Mr. Ashwini Mehra vs Committee Of Creditors

Per: Ajay Kumar Vatsavayi, Member (Judicial)

The present application is filed by Resolution Professional (RP) under Section 30 & 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the Regulations) seeking sanction of resolution plan as approved through e-voting by Committee of Creditors on 23.09.2019.

It has been submitted that the insolvency petition was filed by M/s Educomp Infrastructure & School Management Limited (Corporate Debtor) under Section 10 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP) in the case of Corporate Debtor and the same was admitted vide order dated 25.04.2018 and the CIRP of the Corporate Debtor was initiated. It is submitted that Mr. Manoj Maheshwari was appointed as Interim Resolution Professional (IRP) vide order dated 25.04.2018 and within one day of the appointment order, the IRP issued a public announcement as per Regulation 6 of the Regulations read with Section 15 of the Code in Form A in two newspapers i.e. Business Standard, (English) and (Hindi), both dated 26.04.2018 and also on the website of the Corporate Debtor, thereby inviting claims from the creditors of the Corporate Debtor as envisaged in the Code.

It is submitted that pursuant to the public announcement, the IRP received claims of Rs. 11,98,26,06,870 lacs from 8 Financial Creditors and Rs. 6,93,99,975 from 27 Operational Creditors (including workmen, employees and statutory creditors) as on 08.10.2019 and based on the collated claims, the IRP constituted the Committee of Creditors (CoC) and their first meeting was held on 24.05.2018.

It is submitted that in the 2nd meeting of the CoC held on 01.06.2018, the CoC took notice of the inability of IRP to continue as Resolution Professional (RP) due to medical problems and resolved to replace Mr. Manoj Maheshwari (IRP) with the proposed RP i.e. Mr. Ashwini Mehra and appointed him as Resolution Professional (RP).The appointment of Mr. Ashwini Mehra as RP was further confirmed vide order dated 15.06.2018 in CA No. 227/2018 by this tribunal.

It is submitted that the applicant as RP had appointed two registered valuers namely; CBRE South Asia Pvt Ltd. and Ernst & Young Merchant Banking Services Pvt Ltd. to determine the fair value and liquidation value of the corporate debtor in accordance with Regulation 35 of the Regulations and the fair / liquidation value(s) as assessed on the basis of their reports as per unamended Regulation 35 is / are as follows:-

It is stated that the respective shares of the members of CoC after incorporating all the claims of all creditors are as follows:-

It is submitted that the Expression of Interest (EOI) has been called from eligible resolution applicants on 18.07.2018 as prescribed in Regulation 36 (A) of the Regulations by publishing Form G in Business Standard, (English) and (Hindi).

It is stated that pursuant to the publication of the advertisement for calling EOI, 21 potential resolution applicants expressed their interest to submit resolution plans for Corporate Debtor and 14 also executed confidentiality undertakings with the Applicant along with payment of Virtual Data Room (VDR) fee. It is also stated that the RP prepared an information memorandum and uploaded the same on the VDR, for ready reference and those 14 prospective resolution applicants sought access to the VDR, in order to carry out necessary due diligence of the Corporate Debtor.

It is further submitted that the CoC thereafter approved the process and evaluation criteria for evaluating a resolution plan in compliance with the requirements of the Code. It is also stated that the CoC appointed SBI Capital Markets as process advisor for the resolution applications and assessment of plans. It is stated that the process document dated 08.10.2018, as amended and clarified from time to time for submission of resolution plans for the Corporate Debtor was issued to the prospective resolution applicants by the Resolution Professional on behalf of the CoC.

It is submitted that the CoC in its fifth meeting held on 28.08.2018, unanimously resolved to extend the CIRP period to facilitate interested resolution applicants to submit the resolution plans for the Corporate Debtor by a period of 90 days and accordingly, the RP filed an application under Section 12(2) of the Code which was allowed by this tribunal vide order dated 20.09.2018 in CA No. 389 of 2018.

It is also submitted that the pursuant to the invitation uploaded on the VDR on 08.10.2018, for receipt of resolution plans from prospective resolution applicants as envisaged under Section 25(h) of the Code, the applicant has received three resolution plans on 05.03.2019. It is stated that the initial deadline for receipt of resolution plans was 05.11.2018 which has been extended from time to time, lastly to 05.03.2019, and the same was intimated to the potential resolution applicants through VDR.

It is further stated that a total of 21 prospective resolution applicants expressed interest initially, but only three resolution plans were submitted by the resolution applicants (RAs) on 05.03.2019 namely (i) Parmjit Gandhi, (ii) Breez Builders and Developers Pvt Ltd (Breez) & (iii) Cerestra Advisors Private Limited acting on behalf of Cerestra Special Situations Real Estate Fund (Cerestra).

It is stated that the applicant had filed an application (CA No. 335 of 2018) under Section 19 of the Code to obtain information pertaining to the corporate debtor for value maximization. And in the meanwhile, exclusion of period spent over litigation in CA No. 335 of 2018 was sought by the Applicant from this tribunal and vide order dated 13.02.2019, this tribunal was pleased to exclude a period of 06.11.2018 to 15.02.2019 and the CIRP period stood extended up to 27.05.2019.

