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Judgment
Per: Ashutosh Chandra, Member (Technical)
I.A. No.440 of 2020 in C.P. (IB) No.28/BB/2019 is filed by Mr. Hari Babu Thota, Resolution Professional of M/s. Flowline Instrumentation Pvt. Ltd. (hereinafter referred to as 'Applicant/RP') under Section 30(6) of the I&B Code, 2016, by inter alia seeking to accept the Resolution Plan submitted by the Resolution Applicants Mr. Mohan P. Rao jointly with M/s. Millitronic Devices OPC Pvt. Ltd. which was approved by the Committee of Creditors at their 10th meeting held on 19th October, 2020, for revival of the Corporate Debtor M/s. Flowline Instrumentation Private Limited.
Brief facts of the case, as mentioned in the Application, which are relevant to the issue in question, are as follows:
C.P. (IB) No.28/BB/2019 is filed by M/s. Swan Analytische Instrumente AG, ('Petitioner / Operational Creditor') U/s 9 of I&B Code, 2016 R/w Rule 6 of the I&B (AAA) Rules, 2016, by inter alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of Corporate Debtor i.e. M/s. Flowline Instrumentation Private Limited. The same was admitted by the Adjudicating Authority vide Order dated 23.10.2019 by appointing Mr. Hari Babu Thota as the Interim Resolution Professional and imposing moratorium in terms of Section 14 of the Code, etc.
Pursuant to Section 15 of the Code r/w Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the RP had made public announcement in Form-A in 'Deccan Chronicle' & 'Samyuktha Karnataka' on 29.10.2019 inviting the Creditors of the Corporate Debtor to submit their claims with proof on or before 11.11.2019. Pursuant to Regulation 13 of IBBI CIRP Regulations, 2016, the IRP has constituted the Committee of Creditors consisting of two Financial Creditors namely Indian Bank holding 81% and M.V.G. Chits Private Limited holding 19%, and the Report constituting the same has been placed on record vide Memo dated 20.11.2019.
The Committee of Creditors (CoC) in its 1st meeting held on 26.11.2019 has approved to continue Mr. Hari Babu Thota, IRP as the Resolution Professional (RP), which was also approved by the Adjudicating Authority vide order dated 17.12.2019 in IA No.639 of 2019.
The RP had appointed four Registered Valuers namely Ms. Shital Darak Mandhana (Registered Valuer – Securities or Financial Assets), Mr. Laxminarayana Joisa H. (Registered Valuer – Securities or Financial Assets), Mr. Vaidyanathan N.S. (Registered Valuer – Plant and Machinery) and Mr. Raju Padmanaban (Registered Valuer – Plant and Machinery) for obtaining the fair value and liquidation value of the Corporate Debtor.
The CoC in its 2nd meeting held on 13.01.2020 has inter alia approved the Evaluation Matrix, Fixed Performance Security and also approved criteria for Resolution Applicant.
It is stated that the invitation for Expression of Interest (EOI) in Form-G was issued on 14.01.2020 in the IBBI website and also in newspapers of 'Financial Express', English Edition and 'Samyukta Karnataka', Kannada Edition. The last date for submission of EOI was 29.01.2020 and the RP had not received any EOI for submission of Resolution Plan. However, on 29.01.2020, the RP received a request from Mr. Mohan P. Rao, the Promoter Director of the Corporate Debtor requesting time for exploring the opportunity and to submit the Resolution Plan for revival of the Corporate Debtor.
The CoC in its 3rd meeting held on 15.02.2020 has approved to re-issue invitation for EOI in Form-G for submission of Resolution Plan for revival of the Corporate Debtor. Accordingly, the RP re-issued the invitation for EOI in Form-G on 15.02.2020 and the last date for submission of EOI was 11.03.2020. However, the RP did not receive any EOI.
At the CoC 4th meeting held on 16.03.2020, an approval was sought for liquidation of the Corporate Debtor and the decision regarding the same was deferred by the CoC. The CoC in its 5th meeting held on 23.06.2020 has further deferred approval for liquidation of the Corporate Debtor.
The CoC in its 6th meeting held on 10.07.2020 has noted the revised timelines for completing the process and adjourned the meeting to 20.07.2020 through video conferencing, wherein it did not approve for liquidation. Subsequently, Mr. R.V. Narasimha Rao, Assistant General Manager / Branch Manager of Indian Bank expressed that the decision of this Adjudicating Authority in connection to the Corporate Debtor shall be binding on the Indian Bank and accordingly shall comply with all the directions of this Adjudicating Authority. During the 6th meeting, the Committee has also noted the valuation reports received from the Registered Valuers.
