Mr. Anurag Goel, Liquidator Of Shree Ambika Sugars Limited

This Application has been filed under Section 230-232 and Section 66 of the Companies Act, 2013 by Mr.Anurag Goel Liquidator of Shree Ambika Sugars Limited (hereinafter referred to as "Corporate Debtor") seeking to sanction and confirm the Scheme of Compromise (hereinafter referred to as 'Scheme') of SNJ Distillers Private Limited and order it to be binding on all the Shareholders/ Members, Secured Creditors/Unsecured Creditors, Operational Creditors (Statutory Authorities), Operational Creditors (Farmers), Operational Creditors (Employees and Workmen) and Operational Creditors (Other Creditors) of the Corporate Debtor viz.M/s.Shree Ambika Sugars Limited (in Liquidation).

It is stated that the Corporate Debtor was admitted to CIRP vide order dated 18.12.2019. The Petitioner herein was appointed as the IRP, subsequently confirmed as RP. 2.2. It is stated that the Applicant issued an Expression of Interest (EoI) on 14.08.2020, and later received two Resolution Plans. In the 22^nd meeting of the Committee of Creditors (CoC), the members of the CoC did not approve the Resolution Plan and passed a resolution to liquidate the Corporate Debtor. This Tribunal vide order dated 20.06.2022 in IA(IBC)/1263(CHE)/2021 ordered liquidation of the Corporate Debtor and the Petitioner herein was appointed as the Liquidator.

Thereafter, the Liquidator carried on the liquidation process of the Corporate Debtor. The sequence of events during the liquidation process is as under,

It is stated that an Invitation for proposing a Scheme under Section 230 of the Companies Act 2013 with the Creditors and/or Members of the Corporate Debtor ("Process Document") was issued by the Liquidator on 05.07.2022 under Regulation 2B of IBBI (Liquidation Process) Regulations, 2016 calling for interested bidders who fulfil the eligibility criteria provided therein.

It is stated that the interested bidders were mandated to submit a non-interest bearing Earnest Money Deposit ("EMD") of INR 50,00,000/- (Rupees Fifty Lakhs only) whilst they submitted their respective Expression of Interest ("EoI") in order to be provided access to the documents pertaining to the Corporate Debtor. The events of issuance of Process Documents are enumerated hereunder,

It is stated that the bidders were mandated to provide the specified KYC documents, proof regarding the source of funds for the Scheme, undertaking by the bidders in the manner so specified in the Process Document, an additional EMD of INR 1,50,00,000/- (Rupees One Crore Fifty Lakhs only) in the manner specified in the Process Document to the Liquidator in order to proceed further in this process.

Thereafter, the Liquidator received EoI from the following bidders,

However, only SNJ Distillers (P) Ltd and Raja Laxmi Wind Energy Limited had submitted their Schemes on 10.08.2022 and 11.08.2022 respectively within the deadline and the same were placed before the Stakeholders Consultation Committee ("SCC") for their evaluation, deliberation and voting. It is stated that the SCC in the 2nd, 3rd, 4th and the 5th SCC meetings held on 17.09.2022, 16.11.2022, 25.11.2022 and 12.12.2022 continued their deliberations on the 2 schemes submitted and in the 6th SCC meeting on 14.02.2023, the SCC with the requisite majority provided their in-principle consent for the Scheme submitted by SNJ Distillers (P) Ltd Proponent to be filed before this Tribunal.

The Scheme Proponent herein, i.e., M/ s. SNJ Distillers (P) Ltd is a part of the SNJ Group of Companies. It is stated that the SNJ Group of Companies was promoted by Mr.S.N.Jayamurugan and consists of the following entities: a. SNJ Distillers (P) Ltd, b. SNJ Sugars and Products Limited, c. Empee Distilleries Ltd, d. SNJ Breweries (P) Ltd, e. Kaycee Distilleries, f. Leela Disilleries (P) Ltd, g. Nandhini Transport (P) Ltd, h. Hotel Nandhini Place, i. Hotel Anitha Towers.

