed the CoC that as required under Regulation 36A(12) of the CIRP Regulations (as amended from time to time), he had issued the final list of eligible PRAs on 27.11.2018.

The Chairman further informed the CoC that the last date for submitting the Resolution Plan is 24.12.2018. However, one of the PRA had called the RP to inform that they are carrying out due diligence and trying to understand more about the industry and requested for extension of the last date of submission of Resolution Plan by 15 days. The CoC after giving due consideration and with consensus, decided to extend the date for submission of Resolution Plan by 1 week i.e. till 31.12.2018.

The RP apprised the CoC that he had filed an application on 19.11.2018 with this Adjudicating Authority under section 14(1)(b) read with section 74 of the Code, so as to bring to the notice of this Adjudicating Authority about the transactions carried out by the Corporate Debtor and its officers, in violation of moratorium under section 14(1)(b) of the Code and the transfers were carried out to the extent of Rs.22,40,000/-

The RP called the 6^th meeting of the CoC on 07.01.2019. The notice was sent to the financial creditors and directors of the Corporate Debtor (copy of the minutes of the meeting as circulated enclosed as Annexure-14 of the CA). The following matters were discussed in the meeting:

The Chairman apprised the CoC that the Resolution Plan was received on 31.12.2018 from two PRAs as below:

It is apposite to mention here that the 6th meeting was convened in order to open the Resolution. Plans, since one of the PRA i.e. Compact Capital Limited had not shared the password of the PDF file, through which they had shared a Resolution plan. It is further important to notice that they were not willing to share the password, even after the RP stated that he reeds to scrutinise the Resolution Plans before putting it in front of the CoC. Consequently, the RP could not open the Resolution Plan and form an opinion about the same and check, whether it is in compliance with the Code before putting forth in front of CoC. The PRA then sent an email stating that they can only share the password in the CoC meeting. Therefore, the RP convened a CoC meeting on 07.01.2019 and the Resolution Plans were duly opened in front of the CoC. The CoC took note of the fact that since the compliance was not checked previously due to the condition put forth by the PRA, therefore, the same shall be done before the next CoC meeting. The Resolution Plans were looked at prima facie by the RP along with its team in the meeting without delving into the details, since the CoC wanted to have an outline of both the Resolution Plans. Thereafter, they made a request for a copy of the Resolution Plans, since they need to assess the Resolution Plans at their end. The RP mailed both the Resolution Plans to the CoC by the evening.

The RP apprised the CoC that he was appointed by this Adjudicating Authority on 12.10.2018 and the order of his appointment was received on 16.10.2018. The CIRP period is coming to an end on 22.01.2019 and the Resolution Plans received on 31.12.2018, are still to be assessed and finalised.

Ms. Vijaylakshmi from the SBI requested the RP to assess the Resolution Plans and check their compliance with the provisions of the Code, and also to do the background check of the PRAs before the next CoC, which was agreed to be held on 15.01.2019. After which, the RP assured the CoC that the same shall be done before the next meeting fixed for 15.01.2019 and a small brief shall be shared with the CoC. It was further agreed that the extension of CIRP shall also be discussed in the next meeting, which is proposed on 15.01.2019. The RP apprised all the CoC members that the issue of extension of CIRP period needs to be taken up urgently.

The RP apprised the CoC that the earnest money deposit (hereinafter referred to as the “EMD”) received from both the PRAs amounting to Rs.50,00,000/- (refundable) is kept in designated EMD account opened with UBI, which was acknowledged by the CoC.

The RP called the 7th meeting of the CoC on 15.01.2019. The notice was sent to the Financial Creditors and directors of the Corporate Debtor (copy of the minutes of the meeting as circulated enclosed as Annexure 15 of the CA). The following matters were discussed in the meeting:

The RP apprised the CoC that he had supplied a brief note before the CoC meeting, containing comparative analysis of both the Resolution Plans and also his observations on the same. The COC members were also apprised that the fair value and liquidation value of the plant has been provided to all the members of CoC after obtaining the necessary confidentiality undertaking from all the members of CoC. The CoC took note of the same and proceeded with the discussion on the Resolution Plans. The RP began the discussion with his point wise observations on the Resolution Plans submitted by both PRAs along with comparative analysis of the Resolution Plans.