The aforesaid Registered Valuers have submitted their respective Valuation Reports and the summary of the same is as under:
| S. No. | Name of the Registered Valuer | Fair Value (Rs.) | Liquidation Value (Rs.) |
|---|---|---|---|
| 1. | Ms Shital Darak Mandhana – Securities or Financial Assets | 1,592,887 | 1,260,179 |
| 2. | Mr Laxminarayana Joisa H – Securities or Financial Assets | 13,29,411 | 10,58,529 |
| 3. | Mr Vaidyanathan N.S. - Machinery | 5,48,000 | 3,83,600 |
| 4. | Mr P. Raju – Plant & Machineries | 517,480 | 388,110 |
Since the CoC did not approve for liquidation and no resolution plan was received for revival of the Corporate Debtor, the RP filed IA No.266 of 2020 for initiation of liquidation of the Corporate Debtor u/s 12 of the Code. The Adjudicating Authority vide order dated 10.08.2020 allowed the request of Mr. Mohan Rao, Promoter Director of the Corporate Debtor, to submit the resolution plan and the RP vide withdrawal memo through an email dated 10.08.2020 has requested for withdrawing the IA No.266 of 2020 and the Adjudicating Authority vide order dated 19.08.2020 has disposed of the same.
The CoC in its 7th meeting held on 17.08.2020 considered the request of Mr. Mohan Rao and approved for extension of 90 days. Subsequently, the RP had filed IA No.336 of 2020 for exclusion of period of lockdown and the Adjudicating Authority approved the said IA vide order dated 04.09.2020.
In the 8th CoC meeting held on 28.09.2020, the RP placed the Resolution Plan received from Mr. Mohan Rao, Promoter Director of the Corporate Debtor on 25.09.2020. Upon discussion on the same, the Committee provided in-principle approval for the Plan and directed Mr. Mohan P. Rao to submit financial projections for full tenure of repayment of debt (i.e. for 7 years and 6 months) to consider Resolution Plan for final approval. Further, the Committee approved for reduction of Performance Security from Rs.15,00,000/- to Rs.2,50,000/- due to economic condition arose because of Covid-19 pandemic.
In the 9th CoC meeting held on 05.10.2020, the final resolution plan was placed for its approval. Upon detailed discussion on the Resolution Plan, the Committee has accepted the same. Further, Mr. RV Narasimha Rao – AGM / Branch Manager of Indian Bank, member of the CoC holding major voting share expressed that the Resolution Plan shall be submitted to the head office of the Indian Bank for their approval.
The CoC in its 10th meeting held on 19.10.2020 through video conferencing with 100% voting share has approved the Resolution Plan submitted by Mr.Mohan P. Rao jointly with M/s. Millitronic Devices OPC Pvt. Ltd. for revival of the Corporate Debtor herein.
The brief of the approved Resolution Plan is stated hereunder:
A. Brief about the Resolution Applicants:
The Applicant-1 namely Mr. Mohan P. Rao, is an individual, MSME Promoter & Director of the Corporate Debtor is a post graduate in MBA (International Business) and B.E. (Mechanical) having rich experience of over 20 years having net worth as on 31.03.2020 of Rs.85 lakh. He has experience in running manufacturing verticals both at corporate and operational level and has handled responsibility for Sales and Manufacturing at varied Multinational Companies and reputed Indian Business Units across industries such as Oil & Gas, Refinery, Steel and Automotive etc. He has extensive experience in Sampling and Analyzer systems that the Corporate Debtor manufactures.
The Applicant-2 namely M/s. Millitronic Devices OPC Pvt. Ltd. is a Company having its registered office at No.245, HMT Layout, 3/2, 3rd Floor, Nelagadaranahalli, Bengaluru-560073, with Mr. Mohan P. Rao, as the Sole Director of OPC Pvt. Ltd. The Company has qualified professionals having more than 20 years of experience in running finance and administration verticals both at operations level.
B. Treatment to various stakeholders:
CIRP cost incurred amounts to Rs.15.38 lakhs. Applicants propose to provide upto Rs.16 lakhs as CIRP cost. In case CIRP cost exceeds the proposed amount then the same shall be adjusted from amount payable to Financial Creditors/Operational Creditor and amount payable to Financial Creditor/Operational Creditor shall get reduced to that extent and if the CIRP cost is less than what Resolution Applicants have provided in the Resolution Plan, then the surplus amount shall be distributed amongst the Financial Creditor/Operational Creditors in the ratio of their admitted claims.
In terms of Section 30(2)(a) of the Code, the CIRP Costs are to be paid in priority to any other creditor of the Corporate Debtor. Any unpaid or outstanding Insolvency Resolution Process Cost shall be paid from the money infused in the Corporate Debtor. The outstanding CIRP cost shall be paid as per the timelines prescribed in the Resolution Plan.
