Mr. Rajiv Khurana, Resolution Professional For Vallabh Textiles Company Private Limited vs Committee Of Creditors

PER: HON'BLE MR. HARNAM SINGH THAKUR, MEMBER (JUDICIAL) HON'BLE MR. SUBRATA KUMAR DASH, MEMBER (TECHNICAL)

The present application has been filed by Mr. Rajiv Khurana Resolution Professional of Vallabh Textiles Company Private Limited (hereinafter referred to as 'Corporate Debtor') under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (the 'Code') read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, ('CIRP Regulations'), seeking approval of the Resolution Plan in respect of the Corporate Debtor as approved by its Committee of Creditors ('CoC') in the latter's commercial wisdom as exercised by it on its 37th meeting dated 30.01.2023 with a voting share of 99.91%.

The matter was relisted on 13.12.2023 as it was found that the Resolution Professional ('RP' for short) was yet to furnish the affidavit in compliance with our administrative order dated 12.12.2023. It has been stated that no such affidavit was filed by the Resolution Professional that the Resolution Plan considered the claim of statutory authorities, wherein a security interest is created by law, as secured creditors for distribution under section 53 (1) of the Code in terms of the decision of State Tax Officer v. Rainbow Papers (Civil Appeal No. 1661 OF 2020) by Hon'ble Supreme Court and further if the Resolution Plan does not consider such claims of Statutory authorities as secured creditors, the SRA did not furnish an affidavit that the distribution will be made in compliance with the decision of the Rainbow Papers and a revised Form-H showing the amended distribution has not been filed. The compliance of the same was made vide Dairy No. 00462/8 dated 15.12.2023 stating the difference in valuation of SFA of Vallabh Textile Company Limited.

The brief facts necessary for adjudication of the present application are that Punjab National Bank ('Financial Creditor') had filed a petition bearing CP(IB) No.391/Chd/PB/2018 under Section 7 of the Code before this Tribunal for initiation of Corporation Insolvency Resolution Process ('CIRP') against the Corporate Debtor. This Tribunal, vide its order dated 12.04.2019 (admitted the petition filed by the financial creditor and appointed, Mr. Sumat Kumar Gupta (also referred to as the "erstwhile RP"), as Interim Resolution Professional ('IRP') and the Committee of Creditors (CoC), in its first meeting held on 09.05.2019, confirmed the appointment of Mr. Sumat Kumar Gupta, as the Resolution Professional with 91.98% voting. Pursuant to the appointment, the IRP duly performed his duties under the Code and the underlying Regulations for carrying out the CIRP of the corporate debtor.

Thereafter, the IRP made a Public Announcement in the newspapers viz. 'Economic Times' in English language dated 15.04.2019 and 'Punjabi Jagran' in Punjabi language, dated 13.04.2019 in prescribed Form A dated 13.04.2019, following Section 15 of the Code read with Regulation 6 of Chapter III of the CIRP Regulations.

Thereafter, the IRP as per Section 21 of the Code, after due verification and examination, collated the claims and constituted the Committee of Creditors as under:-

The shares of the members of CoC have been provided as under:

The Valuation Report has been provided as under;

The Applicant Submits that a total of 41 CoC meetings have been held during the CIRP period. The details are as follows:

The erstwhile RP Sh Sumat Kumar Gupta was replaced with Sh Rajiv Khurana vide order dated 11.07.2022 of this Adjudicating Authority.

The list of Prospective Resolution Applicant(s) (PRAs)

The Applicant in terms of the decision of CoC, had issued Form G dated 24.07.2022 for invitation of resolution plans in the matter of the Corporate Debtor in terms of Regulation 36A of the CIRP Regulations. The Form G was issued in Times of India (English) and Amar Ujala (Hindi) Newspapers, and the last date for submission of expression of interest was stipulated as 08.08.2022 while the last date for submission of resolution plan was stipulated as 15.09.2022

It is submitted that the erstwhile RP had carried out a substantial portion of the CIRP and had convened 21 meetings in the matter of the Corporate Debtor, wherein in the 21^st meeting held on 22.05.2020 and 26.05.2020, the CoC in its commercial wisdom and after considering the feasibility and viability, voted in favor of the Resolution Plan submitted by M/s Aggarsain Spinners Limited (“Erstwhile Successful Resolution Applicant” or “Erstwhile SRA”) with a majority of 94.36%. Subsequently, the erstwhile RP filed an Application in June 2020, bearing I.A. No. 458 of 2020 in C.P.(IB) 391/CHD/PB/2018 under Section 30(6) of the Code before this Hon’ble Adjudicating Authority seeking approval of the Resolution Plan in the matter of the Corporate Debtor. During the pendency of the above application, the erstwhile RP received complaints regarding the eligibility of the Erstwhile SRA, and upon investigating the same the erstwhile RP, convinced that a prima facie case of ineligibility was made out, filed an Application bearing I.A. 342/2021 seeking directions against the erstwhile SRA to declare them as ineligible.