The RP invited both the PRAs to present their Resolution Plans at the CoC meeting.

After discussion on the plan by Compact Capital Limited, the CoC advised the PRAs to suitably amend the Resolution Plan. The PRAs sought time of 20 days in order to revise the Resolution Plan vis-a-vis discussion held in the CoC. The CoC agreed for the same and told the PRAs to strictly adhere to the time grated.

The Manager (Accounts) of the Vardhman Ispat Udyog came and apprised the CoC that Mr. Pradeep Garg (key partner) was busy and therefore, could not come for the meeting. The CoC pointed out that they must inform the RP about their Incapacity to attend the meeting, as this reflects upon their non-seriousness. The Manager of Vardhman Ispat Udyog apologized and left the meeting. So, no discussion could be held with the representative of the Vardhman Ispat Udyog.

The CoC thereafter, upon consensus decided that Vardhman Ispat Udyog shall be given one more opportunity in order to present their Resolution Plan.

The CIRP period is coming to an end on 22.01.2019. Although the Form G was circulated on 25.10.2018, the final list of PRAs was circulated on 19.11.2018 and the last date of submission of Resolution Plans was 24.12.2018, however, one of the PRAs requested for extension of time and therefore in the 5^th meeting of CoC held on 21.12.2018, it was decided to extend the time of submission of Resolution Plan by one week till 31.12.2018. After the Resolution Plans were received, another PRA i.e. Compact Capital Limited stated that their Resolution Plan shall be opened only in the meeting of CoC. Therefore, a meeting was convened on 07.01.2019 specifically to open the Resolution Plans and the next date for the meeting of CoC was fixed on 15.01.2019 in order to discuss the Resolution Plans submitted by the PRAs among the CoC as well as with the PRAs. Accordingly, the discussion and deliberation on the same were held on 15.01.2019 and upon request by one of the PRA, it was decided by the CoC to grant them time of 20 days to revise the Resolution Plan, since they agreed to make necessary changes to the Resolution Plan and present the same to the CoC. As the application for extension was to be filed prior to the lapse of moratorium as per the provisions of the Code, therefore, after due deliberations and discussions on the Resolution Plan and also after hearing the PRAs, it was decided that the CIRP period be extended for a period of 90 days, so that revised Resolution Plans can be placed on record for further discussions in order to arrive at a sustainable resolution, which serves all the stakeholders equally.

The RP called the 8th meeting of the CoC on 26.02.2019. The notice was sent to the Financial Creditors and directors of the Corporate Debtor (copy of minutes of the meeting as circulated enclosed as Annexure-16 of CA). The following matters were discussed in the meeting:

this Adjudicating Authority on 23.01.2019 had passed an order for extension of the CIRP period by 90 days (copy enclosed as Annexure-17 of the CA).

The Corporate Debtor had filed an insurance claim for the fire that broke out in its premises on 09.05.2011. The aforesaid application was dismissed on the grounds of misrepresented loss and falsified records. The Corporate Debtor went into appeal at National Consumer Dispute Redressal Commission (hereinafter referred to as the “NCDRC”). The case at the NCDRC is at the stage of cross-examination and the next date of the hearing had been faxed for 17.07.2019.

The representatives of Compact Capital Limited did not bring the revised Resolution Plan even after giving them an extension of 20 days, as request by them, to submit their revised Revolution Plan.

The representatives of Vardhman Ispat Udyog, the second PRA informed the CoC that they were not interested to submit the Revolution Plan.

Resolved that the fees and expanse of Rs.42,964/ Incurred by the RP for travelling, lodging etc. was ratified and approved.

Resolved that fees and expenses of Rs.2,37,500/- and Rs.25000/- (taxes as applicable) to be paid to CA Vinod Jain for applications filed with this Adjudicating Authority were also ratified and approved.