C. Treatment to Financial Creditors:
1. Secured Financial Creditors
The Resolution Applicant proposes payment to Secured Financial Creditors as follows:
| Name of Creditors | Claims Admitted | Proposed Payment Amount | Upfront Payment | Deferred Payment | Proposed Payment Structure |
|---|---|---|---|---|---|
| (Rs.) | (Rs.) | (Rs.) | (Rs.) | ||
| M/s. Indian Bank | 23,863,000 | 9,931,000 | NIL | 9,931,000 | OCC & OD Working Capital Limits to be converted to Term Loan for MSME with period of 84 Months, 6 Months EMI Holiday from effective date (Effective date is the date on which resolution plan is approved by this Hon'ble Tribunal). Rate of Interest as 10.25% and / or at |
| 5,994,000 | 994,000 | 5,000,000 | |||
| 5,109,000 | NIL | 5,109,000 |
| BR+2.5% annually as and / or as applicable for MSME Firms. | |||||
| 1,496,000 | NIL | 1,496,000 | BG's to run their course. In case of invocation of BG's the same to be met out of own sources at the time. | ||
| 629,000 | NIL | 629,000 | FITL Payments within 31.03.2021. | ||
| 326,000 | NIL | 326,000 | FITL Payments within 31.03.2021. | ||
| 378,000 | NIL | 378,000 | FITL Payments within 31.03.2021. | ||
| Total | 23,863,000 | 23,863,000 | 994000 | 22,869,000 |
2. Unsecured Financial Creditors other than Related Parties
The Resolution Applicants propose to pay Rs. 0.25 lakhs upfront and Rs.76.37 lakhs Deferred payment towards claims by all unsecured unrelated Financial Creditors. Apart from upfront payment we are providing deferred payment as mentioned in this plan. The said payments shall be full & final payments and after the said payments no further amount shall be payable by the Corporate Debtor or Resolution Applicants. In the event the Unsecured Financial Creditors are not acceptable to the deferred payment and the accompanying terms then only upfront payment as listed above will be paid and the Unsecured Financial Creditors forfeit the deferred payment.
3. Unsecured Financial Creditors who are Related Parties
The Resolution Applicants is not proposing to make payments to Related Financial Creditors.
4. Treatment towards Statutory Dues
Following are the claims received by the Resolution Professional from the statutory authorities:
| Name Of Claimant | Amount Claimed (Rs.) | Amount as per Books of Accounts (Rs.) | Amount Admitted (Rs.) |
|---|
| Commercial Tax Dept. (C Forms Claim) | 29,356,832.00 | - | 29,356,832.00 |
| ESI | 15,960.00 | 15,960.00 | 15,960.00 |
Resolution Applicants are providing an amount of Rs. 0.25 Lakhs towards full and final settlement of all statutory dues. The same shall be distributed amongst the various statutory dues, in the ratio of their claim admitted by Resolution Professional.
Further, claims of Commercial Tax for subsequent years shall be dealt by the Resolution Applicant by submitting the relevant C Forms.
Irrespective of the fact that the notice has or has not been given or claim has been made or not been made, then the same shall be settled fully within Rs. 0.25 Lakhs provided herein above. All Dues whether as per Books of Account ,as per Assessment Order, Demand Notice etc. shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity on the Effective Date. In case there are any other Statutory Dues that are not included in the above claims, then they too should be covered in the amount provided and no further amount shall be provided for them. After the proposed payment, all statutory dues shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity on the Effective Date.
5. Treatment towards Operational Creditors
With regards to the claim of operational creditors worth Rs.57,073,540.31, the Resolution Applicants are proposing to pay a onetime payment of Rs. 0.50 Lakhs in the following proportions:
Name of Operational Creditor Claims Admitted (Rs.) % of Total Claim (Operational Creditors other than Statutory Dues) Amount Offered (Rs.)
Bangalore Fluid System Components Pvt. Ltd. 4,953,141.00 8.68 4,339.26 Fitexcel 262,248.00 0.46 229.75 Spirare Energy Pvt. Ltd. 9,945,325.00 17.43 8,712.73 Manvia 6,439,449.00 11.28 5,641.36 SEATON SALES 100,902.00 0.18 88.40 SWAN 25,735,696.51 45.09 22,546.08 Sealexcel 554,552.80 0.97 485.82 Pepprl and Fuchs India Pvt. Ltd. 7,251,030.00 12.70 6,352.36 Mettler-Toledo India Private Limited 1,512,935.00 2.65 1,325.43 Singh Security Corps 255,240.00 0.45 223.61 4 Front 63,021.00 0.11 55.21 57,073,540.31 50,000.00 In case there are any other Operational Creditors that are not included in the above claims, who have not submitted their claim or whose dues are not available in books of accounts due to any reason, then they too should be covered in the total amount provided and no further amount shall be provided for them.
All other Operational creditors for Statutory Dues and Operational Creditors for other than Statutory Dues who have not submitted their claims but are outstanding as per Books of Account shall be written off and the amount shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity on the Effective Date.
Note: It is proposed that if there are Dissenting Operational Creditors, they shall be entitled to receive only the liquidation value due to them, the said amount shall be paid in priority before any payment is made to the assenting Operational Creditors.
Any shortfall in payment of liquidation value due to dissenting Operational creditors shall be made available on the proportionate basis by the Assenting Operational Creditors and any excess shall also be distributed amongst the Assenting Operational Creditors.