It is stated that the entire group of companies promoted by Mr. S.N. Jayamurugan is having individual book value of net-worth of INR 290 crore and Mrs. Geetha Jayamurugan is having individual book value of net-worth of INR 177 crore as on 31.03.2021 as Promoters/Directors of the Scheme Proponent.

The Gross Annual Turnover and the VAT payment details of M/ s. SNJ Distillers (P) Ltd for the past 3 (three) years is tabulated below,

It is stated that as per the Scheme submitted by SNJ Distillers (P) Ltd, the Scheme Proponent shall fund the acquisition of the Corporate Debtor and infuse/ raise the funds as laid down in this Scheme. From the net-worth documents of the Scheme Proponent it is believed that the Scheme Proponent is potential enough to infuse the sum proposed in the Scheme.

The following are enumerated as the Rationale in the Scheme proposed in the application,

The Scheme of Arrangement and Compromise proposed by the Proposer to the creditors and shareholders of the Company shall, inter alia, result in following benefits to the Company and its Creditors:

It is submitted that the total amount that is proposed to be paid towards the admitted claims of the numerous claimants / stakeholders of the Corporate Debtor is a sum of INR 180,06,00,000/- (Rupees One Hundred and Eighty Crore and Six Lakhs only). The summary of the proposed payments to the various creditors and stakeholders of the Corporate Debtor vide the Scheme is tabulated below,

The Scheme states that the CIRP costs and Liquidation Costs including any salaries payable to workmen and employees during the CIRP period and any other fee payable to the Resolution Professional Liquidator, does not exceed a sum of Rs.8,28,68,175/-.

The Scheme also proposes that in case the actual CIRP and Liquidation Cost exceed beyond Rs.8,28,68,175/- the Scheme Proponent undertakes to pay such sum on actuals basis on priority, within 30 days from the Effective Date / actual date of expenses incurred.

It has also been clarified that any payment to be made to any Chairman or Authorized Representative, who may be appointed by this Tribunal, shall also be made from the provision made for Liquidation Costs only.

It is stated in the Scheme that in case of any further liability, i.e., if any further claims are admitted by the Liquidator, the Scheme Proposer's liability shall remain INR 73,48,608/- and the said monies can be distributed on a pro-rata basis. It is also made clear that no additional monies whatsoever in the nature of salary, wages, PF, ESI, gratuity, bonus, compensation, allowances, including any interest or penalty therein, etc. by whatever name called, are payable to the employees and workmen, more than the aforesaid amount proposed to be paid by the Proposer.

It is stated in the Scheme that in case of any further liability, i.e., if any further claims are admitted by the Liquidator, the Scheme Proposer's liability shall remain Rs.10,78,908/- and the said monies can be distributed on a pro-rata basis. It is also made clear that no additional monies whatsoever in the nature of salary, wages, PF, ESI, gratuity, bonus, compensation, allowances, including any interest or penalty therein, etc, by whatever name called, are payable to the employees and workmen, more than the aforesaid amount proposed to be paid by the Proposer.

It is stated that the scheme also makes it clear that that no monies whatsoever, whether claimed or unclaimed, crystallized or uncrystallized, whether reduced to in the form of a decree or otherwise by any order of Court or authority, shall be payable to any operational creditor, including the Income Tax Department, Sales Tax Department, GST or any other Government agency, under the Scheme. It is stated that the Scheme also states that any further monies due from the Corporate Debtor, apart from those which have been admitted by the erstwhile Resolution Professional/Liquidator and set out in the information memorandum, shall stand extinguished and shall no longer be the liability of the Corporate Debtor, after the approval of the Scheme.

It is stated in the Scheme that in case of any further claims from any Cane Farmers or any governmental authority or society or agency on their behalf are admitted by the Liquidator, then even in such a case the amounts proposed to be paid to such Cane Farmers by the Scheme Proposer shall remain Rs.29,43,67,131/-, no additional funds will be provided by the Scheme Proposer. So the additional claims will have to be dealt with on a pro-rata basis only.