It is further stated that M/s Breez Builders & Developers Private Limited filed an application (CA No. 462 of 2018) seeking directions to replace the RP, Mr. Ashwini Mehra and to initiate disciplinary action against the RP, for carrying out various functions in the CIR Process in which the RP has beneficial interest. It was observed that M/s Breez Builders & Developers Private Limited has a remedy in filing compliant to the IBBI or other competent authority against the conduct of Resolution Professional but once the CoC has taken a firm decision on the representation made before it by the applicant, rejecting the same, this tribunal did not consider replacing the RP and in order to overcome any apprehensions expressed by the applicant, the following directions were issued:-

On 04.07.2019, the sealed envelopes were opened by the Designated Registrar of this Tribunal in the presence of the applicant, Counsel for CoC, representatives of the banks and counsel for the resolution applicants, in compliance of the above mentioned directions.

It is stated that upon opening of the sealed covers, the Applicant was apprised of the fact that no decision was taken by the CoC since none of the plans were found compliant.

It is noticed that the CoC has raised two major objections with regard to the resolution plan submitted by Mr. Parmjit Gandhi, viz. i) objection in respect of letter of comfort issued by a bank, namely, Dene Bank and Trust (Sovereign Native International Trade Bank- Americas) and ii) objection in respect of personal guarantee in favour of the bank whether to be assigned to the Resolution Applicant.

It is further submitted that CA No. 424 of 2019 was filed by Mr. Parmjit Gandhi to consider the plan submitted by him on 25.05.2019. Mr. Parmjit Gandhi had given an undertaking that the objection in respect of submission of letter of comfort was going to be redressed by submitting another letter issued by IndusInd Bank in addition to the letter of comfort, already issued. It was proposed that Mr Parmjit Gandhi was going to submit an addendum to the Resolution Plan of 25.05.2019 so as to cover the question of assignment of personal guarantees. In the light of the above, Learned Counsel representing the CoC raised no objections and submitted that the said proposal could be discussed in a meeting, if directed by this tribunal.

Vide order dated 12.07.2019, this tribunal directed the CoC to convene its meeting on 19.07.2019 and place the decision of the COC before this tribunal by 24.07.2019.

It is further submitted that the RP submitted its report on 24.07.2019 before this tribunal regarding the decision of the CoC on the plan submitted by Mr. Parmjit Gandhi, which was voted in favour by 60.28 % of the Members of CoC i.e. below the threshold of 66% as per the Code and hence, could not be considered.

It is stated that in view of the above, an application under Section 33(1) of the Code (CA No. 683 of 2019) was filed by the Applicant on 09.08.2019 before this tribunal seeking directions for liquidation of the Corporate Debtor as a ‘going concern’ and the same was dismissed as infructuous as the present Company Application was filed with this tribunal seeking approval of the resolution plan vide order dated 30.10.2019.

Vide order dated 03.09.2019, the following directions were issued in CA No. 424/2019 :-

It is stated that a revised plan was submitted by Mr. Parmjit Gandhi on 06.09.2019 and further another revised plan was again submitted by Mr. Gandhi on 16.09.2019. It is further submitted that CoC in its meeting held on 17.09.2019, discussed the feasibility and viability of the revised resolution plan submitted by Mr. Gandhi and the same may be put to vote. It was also resolved that the voting lines will be kept open from 12 pm on 20.09.2019 to 12 pm on 23.09.2019, which was extended further up to 4 pm on 23.09.2019 upon request made by one of the CoC member i.e. Axis Bank.

It is further submitted that the e-voting results were declared on 23.09.2019 wherein the revised plan submitted by Mr. Parmjit Gandhi was approved by 100 % assenting vote of the CoC. Copy of the complete resolution plan is at Annexure-6 of the application. The applicant has thereafter filed its affidavit on 25.09.2019 bringing on record the decision of CoC regarding the approval of the above resolution plan submitted by Mr. Gandhi.

It is also submitted that CoC while accepting the bid had taken care of all the provisions and Regulations. It is prayed that the application may be allowed and resolution as approved by the CoC in the CIRP of the Corporate Debtor be approved.

The learned counsel for the RP submitted that as per the Form H (Annexure-6 of the application), all the provisions of the Code and Regulations were complied with and that the approval of the resolution plan was made by 100 % voting share of the financial creditors on 23.09.2019 through e-voting and therefore, resolution plan submitted by Mr. Parmjit Gandhi be approved.

We have carefully considered the submissions of the learned counsel for the RP and the learned Counsel for the resolution applicant and have also perused the record.

The corporate debtor was incorporated on 02.09.2006 and the CIRP proceedings were initiated under Section 10 of the Code by the corporate debtor by order delivered on 25.04.2018. The present application is filed for approval of the resolution plan submitted by Mr. Parmjit Gandhi (Successful Resolution Applicant). The approval has been sought under the provisions of Section 31 (1) of the Code.