D. It is stated that the Resolution Applicant has already made payment of Rs.10,00,000/- to Indian Bank to keep the Bank a/c in standard state which shall be treated as payment towards upfront payment on approval of the resolution plan.
E. Security on the Assets of Corporate Debtor:
All the assets of the Corporate Debtor was provided as security to the secured financial Creditor i.e. M/s Indian Bank, SSI Peenya Branch shall be continued till the payment of full and final settlement as proposed in this resolution plan and the same shall be released on satisfaction of the secured creditor.
F. Schedule of payment to various stakeholders:
Particulars Name of Creditors Claims Admitted Proposed Payment Amount Upfront Payment Deferred Payment Proposed Payment Structure (Rs.) (Rs.) (Rs.) (Rs.) CIRP Cost CoC Approved Expenses 1,538,474 1,538,474 600,000 938,474 Upfront Payment within 30 Days, Balance in 2 instalments within 180 Days or earlier from effective date. Short Term Credit (Fund infusion or credit purchases towards execution of Orders) Not Applicable Not Applicable Not Applicable Deferred payment of upto Rs. 1 Crore for funds infused or material supplied. Short Term Trade Finance or purchase of raw materials on credit upto Rs. 1 Crore for Executing orders. Repayment with agreed commission / interest within 180 Days as per signed MoU between the RA and the creditor / supplier.
Financial Creditors - M/s Indian Bank M/s Indian Bank 23,863,000 9,931,000 NIL 9,931,000 OCC & OD Working Capital Limits to be converted to Term Loan for MSME with period of 84 Months, 6 Months EMI Holiday from effective date. Rate of Interest as 10.25% and / or at BR+2.5% annually as and / or as applicable for MSME Firms. 5,994,000 994,000 5,000,000 5,109,000 NIL 5,109,000 1,496,000 NIL 1,496,000 BG's to run their course. In case of invocation of BG's the same to be met out of own sources at the time. 629,000 NIL 629,000 FITL Payments within 31.03.2021. 326,000 NIL 326,000 FITL Payments within 31.03.2021. 378,000 NIL 378,000 FITL Payments within 31.03.2021. Financial Creditors - Unsecured MVG Chits Private Limited 5,355,153 5,355,153 25,000 5,330,153 Loan for period of 84 Months, 6 Months EMI Holiday from effective date. Rate of Interest to be same as that of M/s Indian Bank, the secured financial creditor. Dr. P. Kalyani Rao 1,500,000 NIL NIL NIL NIL Payments to related parties. Mohan P. Rao 969,964 NIL NIL NIL NIL Payments to related parties. Bajaj Finserv 1,638,691 1,638,691 NIL 1,638,691 Resumption of Existing Loan EMI with a 6 Month EMI Moratorium from effective date. Capital First Limited 668,438 668,438 NIL 668,438 Resumption of Existing Loan EMI with a 6 Month EMI Moratorium from effective date.
Operational Creditors - Statutory Dues Commercial Tax 29,356,832 9,040 9,040 NIL Upfront Payment within 30 Days. ESI 15,960 15,960 15,960 NIL Upfront Payment within 30 Days. Operational Creditors - Other than Statutory Dues Bangalore Fluid System Components Pvt Ltd. 4,953,141.00 4,339 4,339 NIL Onetime Payment within 90 Days for Assenting Creditors. NIL for Dissenting Creditors. Fitexcel 262,248.00 230 230 NIL Spirare Energy Pvt. Ltd. 9,945,325.00 8,713 8,713 NIL Manvia 6,439,449.00 5,641 5,641 NIL SEATON SALES 100,902.00 88 88 NIL SWAN 25,735,696.51 22,546 22,546 NIL Sealexcel 554,552.80 486 486 NIL Peeperl And Fuchs India Private Limited 7,251,030.00 6,352 6,352 NIL Mettler-Toledo India Private Limited 1,512,935.00 1,325 1,325 NIL Singh Security Corps 255,240.00 224 224 NIL 4 Front 63,021.00 55 55 NIL Workmen and Employees Dues NIL NIL NIL NIL NIL TOTAL (Rs.) 121,980,052 33,138,756 1,694,000 31,444,756 (16)By virtue of the order of NCLT approving this Resolution Plan, any new inquiries, investigations notices, suits, claims, disputes, litigation, arbitration or other judicial, regulatory or administrative proceeding will not be initiated or admitted if these relate to any period prior to the effective date or if they are on account of the acquisition of control by the Resolution Applicants over the Corporate Debtor, pursuant to this Resolution Plan, if they are against the Corporate Debtor or any of its employees or directors or the Resolution Applicants.
(17)With regards to any other case which corporate debtor or on behalf of corporate debtor any third person or agent of corporate debtor has done on any party under any law for the time being in force shall be allowed to be continued, only to the extent the amount is recoverable from the other parties. The Corporate Debtor or the Resolution Applicants or PAC should not be liable for payment of any amount whatsoever in respect of such cases.