It is stated that in case the CIRP / Liquidation costs have been met from the liquid assets of the Corporate Debtor, the excess monies available on account of such CIRP / Liquidation Costs shall be distributed amongst the Secured Financial Creditors of the Corporate Debtor. In the Scheme it has been illustrated with the following example/ analogy - "In other words, if say a sum of Rs.1 crore has been realised from the liquid assets of the Corporate Debtor, which sum has been used towards liquidation expenses, in such a case, Rs.1 crore which remains in excess on the monies due under CIRP/ Liquidation Costs, shall be distributed amongst the Secured Financial Creditors."

It is stated that in the Scheme that, certain contingent receivables to the Corporate Debtor have been categorized as "Identified Assets" with regards to which the Stakeholders Consultation Committee seeks to realize independently for the purposes of which a trust is envisaged to be created. The creation of a trust for the said purpose is also taken cognizance of in the Scheme. The list of Identified Assets is broadly listed below:

A. Outcome of Arbitration Proceedings in Arbitration Courts of United Kingdom (Pending reimbursement of cost of arbitration in terms of award) under Arbitration award No. 235 dated 10th October 2019 in respect of Contract No 17595 dated 21 August 2009 as subsequently amended on 12 October 2009 ("the Contract").

B. Outcome of Litigation Proceedings in Appellate Tribunal for Electricity (APTEL) Court in New Delhi against PTC India Ltd under case No. DFR No.9 & 74 of 2022 against order dated 05.10.2021 in case no. DRP 15 & 16 of 2011 in respect of claim of Rs.7,53,88,371/- and interest thereon.

C. Outcome of Dispute on Raw/Processed Sugar of approx 19,500 MT (under Lien with Customs and ownership in dispute) lying in Custom Bonded Warehouse in the premises of the Kottur & Pennadam Units of Shree Ambika Sugars Ltd (Corporate Debtor) imported under Bill of Entries as listed in Seizure Notice by DRI dated 29.08.2019, Presently under Litigation in High Court of Madras.

It is stated that in addition to above Identified Assets, if any recoveries are made in pursuance to the PUFE applications, which are pending before this Tribunal, then the same shall also be inured for the benefit of the Creditors of the Corporate Debtor.

The proceeds from the realization of the aforesaid Identified Assets shall be outside the liquidation estate and shall be dealt with by the Stakeholders Consultation Committee, in accordance with the law.

It is stated that it has been stated in the Scheme that even in case any further claims are admitted by the Liquidator, there will be no increase in the aforesaid amount of monies brought in by the Scheme Proposer for the purpose of payment towards the Unsecured Financial Creditors and all the claims therein would have to be dealt with on a pro-rata manner only.

It is stated that the Scheme Proposer has given a No-Objection Certificate ("NOC") for the special treatment and exclusion of the following assets (Identified Assets) and corresponding liabilities associated or connected with the Identified Assets, and has agreed that the same shall be excluded under the terms of the Scheme, in accordance with the NoC issued for the realization of the identified assets independently. The identified assets are as follows,

A. Outcome of Arbitration Proceedings in Arbitration Courts of United Kingdom (Pending reimbursement of cost of arbitration in terms of award) under Arbitration award No. 235 dated 10th October 2019 in respect of Contract No 1759S dated 21 August 2009 as subsequently amended on 12 October 2009 ("the Contract").

B. Outcome of Litigation Proceedings in Appellate Tribunal for Electricity (APTEL) Court in New Delhi against PTC India Ltd under case No. DFR No.9 & 74 of 2022 against order dated 05.10.2021 in case no. DRP 15 & T 16 of 2011 in respect of claim of Rs.7,53,88,371/- and interest thereon.