The NCLT vide Order dated 24.05.2022 held the Erstwhile SRA as ineligible under Section 29A(f) of the Code and rejected the Resolution Plan submitted by the latter in the matter of the Corporate Debtor, while granting extension to the CIRP period by 90 days for exploring the possibility of resolution of the corporate debtor, and sent back the matter to the CoC which was then reinstated to make another attempt for consideration of other resolution plans in accordance with law.

The erstwhile RP then convened the 22^nd Meeting of the Committee of Creditors in the matter of Corporate Debtor on 31.05.2022 (which was subsequently adjourned to 04.06.2022), wherein the CoC members with requisite voting (which concluded on 10.06.2022) of 93.80% resolved for the replacement of the erstwhile RP with Mr. Rajiv Khurana (the Applicant), having registration no. IBBI/IPA-001/IP-P00126/2017-18/10268, in accordance with the provisions of Code. Thereafter, the CoC through Punjab National Bank filed an Application bearing I.A. No. 682 of 2022 under Section 27 of the Insolvency and Bankruptcy Code, 2016 seeking directions to replace erstwhile RP with the Applicant which was granted by the NCLT vide Order dated 11.07.2022.

In the 24^th meeting of the CoC on 21.07.2022, the Applicant took over the charge from the erstwhile RP on 14.07.2022 and placed before the members of the CoC a draft Form G and requested the CoC to consider publishing the same. The members of the CoC also finalised the evaluation matrix in the meeting. As it was observed that lot of time had been lost from 24.05.2022 till 11.07.2022 i.e. till the appointment of Applicant as the Resolution Professional, the CoC directed the Applicant herein to file an Application seeking exclusion of period from 24.05.2022 till 11.07.2022 (48 days) as no effective steps could be taken in the CIRP process of the Corporate Debtor during that period, filed through I.A. No. 843 of 2022 which was allowed by the NCLT vide Order dated 28.07.2022.

The Applicant in terms of decision of CoC, had issued the fresh Form G dated 24.07.2022 for invitation of resolution plans in the matter of the Corporate Debtor in terms of Regulation 36A of the CIRP Regulations. The Form G was issued in Times of India (English) and Amar Ujala (Hindi) Newspapers, wherein the last date for submission of expression of interest was stipulated as 08.08.2022 and the last date for submission of resolution plan was stipulated as 15.09.2022.

The Applicant then issued a provisional list of prospective resolution applicants in the matter of the Corporate Debtor, and thereafter, issued a final list of prospective resolution applicants in the matter of the Corporate Debtor.

It is pertinent to mention that the Erstwhile SRA had assailed the Order dated 24.05.2022 passed by this Adjudicating Authority before the Hon'ble Appellate Authority vide Company Appeal No. 637-638 of 2022 which vide Order dated 14.09.2022 upheld the Order dated 24.05.2022 passed by this Adjudicating Authority while dismissing the Appeal filed by the Erstwhile SRA in the matter of the Corporate Debtor. The Hon'ble Appellate Authority was further allowed the exclusion of the period spent in appeal.

In the 25th meeting of COC on 17.09.2022, the Applicant presented eight resolution plans which were received in the matter of the Corporate Debtor before the last date i.e. 15.09.2022. The sealed envelopes of the Resolution Plans received in the matter of the Corporate Debtor were opened before the COC. Upon discussions and deliberations, it was decided that the RP shall verify the resolutions plans and check if they are compliant with the provisions of the Code and underlying Regulations.

The Applicant convened the 26th meeting of COC on 27.09.2022 wherein upon discussions and deliberations on the resolution plans, the majority of the CoC requested the prospective resolution applicants to revise the amount offered under the resolution plan.

The Applicant apprised the members that the prospective resolution applicants have sought more time to revise the amount offered under the resolution plan during the 27th meeting of COC on 29.09.2022 wherein The majority of the CoC requested the prospective resolution applicants to revise the amount offered.