(18)The term of the plan and its implementation schedule for payment to the Financial Creditors, Operational Creditors and Statutory Dues / Liabilities and other persons as envisaged in this Resolution Plan, shall be 180 days commence from Effective Date.
(19)Upon approval of the Plan by the Adjudicating Authority, the Resolution Professional shall get the Accounts and Financial Statement prepared up to the Effective date and submit the same to the Resolution Applicants. The Accounts and Financial statement prepared shall be such that it truly reflects the fair value of the assets and liabilities of the Corporate Debtor. The Resolution Professional shall adjust so much of the said Share Capital, Share Suspense account, Share Capital Redemption account, Capital Reserve Account, Securities premium account and any other Reserves available with the Corporate Debtor as deemed appropriate by the Resolution Applicants to write off losses in the books of the Corporate Debtor. Accordingly, no further approval or consent shall be required from any other person / Government authority including but not limited to shareholders, stakeholders, Regional director, Registrar of Companies, Central Government etc.
(20)As regards Business Plan, it is stated that the Resolution Applicants propose to continue the business of Corporate Debtor. Resolution Applicants will try to discontinue low margin products and would emphasize more on high margin products as well as new products. A periodic review of the same will be made by the management team. Pending orders that were existing on the Corporate Debtor are proposed to be executed through collaboration with other industrial entities under a 60:40 sharing of gross profits and also proposed for bidding aggressively for further refinery projects and execution of the same. RA and Team will provide Engineering & Sales support. Further, Resolution Applicants would revalidate the registrations and enter into long term supply of products to major PSUs and also explore new business lines & new areas of manufacturing. Resolution Applicants proposes to evaluate and use the technology best suited to the Corporate Debtor.
(21)Upon the approval of Resolution Plan by the Adjudicating Authority in favour of the Resolution Applicants, the management of the Corporate Debtor is proposed as under: (a) the existing Board of Directors will be continued to be in existence. (b) A Monitoring Committee would be formed to oversee the Board, for smooth implementation of the proposed Resolution Plan by Resolution Applicants and the same will be formed within 30 days of approval of the Resolution Plan by the Adjudicating Authority. One member from the team of RP, one member from the CoC and one member from the team of Resolution Applicants would also be appointed in the Monitoring Committee. The Monitoring Committee shall supervise the implementation of the Resolution Plan and it shall be dissolved after the closing date.
(22)The Resolution Plan also provides the source of funds as under:
Means of Finance Upfront Amount Deferred Funds Total Funds
(Rs.) (Rs.) (Rs.) Infusion of RA Funds (By way of Unsecured Loans out of Net owned Funds to the Corporate Debtor) 1,700,000 -- 1,700,000 Collection from receivables related to the period prior to the effective date from the Sundry receivables and Govt. dues receivable. -- 3,000,000 3,000,000 Margin from Order Execution - Year 1 -- 7,400,000 7,400,000 Margin from Order Execution – Year 2 to 7 -- 20,000,000 20,000,000 TOTAL FUNDS 32,100,000 (23)The Resolution Applicant has provided business projections for 7 years and 6 months (moratorium period as proposed for repayment of debt) and the same is given hereunder:
(Amount in Rs.)
Particulars Moratorium Period (31.3.2021) (Provisional) Year 1 (31.3.2022) Year 2 (31.3.2023) Year 3 (31.3.2024) Year 4 (31.3.2025) Year 5 (31.3.2026) Year 6 (31.3.2027) Year 7 (31.3.2028) Net Sales / Total Revenue 31,000,000 70,150,000 80,672,500 92,773,375 106,689,381.25 122,692,788.44 141,096,706.70 162,261,212.71 Profit / Loss for the year 2,509,535.63 7,242,346.41 6,149,065.88 6,807,154.82 8,042,190.17 9,401,348.28 10,957,152.26 12,739,821.76 (24)The Break-up of CIRP Cost is as under:
| Particulars | Amount (In INR) |
|---|---|
| Meeting related expenses | 1,010 |
| Registered Valuers' Fees | 94,400 |
| Fees of Resolution Professional (Incl GST) | 13,27,500 |
| Printing, stationery, conveyance, notary, postage, filing fees etc. | 21,077 |
| Newspaper publication | 58,968 |
| Insurance | 6,019 |
| Remuneration of Interim Resolution Professional (Incl GST) | 1,77,000 |
| Total | 16,85,974 |
Heard Mr. Hari Babu Thota, learned Resolution Professional through Video Conference. We have carefully perused the pleadings of Party and extant provisions of the Code and the Rules made thereunder. We have also gone through the detailed Resolution Plan and the details of the proceedings gone through during the CIRP, and the reports of the CoC submitted from time to time.
Mr. Hari Babu Thota, RP, while reiterating various averments made in the Application / Petition, has further submitted that the Resolution Plan in question as approved by the CoC satisfies all requisite conditions as per the provisions of the I&B Code, and the same is approved with requisite majority, and thus urged the Adjudicating Authority to approve the said Resolution Plan.