C. Outcome of Dispute on Raw/Processed Sugar of approx 19,500 MT (under Lien with Customs and ownership in dispute) lying in Custom Bonded Warehouse in the premises of the Kottur & Pennadam Units of Shree Ambika Sugars Ltd (Corporate Debtor) imported under Bill of Entries as listed in Seizure Notice by DRI dated 29.08.2019, Presently under Litigation in High Court of Madras.

D. In to above three identified assets, if any recoveries are made under in pursuance to the PUFE applications, which are pending before the Hon'ble Adjudicating Authority, then the same shall also be inured for the benefit of the Creditors of the Corporate Debtor, as per provisions of mc 2016.

It is stated that following treatment has been proposed by the Liquidator w.r.t. the identified and excluded assets as per the No Objection Certificate. The relevant clauses of the NoC are extracted hereunder,

a. Creation of Trust for assignment of the claims and receivables under the above Identified Assets.

b. All the above Identified Assets together with corresponding liabilities, future liability and contingency thereon shall be move to Trust be created for the purpose of trust. The said assets shall be excluded from balance sheet of Corporate Debtor by Liquidator in consultation with SCC upon date of creation of Trust or Balance Sheet as prepared on effective date /cut-off date i.e. the date of transfer of assets or approval of above said scheme by Hon'ble Adjudicating Authority, NCLT, whichever is earlier or applicable with the approval of Hon'ble Adjudicating Authority.

c. All the above identified assets are proposed to be held in the name of trust I on "as is where is", "as is what is" and "whatever there is basis".

d. All the corresponding liabilities against the above identified assets have also been identified by the undersigned. To be clear that no liability of the same will fall within the scope of the scheme and the corresponding identified liabilities shall also stand excluded from the Liabilities / Claims admitted by the Liquidator.

e. The Scheme proposer shall issue a NOC for carving out the above identified assets along with its identified corresponding liabilities from the ambit of Proposed Scheme of Compromise or Arrangement u/s 230 of Companies Act 2013 read with of the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016.

f. It is clarified here that nothing in the NOC shall be deemed to take away any other right that comes to the Scheme Proponent under the Scheme submitted.

g. All future expenses in relation to on-going litigations in relation to above identified Assets shall be borne by the Trust and there shall be no liability on the Scheme Proponent for the same except expenses already incurred which have been part of CIRP / Liquidation Cost and approved by the COC/SCC (or incurred till the effective date i.e., date of Order by NCLT on the scheme). All costs associated with the Trust shall be borne by beneficiary of Trust. No Expenses or Liability or obligations, in relation to trust and the Identified Assets moved thereon, shall be the responsibility of the Corporate Debtor/ Scheme Proponent.

TIME LINES ENVISAGED FOR THE PAYMENT OF MONIES TO THE STAKEHOLDERS POST APPROVAL OF THE SCHEME:

It is stated that upon approval of the Scheme by this Tribunal, the payments shall be made to the stakeholders of the Corporate Debtor from the effective date, in the following timelines.

It is stated that as per the Scheme, the Monitoring Committee shall comprise of the following persons:

Liquidator / Resolution Professional

Shri N Jayamurugan, Nominee of Proposer

Shri Bimalendra Mishra, Nominee of Proposer

Shri R Anbalagan, Nominee of Proposer.

Nominees of the Committee of Creditors/ Stakeholders Committee (Two Secured Financial Creditor and One Unsecured Financial Creditor) However, the Scheme also states that the Proposer shall be at liberty to nominate any other person in place of its members to be a part of the Monitoring Committee.

It is stated that the Monitoring Committee shall be responsible for carrying out the business of the Corporate Debtor post the approval of the Scheme until the disbursement of monies payable under the Scheme Addendum. It is submitted that the Monitoring Committee shall have such duties as contemplated in various parts of the Scheme.

The Petitioner Companies filed the First Motion Application vide CA(CAA)/11(CHE)/2023 in IBA/1017/2019. Wherein, this Tribunal vide order dated 13.04.2023 directed the Applicant/Liquidator herein to constitute a Stakeholders Committee in terms of Regulation 31A of the Liquidation Process Regulations. Further directed the Liquidator to convene a meeting for all stakeholders. Mr.Nallasenapathy and Ms.Pavitra Sundarrajan have been appointed as the Chairman and Scrutinizer of the aforesaid meetings.