Resolved that fees and expenses of Rs.30,000/- (including taxes) to be paid to Advocate, Amandeep Sharma, for obtaining certified copies of title deeds for SBI.

A payment of Rs.1,95,056/- had been received on account of refund of market fees. Apart from that, efforts were being made to generate more receipts and the Chairman had taken its best efforts in order to keep the unit profitable.

The RP called the 9th meeting of the CoC on 01.03.2019. The notice was sent to the Financial Creditors and directors of the Corporate Debtor (copy of minutes of the meeting as circulated enclosed as Annexure-18 of the CA). A revised Resolution Plan was submitted by Compact Capital Limited, in which it submitted two Resolution Plans. Resolution Plan A was rejected by the members of CoC whereas Resolution Plan B was asked to be modified again.

The PRA has to reduce the timeline and it shall not increase 6 months in any circumstances.

The CoC authorised the RP to file an application with this Adjudicating Authority for liquidation, since the Resolution Plan was not approved by 66% members of the CoC.

The CoC after obtaining consent of Mr. Mohit Chawla decided to appoint him as the liquidator of the Corporate Debtor on such fee per month, as will be decided by the Financial Creditors and will be notified to him in the mean course.

Pursuant to the Order dated 01.11.2019 (copy attached as Annexure-21 of the CA), this Adjudicating Authority instructed the CoC to reconsider the Resolution Plan submitted by the PRA on 20.04.2019 and further instructed the CoC to convene a meeting, so as to discuss and vote on the Resolution Plan dated 20.04.2019 and thereafter decide, whether to accept the Resolution Plan submitted before the members of CoC or to vote on the liquidation of the Corporate Debtor.

Therefore, the RP called the 12^th meeting of the CoC on 05.11.2019. The notice was sent to the Financial Creditors and directors of the Corporate Debtor (copy of notice and the copy of minutes of the meeting as circulated are enclosed as Annexure-22 and Annexure-23 respectively of the CA. The following matters were discussed in the meeting.

Total amount of Rs.11,34,391/- has been recovered by the RP on account of Rural Development Fund from Ajnala Mandi.

Total amount of Rs.33,85,838/- has been recovered from the market committee on account of security deposit and Rural Development Fund.

An email dated 03.11.2019 (copy attached as Annexure-24 of the CA) was received from the PRA answering the queries of the CoC.

The Resolution Plan presented by Compact Capital Limited dated 20.04.2019 along with addendum dated 05.11.2019 (copy of addendum attached as Annexure-26 of the CA) was ratified and approved with 91.95% votes in favour of the Resolution Plan.

First Event Report for the period 16.10.2018 to 29.10.2018

Second Event Report for the period 30.10.2018 to 12.11.2018

Third Event Report for the period 13.11.2018 to 27.11.2018

Fourth Event Report for the period 28.11.2018 to 15.12.2018

Fifth Event Report for the period 16.12.2018 to 09.01.2019

Sixth Event Report for the period 10.01.2019 to 24.01.2019

Seventh Event Report for the period 25.01.2019 to 07.02.2019

Eighth Event Report for the period 08.02.2019 to 04.03.2019

Ninth Event Report for the period 05.03.2019 to 19.03.2019

Tenth Event Report for the period 20.03.2019 to 04.04.2019

Eleventh Event Report for the period 05.04.2019 to 20.04.2019

Twelfth Event Report for the period 21.04.2019 to 13.05.2019

Thirteenth Event Report for the period 14.05.2019 to 28.05.2019

Fourteenth Event Report for the period 29.05.2019 to 15.06.2019

Fifteenth Event Report for the period 16.06.2019 to 02.07.2019

Sixteenth Event Report for the period 03.07.2019 to 20.07.2019

Seventeenth Event Report for the period 21.07.2019 to 10.08.2019

Eighteenth Event Report for the period 1.08.2019 to 28.08.2019

Nineteenth Event Report for the period 29.08.2019 to 13.09.2019

Twentieth Event Report for the period 14.09.2019 to 03.10.2019

Twenty First Event Report for the period 04.10.2019 to 20.10.2019

Twenty Second Event Report for the period 21.10.2019 to 05.11.2019.