The Resolution Professional has furnished Minutes of the (9^{\text{th}}) and (10^{\text{th}}) Meetings of the Committee of Creditors of Flowline Instrumentation Private Limited, the Corporate Debtor, held on (05^{\text{th}}) October, 2020 at the Office of the RP and (19^{\text{th}}) October, 2020 through Video Conferencing, wherein, in its (10^{\text{th}}) Meeting held on (19^{\text{th}}) October, 2020, the Resolution Plan dated (25^{\text{th}}) September, 2020 submitted by Mr. Mohan P. Rao jointly with M/s. Millitronic Devices OPC Private Limited, was considered in depth and approved. He has also submitted the proceedings of the CoC held on various dates and also filed Compliance Certificate in Form-H dated 18.10.2020, under Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by inter alia furnishing all the requisite details.
In order to approve a Resolution Plan U/s 31(1) of the Code, Resolution Professional shall examine each Resolution Plan as prescribed inter alia under Section 30(2) of the Code, as mentioned below:
a)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;
b)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 the operational creditors in the event of a liquidation of the corporate debtor under Section 53;
c)provides for the management of the affairs of the corporate debtor after approval of the resolution plan;
d)the implementation and supervision of the resolution plan;
e)does not contravene any of the provisions of the law for the time being in force;
f)confirms to such other requirements as may be specified by the Board.
As detailed supra, that in compliance with the said requisite conditions, the Resolution Professional has submitted various documents and statements as per provisions of the Code and the Rules made thereunder. These compliances are briefly mentioned out as under:
The Resolution Professional has filed the Compliance Certificate in Form-H dated 18.10.2020 under Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
The details of CIRP are as under:
| S.No. | Particulars | Description |
|---|---|---|
| 1 | Name of the CD | Flowline Instrumentation Private Limited |
| 2 | Date of Initiation of CIRP | 23-10-2019 |
| 3 | Date of Appointment of IRP | 23-10-2019 |
| 4 | Date of Publication of Public Announcement | 29-10-2019 |
| 5 | Date of Constitution of CoC | 20-11-2019 |
| 6 | Date of First Meeting of CoC | 26-11-2019 |
| 7 | Date of Appointment of RP | 17-12-2019 |
| 8 | Date of Appointment of Registered Valuers | 03-12-2019 |
| 9 | Date of Issue of Invitation for EoI | 14-01-2020 and re-issued on 15-02-2020 |
| 10 | Date of Final List of Eligible Prospective Resolution Applicants | NA |
| 11 | Date of Invitation of Resolution Plan | NA |
| 12 | Last Date of Submission of Resolution Plan | NA |
| 13 | Date of Approval of Resolution Plan by CoC | 19-10-2020 |
| 14 | Date of Filing of Resolution Plan with Adjudicating Authority | 22-10-2020 |
| 15 | Date of Expiry of 180 days of CIRP | 20-04-2020 |
| 16 | Date of Order extending the period of CIRP | 04-09-2020 |
| 17 | Date of Expiry of Extended Period of CIRP | 28-10-2020 |
| 18 | Fair Value | 19,93,889.00 |
| 19 | Liquidation value | 15,45,209.00 |
| 20 | Number of Meetings of CoC held | 10 |
The Resolution Plan is received from Resolution Applicant Mr. Mohan P. Rao jointly with M/s. Millitronic Devices OPC Private Limited and is approved by Committee of Creditors of Flowline Instrumentation Private Limited.
The Resolution Professional also certified that:
i. The said Resolution Plan complies with all the provisions of the Insolvency and Bankruptcy Code 2016 (Code), the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) and does not contravene any of the provisions of the law for the time being in force.
ii. The Resolution Applicant Mr. Mohan P. Rao jointly with M/s. Millitronic Devices OPC Pvt. Ltd. has submitted an affidavit pursuant to Sec. 30(1) of the Code confirming its eligibility u/s 29A of the Code to submit Resolution Plan. The contents of the said affidavit are in order.
The said Resolution Plan has been approved by the CoC in accordance with the provisions of the Code and the CIRP Regulations made thereunder. The Resolution Plan has been approved by 100% of voting share of financial creditors after considering its feasibility and viability and other requirements specified by the CIRP Regulations.
The voting was held in the meeting of the CoC on 19.10.2020 where all the members of the CoC were present.
The list of financial creditors of the Corporate Debtor - M/s. Flowline Instrumentation Private Limited, being members of the CoC and distribution of voting share among them is as under:
| Sl. No. | Name of Creditor | Voting Share (%) | Voting for Resolution Plan (Voted for / Dissented / Abstained) |
|---|---|---|---|
| 1. | Indian Bank | 81% | Voted for |
| 2. | M.V.G Chita Private Limited | 19% | Voted for |
The Resolution Plan includes a statement under regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interests of all stakeholders in compliance with the Code and Regulations made thereunder.
