Ms. Nisha Malpani vs NIIL Infrastructure Private Limited

PER- HEMANT KUMAR SARANGI, MEMBER(T)

This is an application filed by the Resolution Professional under Section 30 (6) of Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the “Code”) seeking approval of the Resolution Plan under Section 31 of the Code read with Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 in respect of the corporate debtor M/s NIIL Infrastructure Private Limited.

The facts in brief necessary for disposal of the present application are that Alchemist Assets Reconstruction Private Limited one of the Financial Creditors had preferred an application under Section 7 of the Code for initiation of Corporate Insolvency Resolution Process against M/s NIIL Infrastructure Private Limited ("Corporate Debtor"). The Company Petition (IB) 560 (PB) / 2017 was admitted on 28.03.2018 imposing moratorium under Section 14 of the Code and by initiating Corporate Insolvency Resolution Process against M/s NIIL Infrastructure Private Limited, the Corporate Debtor.

It is submitted in the application that the Resolution Professional has taken several steps in accordance with the provisions of the Code like public announcement in terms of Regulation 6(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016, appointment of authorized representative for the class of creditors namely Homebuyers and initiating steps for inviting Expression of Interest etc.

Mr. Gopal Lal Baser, Insolvency Professional was appointed as authorized representative for the Homebuyer class of creditors on 18.10.2018.

The Resolution Professional also took steps for appointment of two valuers namely Sapient Services Private Limited and Adroit Valuations, under Regulation 27 of the Regulations, to determine the Fair value and Liquidation value of the corporate debtor in accordance with Regulation 35. Besides M/s Brahmayya & Company was appointed as transaction auditor and the transaction audit report was received on 06.04.2019.

It is pertinent to mention here that at the request of the Resolution professional 137 days period were excluded on 25.09.2018 from the insolvency resolution process period. Additionally, on 06.02.2019 a further 90 days period was extended beyond the initial 180 days of Corporate Insolvency Resolution Process period in order to explore the possibility of Insolvency Resolution of the corporate debtor.

It is observed that the Resolution Professional published an invitation for expression of interest in requisite Form G initially on 24.12.2018. However, as no response was received, Resolution Professional again issued Form G on 16.01.2019 in newspapers extending the timeline for submission of the Resolution Plan.

Pursuant to the public invitation, two parties namely SSG Infratech Private Limited and consortium of Mr. Rakesh Kumar Verma and Mr. Shilendra Khirwar along with N-Homes Private Limited expressed their interest for submission of Resolution Plan.

Despite extension of last date for submission of Resolution Plan till 02.04.2019, SSG Infratech Private informed that they are not interested in submitting the resolution plan as the project cost estimate and financials were not viable for them.

The other prospective resolution applicant, the consortium of Mr. Rakesh Kumar Verma and Mr. Shilendra Khirwar along with N-Homes Private Limited submitted the resolution plan to the Resolution Professional on 02.04.2019.

The Resolution Professional has submitted its Compliance Certificate under Section 30(2) of the Code along with the resolution plan under Section 30(3) for approval before the Committee of Creditors.

The Resolution Professional presented the resolution plan to the CoC for discussion and approval in the 11^th meeting of CoC held on 16.04.2019. At the CoC meeting, the resolution applicant also made a presentation to the CoC members. Thereafter, the resolution plan was discussed in detail and the final plan based on the discussion with the resolution applicant was circulated electronically to the CoC members. The resolution for approval of the resolution plan submitted by the resolution applicant was put for e-voting by the CoC members and the following resolution was approved by 77.04% vote share of the members of the Committee of Creditors: -

The break-up of the voting pattern of the Financial Creditors/Members of the Committee of Creditors in approving the Resolution Plan was as under:

It has been submitted that before the approval of Resolution Plan by CoC, one of the consortium member Mr. Rakesh Kumar Verma expired. Consequently, one of the legal heirs of Late Rakesh Kumar Verma i.e. Mr. Rishabh Varma undertook to be a part of the consortium in place of Late Rakesh Kumar Verma and further undertook to abide by the terms and conditions of the Resolution Plan. In this regard affidavit of Mr. Rishabh Varma along with Death Certificate of Late Rakesh Kumar Verma and Affidavit and no objection certificates of other legal heirs of Late Rakesh Kumar Verma and No-objection certificate of other consortium members have been placed on record.