The Applicant apprised the CoC of the fact of dismissal of the erstwhile SRA's Appeal by the Hon'ble Appellate Authority. Applicant convened the 28th meeting of COC on 12.10.2022 wherein the Applicant apprised the members of the CoC that Appeal was dismissed filed by the Erstwhile Successful Resolution Applicant and excluded the period of pendency of appeal before the Hon'ble Appellate Authority. It was further apprised that the Hon'ble Adjudicating Authority was pleased to take the Order dated 14.09.2022 passed by the Hon'ble Appellate Authority on record vide its Order dated 30.09.2022.

The Applicant convened the 29th meeting of COC on 17.10.2022 wherein the Applicant apprised the members of the CoC that the prospective resolution applicant has revised their offer and two prospective resolution applicants have sought more time to revise their offers. Upon discussions and deliberations, the members of the CoC directed the RP to take steps for further improvement in the amount offered under the resolution plans.

The Applicant convened the 30th meeting of COC on 03.11.2022 wherein the Applicant apprised the members that most of the prospective resolution applicants had sought more time to revise their offers. Upon discussions and deliberations, the members of the CoC decided that the final round of bidding shall be conducted on 05.11.2022.

The Applicant convened the 31st meeting of COC on 05.11.2022 wherein the Applicant apprised that in terms of the last meeting the final round of bidding with the resolution applicants had to take place. The prospective resolution applicants submitted their best offers which were placed before the CoC. However, the challenge process could not be completed and the challenge process was postponed to the next meeting.

The Applicant convened the 32nd meeting of COC on 09.11.2022 wherein the Applicant apprised that in terms of the last meeting challenge process had to continue. The challenge process was continued and further improvements were made by the prospective resolution applicants. Thereafter, the CoC decided that the prospective resolution applicants would submit their final revised resolution plans with the Applicant on or before 15.11.2022 which shall be treated as final. Further, the Applicant placed the agenda for performance linked incentive fee payable to the RP in terms of CIRP Regulations. Upon discussions and deliberations, the CoC approved the payment of such incentive fee to the Applicant.

The erstwhile Successful Resolution Applicant had assailed the Order passed by the Hon'ble Appellate Authority before the Hon'ble Supreme Court by filing a Civil Appeal bearing Civil Appeal No. 7015-7016/2022. The Hon'ble Supreme Court vide Order dated 14.11.2022 issued notice upon the Respondent with direction to file Counter Affidavit. Thereafter, the matter was mentioned by the Appellant before the Hon'ble Supreme Court on 15.11.2022, wherein the Hon'ble Supreme Court vide Order dated 15.11.2022 passed an interim direction that the resolution plan shall not be finalised by the CoC till the next date of hearing i.e. 09.12.2022.

The Applicant convened the 33rd meeting of COC on 22.11.2022 wherein the Applicant apprised that in terms of the last meeting, five prospective resolution applicants have submitted their final resolution plans by 15.11.2022. The Applicant further apprised that one of the prospective resolution applicants namely Shalimar Infrabiz Private Limited communicated their decision to withdraw from the process and requested for refund of EMD. Upon discussions and deliberations, the CoC requested the RP to prepare a comparative chart of all resolution plans. The Applicant also apprised the members that the Erstwhile Successful Resolution Applicant had approached the Hon'ble Supreme Court wherein interim direction has been passed to not finalise the resolution plan, however neither a copy of appeal nor copy of notice issued by Hon'ble Supreme Court was served on him as on date.

The Hon'ble Supreme Court heard the Civil Appeal No. 7015-7016 of 2022 filed by the erstwhile Successful Resolution Applicant on 09.12.2022. The Hon'ble Supreme Court vide its Order dated 09.12.2022 was pleased to dispose of the Civil Appeal granting liberty to the Appellants to submit a resolution plan and an EOI to the CoC within a period of thirty days. Further, the Hon'ble Supreme Court was pleased to extend the period for the completion of the process by sixty days from the date of Order. In terms of the Order dated 09.12.2022 passed by the Hon'ble Supreme Court, the CIRP period in the matter of the Corporate Debtor would end on 07.02.2023.

The Applicant convened the 34th meeting of COC on 22.12.2022 wherein the Applicant apprised that the Hon'ble Supreme Court vide its Order dated 09.12.2022 has granted the erstwhile successful resolution applicant to submit resolution plan/EOI if any within a period of 30 days and extended the CIRP period by 60 days from date of Order.