The amounts provided for the stakeholders under the Resolution Plan is as under: (Amount in Rs. lakh)
| Sl. No. | Category of Stakeholder* | Sub-Category of Stakeholder | Amount Claimed | Amount Admitted | Amount Provided under the Plan# | Amount Provided to the Amount Claimed (%) |
|---|---|---|---|---|---|---|
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
| 1. | Secured Financial Creditors | (a) Creditors not having a right to vote under sub-section (2) of section 21 | - | - | - | - |
| (b) Other than (a) above: |
| (i) who did not vote in favour of the resolution Plan | - | - | - | - | ||
| (ii) who voted in favour of the resolution plan (Indian Bank) | 23,863,000 | 23,863,000 | 23,863,000 | 100 | ||
| Total [(a) + (b)] | 23,863,000 | 23,863,000 | 23,863,000 | 100 | ||
| 2. | Unsecured Financial Creditors | (a) Creditors not having a right to vote under sub-section (2) of section 21 (Bajaj Finserv and Capital First Limited) | 2,307,129 | - | 2,307,129 | 100 |
| (b) Other than (a) above: | ||||||
| (i) who did not vote in favour of the resolution Plan | - | - | - | - | ||
| (ii) who voted in favour of the resolution plan (MVG Chits Private Limited) | 5,355,153 | 5,355,153 | 5,355,153 | 100 | ||
| Total [(a) + (b)] | 7,662,282 | 5,355,153 | 7,662,282 | 100 | ||
| 3. | Operational Creditors | (a) Related Party of Corporate Debtor | - | - | - | - |
| (b) Other than (a) above: | ||||||
| (i) Government (Commercial Tax Dept. and ESI) | 29,372,792 | 29,372,792 | 25,000 | 8.51% | ||
| (ii) Workmen | - | - | - | - | ||
| (iii) Employees | - | - | - | - | ||
| 57,073,540.31 | 49,822,510.31 | 50,000 | 10.04% |
| (iv) Trade Creditors | ||||||
| Total [(a) + (b)] | 86,446,332.31 | 86,446,332.31 | 75,000 | 8.68% | ||
| 4. | Other debts and dues | Financial Creditor who are related parties (Promoters) | 2,469,964 | 2,469,964 | - | - |
| Grand Total | 120,441,578 | 110,883,419 | 31,600,282 | 28.49% | ||
*If there are sub-categories in a category, please add rows for each sub-category. Amount provided over time under the Resolution Plan and includes estimated value of non-cash components. It is not NPV.]
The interests of existing shareholders have been altered by the Resolution plan as under: Interest of the existing shareholders has not been altered.
| Sl. No. | Category of Share Holder | No. of Shares held before CIRP | No. of Shares held after the CIRP | Voting Share (%) held before CIRP | Voting Share (%) held after CIRP |
|---|---|---|---|---|---|
| 1. | Equity | 1000 | 1000 | 100 | 100 |
| 2. | Preference | -- | -- | -- | -- |
The compliance of the Resolution Plan is as under:
| Section of the Code / Regulation No. | Requirement with respect to Resolution Plan | Clause of Resolution Plan | Compliance (Yes / No) |
|---|---|---|---|
| 25(2)(h) | Whether the Resolution Applicant meets the criteria approved by the CoC having regard to the complexity and scale of operations of business of the CD? | Yes | |
| Section 29A | Whether the Resolution Applicant is eligible to submit resolution plan as per final list of Resolution Professional or Order, if any, of the Adjudicating Authority? | Yes | |
| Section 30(1) | Whether the Resolution Applicant has submitted an affidavit stating that it is eligible? | ||
| Section 30(2) | Whether the Resolution Plan- (a) provides for the payment of insolvency resolution process costs? (b) provides for the payment to the operational creditors? | Part 3(A)(1) of the plan Part 3(A)(8) of the plan | Yes Yes Yes |
| (c) provides for the payment to the financial creditors who did not vote in favour of the resolution plan? (d) provides for the management of the affairs of the corporate debtor? (e) provides for the implementation and supervision of the resolution plan? (f) contravenes any of the provisions of the law for the time being in force? | Part 7 of the plan Part 7 of the plan | Yes Yes No | |
| Section 30(4) | Whether the Resolution Plan (a) is feasible and viable, according to the CoC? (b) has been approved by the CoC with 66% voting share? | Yes Yes | |
| Section 31(1) | Whether the Resolution Plan has provisions for its effective implementation plan, according to the CoC? | Yes | |
| Regulation 35A | Where the resolution professional made a determination if the corporate debtor has been subjected to any transaction of the nature covered under sections 43, 45, 50 or 66, before the one hundred and fifteenth day of the insolvency commencement date, under intimation to the Board? | No | |
| Regulation 38 (1) | Whether the amount due to the operational creditors under the resolution plan has been given priority in payment over financial creditors? | Yes | |
| Regulation 38(1A) | Whether the resolution plan includes a statement as to how it has dealt with the interests of all stakeholders? | Yes | |
| Regulation 38(1B) | (i) Whether the Resolution Applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any resolution plan approved under the Code. (ii) If so, whether the Resolution Applicant has submitted the statement giving details of such non-implementation? | No - | |
| Regulation 38(2) | Whether the Resolution Plan provides: (a) the term of the plan and its implementation schedule? (b) for the management and control of the business of the corporate debtor during its term? (c) adequate means for supervising its implementation? | Part 7 of the plan | Yes Yes Yes |