Land admeasuring 12 Kanal 6 Marla on which infrastructure of manufacturing unit has already been constructed, situated at Village Udipur, Tehsil Gurdaspur Punjab owned by JR Energy Solutions. ii. Land admeasuring 12 Kanal on which infrastructure of manufacturing unit has already been constructed, situated at Village Awankha, Tehsil Gurdaspur Punjab owned by JK Industries. iii. Land admeasuring 5 Kanal 7 Marla on which godown has already been constructed, situated at Village Bahmani, Tehsil Gurdaspur Punjab owned by Raman Kumar. iv. Flour Mill owned by Krishna Pulses established over land parcel owned by JR Agrotech Private Limited.

The Applicant has not initiated any other legal proceedings before any other forum, which is the subject matter of the present application.

The present Application is within the limitation and does not suffer from delay and/ or latches.

Under the provisions of the Code, an affidavit dated 02.11.2019 from Resolution Applicants regarding their eligibility under section 29A, read with regulation 38 of IBC has been received and has been attached as Annexure-27 of the CA.

The Resolution Applicant undertakes that payment of the CIRP cost amounting to Rs.6.89 lakhs (which was initially contributed by the OBC) out of total estimated cost of Rs.10 lakhs would be made in priority to all other debts of the Corporate Debtor. The rest of the CIRP cost of Rs.64.59 lakhs (Rs.71.48- 6.89 lakhs) has already been paid, since the unit was a going concern.

An amount of Rs.9.50 crore will be infused by the Resolution Applicant in Corporate Debtor as unsecured loan @ 12% per annum.

An amount of Rs.2.00 crore available in the account of Corporate Debtor will also be utilized for the payment of all stakeholders as envisaged in the Resolution Plan

The Resolution Applicant proposes payment of Rs. 33.00 crores to the Financial Creditors that will be further divided among all the CoC members in the ratio of their voting right in the CoC.

The total CIRP cost of Corporate Debtor, till the effective date is not known to the Resolution Applicant. That's why Resolution Applicant assumed the CIRP cost incurred or to be incurred till the effective date is Rs.10.00 lakh. The Resolution Applicant proposes to pay CIRP cost on actual basis as contemplated by the RP. In the event, CIRP cost is more than Rs.10.00 lakh, the same will be adjusted from the payment of Financial Creditors in the ratio of their voting rights in CoC. In the event, CIRP cost is less than Rs.10.00 lakh, the same will be adjusted to the payment of financial creditors in the ratio of their voting rights in CoC.

The Resolution Applicant proposes to make a payment of Rs.10.00 lakh, since the liquidation value of Corporate Debtor is not known to the Resolution Applicant. However, the Resolution Applicant has assumed that the liquidation value payable to the Operational Creditor (except for the dues/wages of workmen's or employees of the Corporate Debtor for the period of 24 Months preceding the Insolvency Commencement Date & excluding related party creditors) is NIL. However, Resolution Applicant proposes payment towards full & final settlement of Operational Creditor dues.

Payment towards discharge of the Operational Creditors being the liabilities pertaining to workmen and employees' dues in full and final settlement is not applicable, since there is no claim filed by any workmen & employee as informed by the RP.

Short note on the issues relating to the appeal filed by the erstwhile directors before NCLAT regarding the avoidance transactions.

A note on the relief, concessions and approvals sought with reference to the orders passed by this Tribunal.

An application was filed by the erstwhile director before the Hon’ble NCLAT, where the Appellant (Mr. Raman Aggarwal, Promoter of the Corporate Debtor) had grievance against the impugned order dated 27.11.2019 of this Adjudicatory Authority limited to the CA No.543 of 2019, wherein the Appellant/ Promoter/ Shareholder raised objection with regard to the maintainability of the application filed by the RP under sections 43, 45 and 66 of the Code.