The Applicant convened the 35th meeting of COC on 12.01.2023 wherein the Applicant apprised the members that the Applicant has received email from the Erstwhile Successful Resolution Applicant that since the Order dated 09.12.2022 passed by the Hon'ble Supreme Court was uploaded on 17.12.2022, therefore the period of 30 days shall be allowed to them from date of uploading of Order. Upon discussions and deliberations, the CoC members were of the opinion that the pronouncement took place in open court wherein the counsel for appellant was present and Appellant cannot claim ignorance, further the Order grants extension of 60 days from date of Order and 30 days to Appellants to submit resolution plan if any. It was deliberated that the Appellant had a 30 days period granted to the Appellant shall be calculated from the date of order. The CoC deliberated on the feasibility and viability of the resolution plans received in the matter of the Corporate Debtor and considered the manner of distribution in each of the resolution plans.

The Applicant convened the 36th meeting of COC on 24.01.2023 wherein the Applicant apprised that the check for eligibility of the prospective resolution applicants has been got conducted through an independent agency and its report has been shared with the members of the CoC. Thereafter, the agenda for voting upon the resolution plans were placed before the Committee of Creditors. Upon discussions and deliberations, majority CoC members requested the Applicant to put the resolution plans on e-voting which shall conclude on 02.02.2023.

The Applicant convened the 37th meeting of COC on 30.01.2023 wherein the Applicant apprised the members that the Applicant has received addenda from the Resolution Applicants in view of the claim of the employee of the Corporate Debtor. The Applicant further placed the agenda received from one of the prospective resolution applicants who was willing to modify the resolution plan to the extent that the recovery from avoidance applications shall go to the Committee of Creditors. Upon discussions and deliberations, the members of the CoC decided that the same shall be considered while voting upon the resolution plan. Further, the Applicant placed the agenda pertaining to the operations of the Corporate Debtor. Upon discussions and deliberations, the CoC unanimously decided that the RP shall continue with the corporate debtor as going concern. The Applicant reiterated the agenda the resolutions to be voted upon in respect of each resolution plan.

The Applicant convened the 38th meeting of COC on 02.02.2023 wherein the Applicant placed the results of e-voting in respect of resolution plans submitted in the matter of the Corporate Debtor. It was apprised that the Resolution Plan submitted by Respondent No. 1 in the matter of the Corporate Debtor was approved by the CoC in its commercial wisdom with 99.91% voting share. The majority of members of the CoC requested the Applicant to communicate the approval of resolution plan with the Successful Resolution Applicant and request to furnish Performance Security in terms of the Request for Resolution Plan. Thereafter, the Applicant placed the agenda for approval of estimated liquidation cost in terms of Regulation 39B of the CIRP Regulations. Upon discussions and deliberations, the members of the CoC approved the estimates of Liquidation costs. The Applicant placed the agenda for assessment of sale as going concern in terms of Regulation 39C of the CIRP Regulations. Upon discussions and deliberations, the members of the CoC approved to endeavour to sell the corporate debtor as a going concern in the event an order of liquidation is passed in the matter of the Corporate Debtor. The Applicant further placed the agenda for approving the fee of the Liquidator if an order of Liquidation is passed by the Hon'ble Adjudicating Authority in terms of Regulation 39D of the CIRP Regulations. Upon discussions and deliberations, the members of the CoC approved the fee payable to the Liquidator in the event an order for liquidation is passed.

The resolution professional by an affidavit vide diary no. 00462/4 dated 30.08.2023, had averred that the applicant is eligible under Section 29A of IBC, 2016.

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

II. Requirements of Regulation 37(1) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is as under:

III. Requirements of Regulations 38 (1), (2) (3) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is as under:-

Details of Resolution Plan/Payment Schedule:

The relevant information with regard to the amount claimed, amount admitted, and the amount proposed to be paid by the Resolution Applicant under the said resolution plan is tabulated as under :

The term of plan and its implementation schedule in detail R.38(2):

PUFE Transactions filed by RP under Regulation 35A:-

It is submitted that Resolution Professional has sent an email to banks/ members of COC on 21.08.2023 asking if any transaction audit/ forensic audit was done anytime within 3 years prior to initiation of CIRP. However, no reply has been received from the banks/ financial creditors for the same. Transaction Audit Report annexed at ANNEXURE A8 in IA 970/2022. The resolution professional has appointed Mr. Sumat Kumar Gupta, forensic auditor, and on the basis of the forensic report, applications under Section 43(2) have been filed in compliance with Regulation 35A of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

It is submitted in the 37^th CoC Meeting it is approved that the CoC (through their authorized representative Punjab National Bank) shall pursue the avoidance transactions and expenses incurred therein shall be contributed by the COC members in the ratio of their debt towards the corporate debtor. The amount so recovered shall be distributed amongst the COC members in the same ratio.