It is submitted that pursuant to approval of the Resolution Plan by the CoC the Applicant issued a Letter of Intent dated 02.05.2019 to the Resolution Applicant inter-alia informing the resolution applicant that the revised resolution plan as submitted before the CoC was approved and accordingly, the resolution applicant was requested to convey their unconditional acceptance. The resolution applicants duly submitted their unconditional acceptance and submitted a Performance Bank Guarantee of Rs. 4.77 Crores. Letter of Intent dated 02.05.2019, Unconditional Acceptance dated 02.05.2019 and performance bank guarantee dated 20.08.2019 have been placed on record.

Resolution professional has also placed a copy of the resolution plan as approved by CoC, stated to have been signed by the authorised representative of the resolution applicant being the consortium of Mr. Rishabh Varma and Mr. Shilendra Khirwar along with M/s N-Homes Private Limited.

The Compliance Certificate dated 02.01.2020 filed by the Resolution Professional in Form H under Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 has also been placed on record.

That brief contours of the Resolution Plan of NIIL Infrastructure Private Limited as approved by the CoC along with the amounts provided for the stakeholders under the Resolution Plan is detailed herein below: -

In terms of Section 30 (6) of the Code read with Regulation 39 of the CIRP Regulations, 2016 the resolution professional has submitted the Resolution Plan for seeking an order under Section 31(1) of the Code for approval of the resolution plan passed by the committee of creditors under sub-section (4) of Section 30 with 77.04% voting share.

Section 31 of the Insolvency and Bankruptcy Code, deals with the approval or rejection of a resolution plan by the Adjudicating Authority. Approval of the resolution Plan is accorded under the provisions of Section 31(1) of the Code.

Section 31 of the Insolvency and Bankruptcy Code, 2016 is reproduced below for ready reference.

(Emphasis given)

Therefore, before approving the Resolution Plan, the Code mandates the Adjudicating Authority to ensure that,

the Resolution Plan meets the requirements of Section 30(2) of the Code and

the resolution plan has provisions for its effective implementation.

In respect of compliance of condition (1) above, it is necessary to refer to sub-section (2) of Section 30 of the Code which reads as follows:

Sub-section 2 of Section 30 casts a duty on the Resolution Professional to examine the Resolution Plan received by him to confirm that such Resolution Plan provides for the payment of insolvency resolution process costs, provides for the payment of the debts of the operational creditors and financial creditors in such manner as specified, provides for the management of the affairs of the corporate debtor after approval of the Resolution Plan; the implementation and supervision of the Resolution Plan, that the Resolution Plan does not contravene any of the provisions of the law, and that the Resolution Plan conforms to such other requirements as may be specified by the Board.

The Resolution Professional has filed compliance certificate in Form H on 02.01.2020 and inter alia has confirmed that she has examined and verified the Resolution Plan approved by the CoC of NIIL Infrastructure Private Limited, in the light of the requirements of the Code and Regulations and that it is compliant to the relevant provisions of the Code and Regulations.

In terms of Section 31(1) of the Code, Adjudicating Authority has also to examine whether the requirements of sub-section (2) of Section 30 have been complied with or not.

It has been submitted in the application and in Form H duly certified by RP that the final Resolution Plan approved by 77.04% vote share of the members of the Committee of Creditors meets the requirements as laid down in various clauses of Section 30 (2) of the Code.

In respect of compliance of Section 30(2)(a) of the Code, it is seen that there is a provision in the resolution plan at Section VI at page no. 13-15 which provides for payment of CIRP costs in priority over payments to any other creditors. It has been inter alia confirmed that the CIRP cost upto the date of approval of Hon’ble NCLT would be considered on an actual basis. Besides the Resolution Professional has also confirmed in the compliance certificate given in Form H that the Resolution Plan provides for the payment of Insolvency Resolution Process costs. Be that as it may it is made clear that Insolvency Resolution Process cost shall be paid in its entirety by the resolution applicant in priority to other debts of the corporate debtor.

As regards compliance of clause (b) of Section 30 (2) of the Code, the Resolution Professional has certified that Section VI at page 14 of the resolution plan provides for the payment of the 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.