The Resolution Applicant, Compact Capital Limited has prayed for the following reliefs and concessions under Para 8 of the resolution plan:

The Adjudicating Authority, before approving any Resolution Plan presented to it by the CoC/RP, has to satisfy itself that such Resolution Plan has provisions for its effective implementation, however, in the present case, the Resolution Plan, as it approved, is incapable of being effectively implemented, as the RP has failed to keep the Corporate Debtor as a going-concern.

An IM prepared under section 29 of the Code by the RP, forms the genesis for submission of a Resolution Plan by any SRA and is the foundation stone, on which the Resolution Plan is set. In the present case, the situation of the Corporate Debtor today is far different, from what had been informed in the IM dated 17.11.2018 (copy of the IM as supplied to the SRA is annexed as Annexure A-1 of the written submission).

The relevant portions of the IM of the Corporate Debtor, which played vital role in the decision-making process for the SRA while formulating its plan are as follows:

Furthermore, not only the IM, even under the Resolution Plan, it was incumbent upon the RP to maintain the unit as a going concern. The relevant clause of the Resolution Plan, is as below:

At present, neither is the plant and machinery valued at ₹22.7 crores, nor is the plant running on job-work basis. Thus, the RP has failed to ensure that there is no material adverse change caused in the business and operation of the Corporate Debtor, as envisaged under clause 7.1 of the Resolution Plan.

As a matter of fact, since January, 2021 the unit is non-operational. Further, in order to reduce expenses, the RP has also reduced the power load of the unit from 2000 KV to 100 KV, which was duly been discussed by the CoC in its 18th meeting dated 13.10.2022 (copy of the minutes annexed as Annexure A-2 of the written submission).

The unit of the Corporate Debtor is situated in an area, which is near the Pakistan border and hence the provision of basic facilities in the area are scarce. Even if the plan is approved, it would take a minimum of 5-6 months for the SRA just to get the power load increased to the required capacity of 2000 KV in addition to incurring a huge cost for the restoration of connection.

The RP has also failed to protect the assets of the Corporate Debtor in a state, as they existed at the time of submissions of the Resolution Plan. The plant and machinery of the Corporate Debtor have been lying idle for the last 3 and half years. The same being open to sky, has also become unusable or in need for major fixings and repairs. The cost of repairing the unit and making the unit operational would be more than Rs.50 lakhs, which expense is being laid at the doorstep of the Resolution Plan for failure of the RP in its duty to keep the mill running and operational.

In view of the aforesaid, on account of the RP having failed to maintain the Corporate Debtor as a going concern, the Resolution Plan is not capable of being implemented effectively and thus deserves to be rejected in view of proviso to Section 31(2) of the Code.

On account of failure of the Resolution Plan to protect the position and the assets of the Corporate Debtor in the state as promised and portrayed in the IM, the Resolution Plan ought to be rejected on this ground. The plan is implementable, only if the Corporate Debtor was a going concern and without the same, the entire structure of the Resolution Plan has been changed unilaterally by the RP/ CoC, which burden cannot in any manner be fastened upon the Resolution Plan.

Even the co-ordinate benches of the Hon'ble NCLT have accepted this position that once the RP fails to maintain the Corporate Debtor as a going concern or if there's any material change from the IM, the Resolution Plan is deemed to be unworkable under the proviso of Section 31(1) of IBC and thus rejected (copy of the Orders dated 30.04.2024 passed by the NCLT Delhi Bench in the matter of ‘Mr. Chandra Prakash vs. Sumit Kumar Khanna and Ors’ in IA/4383/ND/2021 in CP(IB) No. 2039/ND/2019 and dated 06.07.2022 passed by the Hon’ble NCLT, Ahmedabad Bench in the matter of ‘M2K Developers Pvt. Ltd. and Ors. vs. Ramachandra D. Choudhary, RP of Anil Mega Food Park Pvt. Ltd. and Ors.’ in IA/843(AHM)/2021 and IA/420(AHM)/2022 in CP(IB) No. 287/NCLT/AHM/2019 are annexed as Annexure A-3 and Annexure A-4 respectively.