The Successful Resolution Applicants have filed an affidavit by diary No.00462/4 dated 30.08.2023 with regard to the payment of gratuity dues and dues to the workmen and employees stating as under:

The implementation of the Resolution Plan shall be as specified in Schedule 3 clause 2 of the plan.

It is further mentioned that upon approval of this plan and on payment to all the stakeholders of the amounts as proposed in the Resolution Plan, all the secured financial creditor shall relinquish their charges from the corporate debtor’s remaining properties existing as on the insolvency commencement date in terms of the decision of the Hon’ble Supreme Court in the case of Ghanshyam Mishra and Sons Private Limited through Authorised Signatory vs. Edelweiss Asset Reconstruction Company Limited through the Director & Ors. 2021 SCC Online SC 313 and the principle of clean slate under Insolvency and Bankruptcy Code, 2016.

Certain Relinquishment/Waiver of liabilities and Approvals have been sought in the Resolution Plan. The applicant has submitted the following facts with regard to the Waivers, Reliefs and Exemptions sought in the Resolution plan:

On a perusal of the reliefs etc., sought above, it is seen that the same are claimed under the general reliefs as per the provisions of IBC, under the ratios of various judicial pronouncements. Some of the reliefs sought comes within the jurisdiction of Government Authorities/Departments. As regards the aforementioned claims under the IBC, it is clarified that this Adjudicating Authority has powers to decide the reliefs claimed which are directly relatable to the Resolution Process and not over those pertaining to extraneous issues. Regarding the reliefs/waivers pertaining to the domain of various Departments/Governmental Authorities, it is further clarified that this Adjudicating Authority has no power to sanction these waivers, etc., and the Successful Resolution Applicants are at liberty to approach the competent authorities/courts/legal forums/office(s) Government or Semi-Government/State or Central Government for appropriate relief(s) sought in the plan. Approval of the Resolution Plan does not mean automatic waivers.

It is directed that any relief sought in the resolution plan, where the contract/agreement/understanding/proceedings/actions/notice etc., is not specifically identified or is for future and contingent liability, is at this moment not acceded to.

For the implementation of the plan following names have been proposed as the members of the Monitoring Committee -

After hearing the submissions made by the learned counsel for the Resolution Professional and perusing the records, we find that the Resolution Plan alongwith the addendum dated 27.01.2023, has been approved on the terms both financial and others as detailed therein.

As per the CoC, the Resolution Plan meets the requirement of being viable and feasible for the revival of the Corporate Debtor. By and large, all the compliances have been done by the RP and the Resolution Applicant for making the plan effective after approval by this Bench.

We have perused the contents of the Addendum dated 27.01.2023, which are mainly clarificatory in nature. The same are, however, subject to the provisions of the relevant law, and also the provisions of IBC, 2016.

On a perusal of the documents on record, we are satisfied that the Resolution Plan along with the Addendum dated 27.01.2023, thereto, are in accordance with Sections 30 and 31 of the Code and comply with Regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Therefore, subject to the observations made in this order, we hereby accord our approval to the Resolution Plan along with the Addendum dated 27.01.2023.

It is further directed that the Resolution Applicant, upon taking control of the corporate debtor, shall ensure compliance under all applicable laws for the time being in force. As far as the question of granting time to comply with the statutory obligations or seeking sanctions from governmental authorities is concerned, the Resolution Applicant is directed to do the same within one year as prescribed under Section 31(4) of the Code.

The Resolution Plan as approved shall be binding on the corporate debtor and its employees, members, and creditors, including the Central Government, State Government, or Local Authority, to whom a debt in respect of the payment of dues arising under any law for the time being in force such as authorities to whom statutory dues are owned, guarantors and other stakeholders involved in the resolution plan.

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

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

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

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

Liberty is hereby granted for moving any application if required in connection with the implementation of this Resolution Plan.

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 Professional shall file a copy of this order with the concerned Registrar of Companies, inter alia, for updating the status of the corporate debtor.

Additionally, the Registry shall send a copy of this order to the concerned Registrar of Companies.

The Resolution Plan is approved alongwith the Addendum dated 27.01.2023 with above-mentioned some observations and thus, application bearing IA No. 416 of 2023 in the main Company Petition, i.e., CP (IB) No. 391/Chd/PB/2018, stands allowed and disposed of accordingly.

A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.