Thereafter the Liquidator filed an Application bearing No. Company Appl/4(CHE)/2023 in CA(CAA)/11/2023 for appointment of Authorized Representatives for the class of creditors and the same was approved by this Tribunal vide order dated 31.05.2023. The list of Authorised Representatives for the class of creditors approved by this Tribunal is as follows,

It is stated that on 01.06.2023, meeting of the Stakeholders had taken place thorough Audio Visual mode. The brief Report of said meeting by the Chairman is extracted hereunder,

Report of Chairman filed before Tribunal: Date 12.06.2023 with Sr. No.2347 of 2023 (E-filed on 09.06.2023)

On a Perusal of the above report, it is noted that the stakeholders of the Corporate Debtor have consented to the Scheme Proposed by the SNJ Distillers Private Limited with the requisite majority of 84.64%. Subsequently, the second motion petition was filed by the Petitioner Company on 12.06.2023 for sanction of the Scheme by this Tribunal.

In the second motion Petition filed by the Petitioner Companies, this Tribunal vide order dated 12.07.2023 directed the Petitioner Companies to issue notice to the Statutory / Regulatory Authorities viz. (i) Regional Director (Southern Region), (ii) RoC, Chennai, (iii) Official Liquidator, (iv) SEBI, (v) The Income Tax Department, with PAN details of all Petitioner companies and copy to the Chief Principal Commissioner Office as well as for paper publication to be made in “Business Standard”, English (All India Edition) and “Dinamani” Tamil (Tamil Nadu Edition).

In compliance with the said directions issued by this Tribunal, the Petitioner Companies effected paper publications in “Business Standard” (All India Edition) in English and “Dinamani” (Tamil Nadu Edition) in Tamil on 19.04.2023. Notices have been served to (i) Regional Director, Southern Region, Chennai on 11.05.2023, (ii) Registrar of Companies Chennai on 11.05.2023, (iii) Official Liquidator on 11.05.2023, (iv) Income Tax Department on 11.05.2023, (v) Reserve Bank of India on 27.04.2023, (vi) SEBI on 27.04.2023, (vii) The District Collector, Thanjavur on 27.04.2023, (viii) The District Collector, Cuddalore on 27.04.2023, (ix) Commissioner of Sugar on The District Collector, Thanjavur on 27.04.2023, (x) Industries Commissioner & Director Commissionerate of Industries of Commerce on 27.04.2023, (xi) Agriculture Commissioner on 27.04.2023, (xii) Additional Director General, Directorate of Revenue Intelligence on 27.04.2023, (xiii) Assistant Commissioner of GST & Central Excise – Cuddalore. The proof of the same by way of affidavit of service dated 31.08.2023 has been enclosed with the separate typed set. Pursuant to the service of notice of the petition, the following statutory authorities have responded as under:

Despite notice having been served and also public notice dated 19.04.2023, there is no representation from the RD and this Tribunal in terms of Section 230(5) of the Companies Act, 2013 presumes that the RD does not have any objection to the sanction of the Scheme.

Despite notice having been served and also public notice dated 19.04.2023, there is no representation from the Official Liquidator and this Tribunal in terms of Section 230(5) of the Companies Act, 2013 presumes that the Official Liquidator does not have any objection to the sanction of the Scheme.

The Income Tax Department to whom the notice was served, objected the scheme on following grounds,

In the reply affidavit dated 23.09.2023, the Liquidator stated that,

Despite notice having been served and also public notice dated 19.04.2023, there is no representation from the SEBI and RBI and this Tribunal in terms of Section 230(5) of the Companies Act, 2013 presumes that the SEBI and RBI do not have any objection to the sanction of the Scheme.