As per the scheme of IBC, a Resolution Plan, which has been approved by the CoC, shall be binding inter-se between the CoC members and the SRA, even when an Application for approval of Resolution Plan is pending adjudication before the Adjudicating Authority. The Hon’ble Supreme Court in the matter of “Ebix Singapore Pvt. Ltd. vs. CoC of Educomp Solutions Limited and Anr. (2022) 2 SCC401”, had categorically held that the SRA cannot withdraw or modify the Resolution Plan after the CoC has approved it.

It is a settled position of law that once the Resolution Plan is approved by the CoC of the Corporate Debtor, the same in binding on the SRA and the CoC and the SRA cannot withdraw or modify the Resolution Plan or make a prayer before the Adjudicating Authority for withdrawing its Resolution Plan. Therefore, the present application is liable to be dismissed, as the Resolution Plan cannot be sent for re-consideration to the CoC.

The Hon'ble Appellate Tribunal in the matter of "Noble Marine Metals Co WII vs. Kotak Mahindra Band Ltd. and Ann, Company Appeal (AT) (Insolvency) No. 653 of 2022" has categorically held that it is a settled position of law that the approved Resolution Plan is binding upon the SRA in terms of the provisions of the Code.

The Resolution Plan once approved by the CoC is a 'Contract' and becomes binding between the SRA and the CoC. The Hon'ble Supreme Court in a catena of Judgements has held that the jurisdiction of this Adjudicating Authority is limited as far as the Commercial Wisdom of the CoC is concerned, unless and until there is any material irregularity or is against the provisions of section 30(2) of the Code and in the instant case there being none therefore, the plea of SRA cannot be allowed.

Once a Resolution Plan has been approved by the CoC of the Corporate Debtor and an Application for approval of Resolution Plan is pending adjudication before this Adjudicating Authority, the SRA has no jurisdiction to withdraw or seek rejection of the Resolution Plan or to reconsider the Resolution Plan or renegotiate the same. The Resolution Plan, once approved by the CoC, is binding on all stakeholders & the SRA and it is only subject to approval of this Hon'ble Adjudicating Authority under Section 31 of the Code. In doing so, it is a settled principle of law that this Adjudicating Authority would not have the jurisdiction to entertain the Application to withdraw the Resolution Plan Approval Application, be it for reconsideration of the Resolution Plan or to renegotiate the same with the SRA. The Resolution Plan was approved by the CoC in their 12th meeting convened on 05.11.2019 with 91.95% voting share in favour of the Resolution Plan with a view to maximize the assets of the Corporate Debtor and to revive the Corporate Debtor at the earliest. The Application for approval of Resolution Plan is pending adjudication before this Adjudicating Authority, and at this stage the SRA cannot be allowed to take a U-Turn from its earlier stand and reverse the decision already taken by it. Once the Resolution Plan is submitted and the CoC has exercised of approving the Resolution Plan by applying its commercial wisdom, the SRA cannot withdraw its Resolution Plan as held by the Hon'ble Supreme Court in Ebix (supra) and Deccan Value Investors L.R & Anr. vs Dinkar Venkatsubramaniam & Anr in Civil Appeal No. 2801 of 2020.

The Hon'ble National Company Law Appellate Tribunal in the matter of "Kalinga Allied Industries India Private Limited vs. CoC and Ors.-Company Appeal (AT) (Insolvency) No. 689 of 2021" has held that once the Resolution Plan is submitted to the Adjudicating Authority, it is binding and irrevocable as between the CoC and the SRA in terms of the provisions of the Code.

It is well settled that the SRA lacks the locus standi to directly object to the approval of its very own Resolution Plan by this Adjudicating Authority however, the present written submission wrongfully seeks withdrawal of the Resolution Plan, which amounts to indirectly objecting to its own Resolution Plan.