During hearing it was placed before us that the resolution plan provides for full and final discharge of the dues of workmen of the corporate debtor for the period of 24 months preceding the insolvency commencement date. On behalf of resolution applicant, it was confirmed that workmen’s dues for the period of 24 months preceding the insolvency commencement date shall be paid in its entirety in terms of water fall provisions of Section 53 of the Code. It is also submitted that in the resolution plan there is no lay off of workman/ employee of the corporate debtor and also no change in employment terms and conditions.

There appears to be no discrimination in the resolution plan in respective class of creditors, as same treatment is provided to similarly situated each class of creditors.

Besides the resolution plan provides for the payment of the 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.

The Resolution Applicant has filed an affidavit in compliance of order dated 29.09.2020, forming part of the resolution plan, whereby it states that;

As a sequel to the aforesaid discussion it is seen that clause (b) of sub-section (2) of Section 30 of the Code stands satisfied.

In terms of Section 30(2)(c), the Resolution Plan provides for management of affairs of the corporate debtor after approval of the Resolution Plan. The management of the affairs and control of the business of the corporate debtor after approval of the Resolution Plan has been provided at Section IX at page 24 of the Resolution plan which inter alia provides that the Company shall continue as a going concern and operate in its normal course of business upon implementation of the Resolution Plan. The Resolution Professional has confirmed in the compliance certificate given in Form H that section IX of the Resolution Plan provides for the management and control of the business of the corporate debtor.

The fourth requirement envisaged by Section 30(2)(d) is that it must provide for the implementation and supervision of the resolution plan. The Resolution Professional has confirmed in the compliance certificate given in Form H that section IX of the Resolution Plan provides for adequate means for supervising its implementation. It has been stated that RP alone shall act as the monitoring agency. However in the interest of justice we direct that the Monitoring Committee be comprised of seven members constituting the resolution professional as Insolvency Professional (IP) and one representative of each financial creditor namely, BOB, Alchemist Asset Reconstruction Company Private Limited, Paisa Lo Digital Limited and Nupur Finvest Private Limited and one of class of creditors, namely allottees and one of the resolution applicant, to be chaired by the IP.

The fifth and sixth conditions in terms of clause (e) & (f) of sub-section (2) of Section 30 of the Code provide to ensure that the Resolution Plan does not contravene any of the provisions of the law and conforms to such other requirements as may be specified by the Board.

In this regard the resolution professional has certified that the said Resolution Plan complies with all the provisions of the Insolvency and Bankruptcy Code 2016, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and does not contravene any of the provisions of the law for the time being in force. Be that as it may in terms of clause (e) & (f) of sub-section (2) of Section 30 of the Code, we make it clear that the Resolution Applicant shall comply with all applicable laws under the proposed Resolution Plan, whether or not specifically provided therein.

It is pertinent to state here that Section 29A of the Code prescribes certain eligibility criteria and disqualifications for persons who submit a resolution plan. Resolution Applicant has given adequate declaration and undertaking on their eligibility to submit the Resolution Plan. At para 4.ii. of Form H Resolution Professional has also certified that the Resolution Applicant, which is a consortium of Shilendra Khirwar and Rishabh Varma having technical partnership with N-Homes Private Limited has submitted an affidavit in this regard. It has been confirmed that the Resolution Applicant is eligible to submit resolution plan and does not fall under any of the categories as mentioned in Section 29A of the Code.

Regulation 36B(4A) of the CIRP Regulations requires that the Resolution Applicant shall provide a performance security. Resolution professional has certified that the Resolution Applicant has submitted Performance Guarantee of Rs.4,77,00,000/- ( Rupees Four Crores and Seventy Seven Lakhs only) issued by Central Bank of India, Regional office, Agra and additional Fixed Deposit of Rs.55.54 lakhs in compliance of Regulation 36B(4A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The Resolution Applicant has further filed an additional affidavit wherein it states that, “all the exclusions and waiver as sought in the Resolution Plan shall be subject to and in accordance with the applicable provisions of all the Law for the time being in force.”

As a sequel to aforesaid discussions we are satisfied that all the requirements of Section 30 (2) are fulfilled and no provision of the law for the time being in force appears to have been contravened.