The District Collector, Thanjavur to whom the notice was served submitted his objections to the proposed Scheme as follows,

In reply, Liquidator stated that,

Vide reply affidavit dated 28.08.2023, the District Collector, Cuddalore raised objections to the proposed Scheme as follows,

In reply the Liquidator vide reply affidavit stated that,

The LPF & INTUC on behalf of employees, workmen, and staff of the Corporate Debtor’s Kottur and Pennadam units also filed their objections dated 22.08.2023 and stated as follows,

In turn, the Liquidator in his stated as follows,

The Assistant Commissioner GST and CE raised the following objections to the proposed Scheme,

In reply, the Liquidator submitted as follows,

Principal Commissioner of Customs (Preventive), Tiruchirappalli, raised his objections as follows,

In reply the Liquidator responded as follows,

COMMISSIONER OF SUGAR, AGRICULTURE COMMISSIONER, INDUSTRIES COMMISSIONER& DIRECTOR, COMMISSIONERATE OF INDUSTRIES AND COMMERCE AND ADDITIONAL DIRECTOR GENERAL, DIRECTORATE OF REVENUE INTELLIGENCE:

Despite notice having been served and also public notice dated 19.04.2023, there is no representation from the above authorities and this Tribunal in terms of Section 230(5) of the Companies Act, 2013 presumes that the above authorities do not have any objection to the sanction of the Scheme.

This Tribunal on 09.01.2024 also sought the following clarifications Since, as per the Scheme,

Under which provision of IBC the Tribunal can approve the formation of a Trust in the Scheme? What is the remedy if the Trust and Trustee failed in their duty?

Who will be the Trustee?

Under what provisions the Trust and the Trustee will handle the assets of the CD?

What is the role of the Liquidator in forming the Trust?

What are the liabilities which are getting transferred to the trust?

Without separate application by the beneficiaries of trust, can the Scheme be approved?

Without creation of trust and transfer of the assets and liabilities, can the Scheme be approved as it involves scheme proponent taking over the Company?

Clarifying the above, the Petitioner filed a memo vide SR.No.178 dated 09.01.2024 and stated that,

Before adverting to the objections as raised by the Income Tax / GST Department / Customs Department / District Collector, Thanjavur & Cuddalore of the Corporate Debtor in relation to the Scheme, it is to be borne in mind that this present Scheme is not filed purely under Section 230 of the Companies Act, 2013. The present Scheme is also governed under Insolvency and Bankruptcy Code, 2016 and the attendant Regulations framed thereunder. The Hon’ble NCLAT after elaborately considering the provisions of the erstwhile provisions of Section 391 of the Companies Act, 1956 as well as the Section 230 of the Companies Act, 2013 and the decided case laws of the Hon’ble Supreme Court in relation to the powers vested in this Tribunal under the provisions of the Companies Act, 2013 to consider and deal with a compromise or make arrangement that may be proposed with creditors and members of a company including in relation to a company in liquidation, had directed the liquidator in para 8 in the matter of “S.C. Sekaran v. Amit Gupta & Ors. in Company Appeal (AT) (Insolvency) Nos. 495 & 496 of 2018 as follows;

Further, the Hon'ble NCLAT in the matter of Y. Shivram Prasad -Vs- S. Dhanapal & Ors. in Company Appeal (AT)(Ins.) No. 224 of 2018 chose to issue guidelines on how to proceed, if a Scheme is contemplated under Section 230 of the Companies Act, 2013 gets placed before this Tribunal in relation to a Company in liquidation under IBC, 2016 and in para 18 and 19 held as follows;

Thus, in relation to the scheme proposed under Section 230 of the Companies Act, 2013 during the Liquidation of the Corporate Debtor, the Hon'ble NCLAT held that this Tribunal is required to play dual role, one as the Adjudicating Authority in the matter of liquidation and other as a Tribunal for passing order under Section 230 of the Companies Act, 2013. Accordingly, this Tribunal has put in its logical attempts and efforts in combining the provisions of these two statutes in perfect harmony.