| 38(3) | Whether the resolution plan demonstrates that — (a) it addresses the cause of default? (b) it is feasible and viable? (c) it has provisions for its effective implementation? (d) it has provisions for approvals required and the timeline for the same? (e) the resolution applicant has the capability to implement the resolution plan? | Part 2 of the Plan Part 3 of the Plan Part 7 of the Plan | Yes Yes Yes No Yes |
| 39(2) | Whether the RP has filed applications in respect of transactions observed, found or determined by him? | No | |
| Regulation 39(4) | Provide details of performance security received, as referred to in sub-regulation (4A) of regulation 36B. | Yes |
As stated supra, Resolution Professional has filed Compliance Certificate in Form-H dated 18.10.2020 under Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, by inter alia stating that no such transactions under section 66 or avoidance application filed / pending:
| Sl. No. | Type of Transaction | Date of Filing with Adjudicating Authority | Date of Order of the Adjudicating Authority | Brief of the Order |
|---|---|---|---|---|
| 1 | Preferential transactions under section 43 | NA | NA | NA |
| 2 | Undervalued transactions under section 45 | NA | NA | NA |
| 3 | Extortionate credit transactions under section 50 | NA | NA | NA |
| 4 | Fraudulent transactions under section 66 | NA | NA | NA |
The committee has approved a plan providing for contribution under Regulation 39B as under:
a. Estimated liquidation cost : Rs...
b. Estimated liquid assets available : Rs...
c. Contributions required to be made : Rs...
d. Financial creditor wise contribution is as under:
Sl. No. Name of financial creditor Amount to be contributed (Rs.) 1 NA NA 2 NA NA Total NA NA (k)The Committee has recommended under Regulation 39C as under: -NA-
a. Sale of corporate debtor as a going concern: Yes / No
b. Sale of business of corporate debtor as a going concern: Yes / No The details of recommendation are available with the resolution professional.
(l)The committee has fixed, in consultation with the resolution professional, the fee payable to the liquidator during the liquidation period under regulation 39D.
From an examination of the Resolution Plan filed before us, and as discussed above, it appears that the Resolution Plan dated 25th September, 2020 as duly approved by the Committee of Creditors on 19th October, 2020 for Flowline Instrumentation Private Limited, submitted by Mr. Mohan P. Rao jointly with M/s.Millitronic Devices OPC Pvt. Ltd., satisfies all the requisite conditions for its approval under Section 31(1) of the Code. Details of the fund infusion, and the sources from which the Resolution Applicants shall arrange the same have been provided in the Resolution Plan. The same provides for the creditors in the distribution table filed with the Plan, and provides adequate details of the infusion of funds required as working capital as well as for payment of the debts. Details of projected profits have also been provided. Considering these facts, as mentioned in the Resolution Plan, and as referred to in the preceding paragraphs, we are satisfied about the viability of the same. The Resolution Plan also provides for the appointment of a Monitoring Committee, to oversee the implementation of the Resolution Plan. The Resolution Plan is approved by members of the CoC with 100% voting share in accordance with law. No prejudice would be caused to any party, if the same is approved. Therefore, we are of the considered opinion that the said Resolution Plan is fit to be approved under Section 31(1) of the Code.
In the result, by exercising the powers conferred on this Adjudicating Authority, under Section 31(1) of the I & B Code, 2016, both the C.P. (IB) No.28/BB/2019 and I.A. No.440 of 2020 are disposed of with the following directions:
The Resolution Plan dated 25th September, 2020 submitted by Mr.Mohan P. Rao jointly with M/s. Millitronic Devices OPC Pvt. Ltd. ('Resolution Applicants') as approved by the Committee of Creditors at their 10th meeting held on 19th October, 2020 with 100% voting share is hereby approved by declaring that the Resolution Plan 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.
The moratorium imposed vide Order dated 23.10.2019 passed in the Company Petition shall cease to have effect from the date of communication of the order.
The Resolution Professional is directed to handover the management control of all the assets, documents / records in physical and/or digital form on an as is where is basis to the Resolution Applicants immediately, and the Resolution Professional will cease to be Resolution Professional.
The Resolution Professional shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the Board to be recorded on its database.
The Resolution Applicants shall pursuant to the Resolution Plan approved under sub-section (1) obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the Resolution Plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later.
The Resolution Applicant is at liberty to file any miscellaneous application seeking for clarification, if any, in the implementation of the terms and conditions to the Resolution Plan.
In view of the above, pending IAs, if any, also automatically stands disposed off.
No order as to costs.