The SRA had earlier filed I.A. no. 332 of 2021 under section 60(5) of the Code, seeking revision/ withdrawal of the Resolution Plan claiming that the SRA is not in the position to implement the Resolution Plan and that the Resolution Plan be taken over by one M/s. R.L. Enterprises. This Adjudicating Authority vide Judgment dated 16.02.2023 dismissed the I.A. 332 of 2021 and held that the SRA doesn't possess adjudicating powers and cannot dictate the terms in which the Resolution Plan must be approved by the CoC. Therefore, the doctrine of Res Judicata will be applicable in the present case and the same amounts to an abuse of the process of Court. The copy of Judgment dated 16.02.2023 passed by this Adjudicating Authority is annexed as Annexure A-1 of the counter written submissions.

The Hon'ble Supreme Court in the matter, Bombay Gas Co. Ltd. Vs. Jagannath Pandurang & Others, (1975) 4 SCC 690 in paragraph 11 held that the doctrine of res judicata is a wholesomeone, which is applicable not merely to matter governed by the provisions of the Code of Civil Procedure, but to all litigations. It proceeds on the principle that there should be no unnecessary litigation and whatever claims and defences are open to parties should all be put forward at the same time provided no confusion is likely to arise by so putting forward all such claims. In the case of Kaushik Co-operative Building Society Vs. N. Parvathamma and Others, (2017) 13 Supreme Court Cases I38 it is held that the application of the rule by the courts should be influenced by no technical considerations of form, but by matter of substance within the limits allowed by law. The rule of res judicata while founded on ancient precedent is dictated by a wisdom, which is for all time. The basic character of this principle is public policy and preventive as to give finality to the decision of the court of competent jurisdiction and prevent further litigation.

The Hon'ble Appellate Tribunal in Vikas Dahiya Vs. Arrow Engineering Limited & Anr., Company Appeal (AT) (Insolvency) No. 699 of 2022, held that the doctrine of Res Judicata is applicable to the proceeding of IBC as well.

In view of the principle laid down in the above judgments, strictly doctrine of Res Judicata is applicable even to the proceedings under IBC and challenge to the findings in incidental or collateral proceedings amounts to an abuse of process of Court.

The delay in the present matter is caused on account of the SRA as the SRA had filed an Application bearing no. I.A. 332 of 2021 under section 60(5) of the Code, seeking revision/ withdrawal of the Resolution Plan claiming that the SRA is not in the position to implement the Resolution Plan and that the Resolution Plan be taken over by M/s. R.L. Enterprises. This Adjudicating Authority vide Judgment dated 16.02.2023 dismissed I.A. No. 332 of 2021 and held that the SRA doesn't possess adjudicating powers and cannot dictate the terms, in which the Resolution Plan must be approved by the CoC. Therefore, the doctrine of Res Judicata will be applicable against the instant plea of SRA.

The SRA, in its written submission, has narrated the sequencing of events in this matter as shown in the Table below:

We note from the above sequence of events that the in April 2019, the CoC had rejected the Resolution Plan filed by SRA and recommended for liquidation of the Corporate Debtor, which was challenged by SRA and when the revised Resolution Plan of the SRA was approved by the CoC, the SRA made attempts to exit from the Resolution Plan by bringing another person in its place. As the same is not permissible as per law, this Adjudicating Authority rejected the IAs filed by the SRA.

The SRA now is attempting to exit from the Resolution Plan on the ground of change in circumstances, which is not permissible under the law. In this regard, we place reliance on the Hon'ble Supreme Court Judgement in the matter of "Ebix Singapore Pvt. Ltd. vs. CoC of Educomp Solutions Limited and Anr. (Supra)", wherein it was held as below:

We also note that the IAs filed by the SRA regarding modification of the plan have already been rejected by this Adjudicating Authority and thus allowing the prayer of the SRA would indirectly amount to review by this Adjudicating Authority of its own order.

In view of the above, we do not find any content in the arguments of the SRA and reject the same. Thus, we proceed further with the direction of the NCLAT to decide the present application for the approval of the Resolution Plan, in accordance with law.

The resolution plan 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.