In relation to the objections raised by the Statutory Authorities viz. Income Tax, Customs and GST Department, it must be noted that even though the present Scheme is presented under Section 230 of the Companies Act, 2013 it should pass the muster as laid down under Section 30 and 31 of IBC, 2016, in such a way, that the present scheme should not be in violation of the provisions of the Insolvency and Bankruptcy Code, 2016.

The main objection raised by the Statutory Authorities is that the Scheme does not provide for payment in terms of Section 53 of IBC, 2016, and there is inter se discrimination between Operational Creditors. Further the Labour Progressive Front (LPR) & Indian National Trade Union Congress (INTUC) have filed an objection stating that the employees being Operational Creditors are no being treated equally at par with other Operational Creditors (Farmers). If we peruse the scheme, it is seen that as against the admitted claim of the Government Dues of Rs.90,57,71,425/-, they are being paid a sum of Rs.43,09,583/-.

In the present case, the farmers, who are the backbone of our country and the weaker section of the society would be the most affected class of creditors if an ordinary auction sale is resorted to and the proceeds are distributed in accordance with Section 53 of IBC, 2016. Hence, the Scheme proposed by the Scheme proponent has agreed to pay 80.06% of the admitted claim to the farmers. At this juncture, it is relevant to refer to the decision of the Hon’ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited –Vs- Satish Kumar Gupta & Ors. in Civil Appeal No. 8766 – 67 of 2019 dated 15.11.2019, wherein at para 54 it has held as follows;

Again in para 56 and 57, it was held as follows;

Thus, it is a settled law that so long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors. Hence for the said reasons, the objections made by the Statutory Authorities viz. Income Tax and the GST Department are not sustainable.

Another objection was raised by the District Collector of Thanjavur and Cuddalore that the Sugar cane is an essential commodity and the farmers are the secured creditors and hence they have to be paid on par with the Banks.

Eventhough Section 3 of the Essential Commodities Act, 1955 states that Sugar is an essential commodity, the Insolvency and Bankruptcy Code, 2016 which came into effect from 01.12.2016 treats only electricity, water, telecommunication services and IT Services as essential commodity in relation to the CIRP / Liquidation of the Corporate Debtor. Further, the farmers are required to be treated only as 'Operational Creditor' in respect of the Corporate Debtor in terms of Section 5(20) & 5(21) of IBC, 2016 (extracted hereunder);

From the records it is seen that there are around 15,000 farmers who are spread across in and around the District of Thanjavur and Cuddalore respectively. It is required to be noted that as per the waterfall mechanism laid down under Section 53 of IBC, 2016, the Operational Creditors will not get any amounts, since there would be no surplus available post payments to the Secured Financial Creditor and Workmen of the Corporate Debtor. 16.11. It is pertinent to note here that the farmers payout is (80.06%) of their admitted claim as compared to the Secured Financial Creditors who are being paid only 9.41% of the admitted claim. Further, the Scheme proponents who are proposing a Scheme under Section 230 for revival of a Company under the provisions of IBC, 2016 cannot be made to pay the FRP rate as fixed by the Government in respect of the farmers. Thus, the objections raised by the District Collector of Thanjavur & Cuddalore are not sustainable.

In relation to the objections raised by the Customs Department, it is seen that the said Department has seized the Goods of the Corporate Debtor vide Seizure Notice by DRT dated 29.08.2019. Thereafter, the CIRP in respect of the CD was initiated on 18.12.2019 and subsequently, liquidation was ordered on 20.06.2022. It is seen that the Customs Department vide order No. 05/2022 dated 12.12.2022 has confiscated the goods in pursuance of the seizure order. In this regard, it is significant to refer to Section 33(5) of IBC, 2016 which states as follows;

As per Section 33(5), the Customs Department ought not to have confiscated the goods of the Corporate Debtor without prior approval of this Adjudicating Authority. Further, it is also to note that the Customs Department has not filed any claim before the RP / Liquidator during CIRP and Liquidation of the Corporate Debtor. Even assuming that they have filed the claim, the Customs Department being a Statutory Authority, will be treated as an 'Operational Creditor' under the provisions of IBC, 2016.