We may first of all state that after receipt, verification and collation of claims as discussed above, the IRP constituted the CoC as per the provisions of Section 21 of the Code. The details of the financial creditors, the distribution of voting share among them and the position of voting for the resolution plan is as under (para No.5 of Form H):-

The details of stakeholders under the resolution plan given in Para 7 of Form H:-

(Amount in Rs. Crores)

The compliance of the resolution plan has been given in Para No. 9 of Form H are as follows:-

The approval of the resolution plan has been sought under Section 31 (1) of the Code, reading as follows:-

The conditions provided for in Section 31(1) of the Code for approval of resolution plan are therefore:-

The satisfaction of the conditions is discussed below.

It is submitted by the RP that the resolution plan has been approved by a vote of 100% of voting share of the financial creditors and therefore, the conditions provided for by Section 30(4) of the Code are satisfied.

The provisions of Section 30(2) of the Code are as follows:-

The compliance of Section 30(2) of the Code is given in para No.9 of Form H (supra). The same is being further examined as under:-

We are now examining the compliance of the proviso to Section 31(1) of the Code that the resolution plan has provisions for its effective implementation. Clause 9 of the resolution plan discusses Supervision & implementation of the Resolution Plan. It is stated that the Resolution Applicant proposes the constitution of a monitoring committee by the CoC which committee shall include one nominee of the Resolution Applicant, which committee shall monitor the implementation of the Resolution Plan after approval of the same by this Tribunal. It is also stated that the Monitoring Committee so constituted shall supervise the management of affairs of Corporate Debtor by the Resolution Professional and implementation of the Resolution Plan, including ensuring settlement of claims of Financial Creditors/Operational Creditors and preparation of any report required to be filed under IBC including to the Insolvency and Bankruptcy Board of India, during the “Interim Period”), i.e. from the date of approval of the Resolution Plan (“Approval Date”) till the takeover of management and control of the Corporate Debtor by the Resolution Applicant(“Completion Date”).

We have discussed above that the requirements under Section 31(1) of the Code are satisfied in the present case. In para 4 of Form H the RP has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force. The RP has also certified that Mr. Parmjit Gandhi, the resolution applicant has submitted an affidavit (Annexure -7) pursuant to Section 30(1) of the Code confirming its eligibility under Section 29A of the Code to submit the resolution plan and the contents of the said affidavit are in order. The RP has submitted that the resolution plan has been approved by the CoC with 100% voting share in accordance with the provisions of the Code and CIRP Regulations made there under and after considering the feasibility and viability and other requirements specified by the CIRP Regulations.

We shall now discuss the requirements of Regulation 39(4) of the Regulations. As per the requirement of performance security, it is stated in Form H that the Performance Guarantee dated 09.10.2019 from HDFC Bank Limited has been provided by the Resolution Applicant. It is also stated that in Form H that the Bank Guarantee is for an amount up to and not exceeding INR 38,20,00,000 and shall remain in full force and effect till 08.10.2020, with an additional claim period of 365 days thereafter. Copy of Extended Bank Guarantee dated 29.09.2020 issued by HDFC Bank for an amount of INR 38,20,00,000/- has been furnished by the RP (Annexure 2 of Diary No. 00302/4 dated 01.10.2020).

It is also stated that the Resolution Professional has formed an opinion that transactions have been discovered or determined in the case of the Corporate Debtor under Sections 43,45,50, and 66 of the Code based on the Transaction Audit Report 22.11.2018 and he has already filed an application before this tribunal on 25.11.2018.

The Learned Counsel representing the Resolution Applicant has also placed on record the Copy of the minutes of the meetings of the CoC held on 17.09.2020 & 30.09.2020 wherein the viability and feasibility of the present resolution was discussed, as directed, vide Diary No. 00302/5 dated 09.10.2020.

I.A No. 486/2020 was filed by the Successful Resolution Applicant (Mr. Gandhi) seeking extension of time of 30 days to submit the letter of comfort/ sanction letters from financial institution beyond 28.09.2020.

On 21.10.2020, while hearing of the above I.A., 14 days' time was granted to the successful Resolution Applicant to submit the letter of comfort. It was also directed that the Resolution Professional shall file a fresh affidavit within 3 days from the receipt of the Letter Of Comfort, recording his satisfaction or otherwise with the said Letter of Comfort.

In compliance of the above directions, the Resolution Professional has filed sanction letter dated 09.10.2020 of Kotak Mahindra Bank for a loan amount of Rs. 210 Crores and sanction letter dated 03.11.2020 of Kalptaru Fincap Limited for a loan amount of Rs. 75 Crores vide Diary No. 00302/6 dated 10.11.2020. The Resolution Professional has also filed an undertaking for fulfilling all filing requirements in the present Company Application which is also a part of Diary No. 00302/6 dated 10.11.2020.

In view of the above discussion, the resolution plan as approved by the CoC under Section 30 (4) of the Code is hereby approved. The resolution plan so approved shall be binding on the corporate debtor and 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 such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the Resolution Plan.

Under the provisions of Section 31 (3) of the Code, we also direct as under:-

CA No. 898/2019 is disposed of.