The RP at page 18-19 of the Convenience Proforma dated 03.02.2023 has mentioned as below:

The RP at page 18 of the Convenience Proforma dated 03.02.2023 has also referred to clause 6.1 of the of the Resolution plan (page 430-431 of the CA), which states as below:

Thus, the Resolution Plan complies with the provision of the section 30(2)(a) of IBC regarding CIRP costs.

The resolution plan 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:

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

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.

The RP at page 19 of the Convenience Proforma dated 03.02.2023 has referred to clause 6.3 of the of the Resolution plan (page 431 of the CA), which states as below:

The RP at page 2 of the Convenience Proforma dated 03.02.2023 has stated the fair and liquidation value of the Corporate Debtor as below:

The RP at page 21 of the Convenience Proforma dated 03.02.2023 has mentioned the amounts actually provided for under Section 30(2) of the Code as below:

The liquidation value of the Corporate Debtor is Rs.20.30 crore and claim admitted of the secured Financial Creditor is Rs.312.59. Since the amount provided in the Resolution Plan is Rs.33.40 crores, which is less than the admitted claim of the Financial Creditor, the Operational Creditors are not likely to get anything in case of distribution under section 53 of the IBC. However, the Resolution Plan provides for Rs.10 lakh for the Operational Creditors and thus, the payment to the Operational Creditors complies with the provision of section 30(2)(b) of IBC.

The liquidation value available for the Operational Creditors (other than workmen) is nil, as the claim of the secured creditors is more than the liquidation value of the Corporate Debtor. Further, there are no claims of the workmen for twenty-four months preceding the insolvency commencement date.

The RP at page 1 of the Convenience Proforma dated 03.02.2023 has mentioned the votes of the CoC members casted in favour/ against the Resolution Plan as below:

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

The resolution plan provides for the implementation and supervision of the resolution plan;

The RP at page 19 of the Convenience Proforma dated 03.02.2023 has referred to clause 7 of the of the Resolution plan (page 433 of the CA), which states as below:

The resolution plan does not contravene any of the provisions of the law for the time being in force; The RP at page 19 of the Convenience Proforma dated 03.02.2023 has stated that the Resolution Plan contravene none of the provisions of the law for the time being in force.

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

The Applicant has submitted the details of various compliances as envisaged by the Code and the CIRP Regulations, which a Resolution Plan is required to adhere to, as follows:

The RP has submitted requirements of Regulation 37(1) of CIRP Regulations as under:

During the course of Audit, the transaction auditor has observed that preferences have been given to the promoters/ creditors, which amounts to Rs.2899.05 lakhs, thus attracting the provisions of Section 43(2) of the IBC.

During the course of audit, the transaction auditor has observed the undervalued transactions amounting to Rs.127.04 lakhs, thus attracting the provisions of Section 45 of the IBC, 2016.

During the course of audit, the transaction auditor has observed the transactions amounting to Rs.10,298.27 lakh, which attracts the provisions of Section 66(1) of the IBC.

The Resolution Plan as approved shall be binding on the Corporate Debtor and its employees, members, and creditors, including the Central Government, State Government, or 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 owned, guarantors and other stakeholders involved in the resolution plan.

The Resolution Plan shall become effective from the date of passing of this Order and shall be implemented by the Monitoring Committee strictly as per the term of the Resolution Plan and Implementation Schedule given therein.

The Moratorium imposed under Section 14 shall cease to have effect from the date of this Order.

The RP shall stand discharged from his duties with effect from the date of this Order. However, he shall perform his duties in terms of the Resolution Plan as approved by this Adjudicating Authority.

The RP is further directed to hand over all records and properties to the Resolution Applicant and shall finalize the further line of action required for starting the operation. The Resolution Applicant shall have access to all the records and premises of the Corporate Debtor through the RP to finalize the further line of action required for starting the operation.

In case of non-compliance with this order or withdrawal of the Resolution Plan, the performance security amount already paid by the Resolution Applicant shall be liable to be forfeited, in addition to such further action as may be permitted under the law.