In this regard, it is significant to refer to the object of IBC, 2016, which is as follows;

Thus, it could be seen that from the object of IBC, 2016 envisages alteration in the order of priority of payment of Government dues. It is to be borne in mind that during Liquidation, the dues of the EPF do not form part of the liquidation estate and hence the Scheme proponent has decided to pay the amount in full to the said authorities. However, the objectors who are the Statutory Authorities, at no point of time can be elevated to the status of a secured creditor. The dues of the Government are below the dues to be paid to the secured creditors/workmen and thus if the proceeds are to be liquidated then the Operational Creditors – Statutory Authorities, would not be getting even a single rupee as per the waterfall mechanism laid down under Section 53 of IBC, 2016. Hence, the objections raised by the Customs Department in this regard are not sustainable.

Since Ld.Sr.Counsel has elaborated the power of this Tribunal to approve the formation of Trust and bifurcation in the Proposed to Scheme, it is necessary to look into the relevant provisions, Rule 11 of NCLT Rules, 2016

Section 230 of the Companies Act, 2013,

Section 232(3)(a) of the Companies Act, 2013

Section 232(3)(a) stipulates that this Tribunal may sanction the compromise or arrangement by order, make provisions for transfer of whole or any part of the undertaking, property or liabilities of the Transferor company to the Transferee company.

Regulation 37A of IBBI Liquidation Process Regulations, 2017, empowers the Liquidator to assign or transfer not readily realisable assets for a consideration to eligible person after consulting the Stakeholders Consultation Committee (SCC). In the instant case the SCC with requisite voting has accorded consent to proposed Scheme. Thus, it is clear that the bifurcation of the assets/liability of the CD in terms of the proposed Scheme of Arrangement which got approval of the SCC, is permissible under these provisions.

Regarding approval of formation of Trust in the Scheme, we see that this Tribunal in the case of St.John Freight Systems Limited (IA(IBC)/1018(CHE)/2022 In CP/759/IB/2018 order dated 19.01.2023) referred supra has permitted the creation of Trust in liquidation for excluded assets and liabilities. The relevant extract of the case is reproduced as under:

In view of the above, and considering maximisation of value of the assets and timely resolution of the CD which is nothing but the very object of the IBC, 2016 this Tribunal permits the formation of Trust to handle the identified assets (as in Clause 5.2 (xv) of the Scheme) in terms of the Scheme. The Liquidator be appointed as the Trustee to process identified assets in terms of the Scheme and IBC, 2016. Liberty is granted to the beneficiaries of the Scheme to replace any eligible person as Trustee, if required.

Thus, the Scheme of Compromise or Arrangement submitted by M/s. SNJ Distillers Private Limited for takeover of assets and properties of M/s. Ambika Sugars Limited is hereby approved which will be is binding on the Corporate Debtor viz. M/s. Ambika Sugars Limited and all other stakeholders involved.

Apart from the above, the applicant has prayed additional reliefs and concessions. For the reliefs sought as below this Tribunal directs as under:

It is made clear that this Sanction of Scheme does not automatically construe that the approvals in relation to the statutory authorities or Government or any other authority have been automatically granted.

During the Implementation Period, the Liquidator shall act as the Chairman of the Monitoring Committee and the members of the Stakeholders Committee shall form part of the Monitoring Committee till the tenure of completion of the Scheme.

While approving the Scheme as above, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law

We direct that a copy of this Order be duly communicated to the Competition Commission of India (CCI) constituted under the Competition Act, 2002 (Act No. 12 of 2003), lest the Scheme should violate any provisions of the said Act.

The Liquidator is directed to file the certified copy of this order to the Registrar of Companies concerned for registration.

As a consequence thereof, CP(CAA)/27(CHE)/2023 stands allowed. All other Applications filed by the objectors, if any which is pending, also stands closed in terms of this order.