The Resolution Professional has further certified that the Resolution Plan has been approved by 77.04 % of voting share of financial creditors after considering its feasibility and viability and other requirements specified by the Code and CIRP Regulations.

Adjudicating Authority is not expected to substitute its view with the commercial wisdom of the CoC nor should it deal with the technical complexity and merits of Resolution Plan, unless it is found contrary to express provision of law and goes against the public interest. The object of the Code is to promote resolution and every effort must be made to try and see that resolution is made possible.

Accepting the Resolution Plan is advantageous to all the stakeholders and amounts to maximisation of the assets of the Corporate Debtor and promotes entrepreneurship and to ensure that the Company continues to function as a going concern. The right of rejection or approval of a plan is with the CoC. In a particular case, what should be the percentage of claim amount payable to one or other 'Financial Creditor' or 'Operational Creditor' or 'Secured Creditor' or 'Unsecured Creditor' can be decided by the Committee of Creditors based on facts and circumstances of each case. What can be screened by this Bench is whether the plan approved by CoC meets the requirements as referred to in sub-section (2) of Section 30 of the Code.

Hon'ble NCLAT in the case of Darshak Enterprise Pvt Ltd Chhaparia Industries Pvt. Ltd & Ors. Passed in Civil Appeal (AT) (Ins) No.327 of 2017 has held that:

In the present case the resolution plan has been unanimously approved with 77.04 % voting share much above the statutory requirement of 66 % in terms of Section 30 (4) of the Code and has the requisite statutory voting share. Besides the decision of CoC is a reasoned and self-speaking one as required under proviso to Regulation 39(3) of the CIRP Regulations, 2016. Needless to state here that the Resolution Plan cannot take care of total outstanding dues of the creditors in its entirety. It is however seen that the resolution applicant proposes to pay the total consideration amount of Rs. 1,03,18,28,974/- within 30 months from the date of approval of the resolution plan, which is higher than the liquidation value of Rs.90,98,89,698/-.

It is a well settled proposition of law that commercial and business decisions of CoC are not open to judicial review. Adjudicating Authority cannot enquire into the commercial wisdom of CoC. The ground for rejection is limited to the matter specified under Section 30(2). It is however reiterated that the resolution plan in question meets the requirements specified in Section 30(2) of the Code and the reasoned commercial decision of CoC is neither discriminatory nor perverse.

In the facts we are satisfied that the requirements as per the Code and regulations have been complied with. Moreover, the Resolution Plan has been approved by 77.04 % voting share of the members of CoC and has been submitted in compliance of Section 30 of the Code for approval. In view of the aforesaid discussions and as no infirmity have been brought out upon screening of the Resolution Plan; we hereby approve the Resolution Plan under sub-section (1) of Section 31 of the Code.

We also approve appointment of 'Monitoring Committee' with modification that the Monitoring Committee shall be composed of seven members constituting the resolution professional as insolvency professional and one representative of the resolution applicant and one representative of each financial creditor namely, BOB, Alchemist Asset Reconstruction Company Private Limited, Paisa Lo Digital Limited and Nupur Finvest Private Limited and one of class of creditors, namely allottees, to be chaired by the IP. Resolution Professional (IP) shall be a member thereof for the term of the resolution plan to monitor and supervise the implementation of the Resolution Plan. We also grant liberty to the monitoring Committee to apply to the Tribunal for any further direction in order to ensure effective implementation of the plan, if such a necessity arises.

In respect of reliefs and concessions sought for in the Plan which are beyond the jurisdiction of this Tribunal, the Monitoring committee can make such claim before the authorities which shall be considered in accordance with law.

The resolution applicant shall obtain the necessary approval required under any law for the time being in force within a period of one year from the date of this order or within such period as provided for in such law, whichever is later.

It is clarified that Section 30 (2) (f) of the Code mandates that the resolution plan should not be against any provisions of the existing law. The Resolution applicant therefore, shall adhere to all the applicable laws for the time being in force under the proposed Resolution Plan, whether or not specifically provided therein.

We hereby exclude the period spent under adjudication and it is declared that the moratorium order passed by this Bench under Section 14 of the Code shall cease to have effect from the date of this order.

The Resolution Professional shall forward all records relating to the CIR Process and the Resolution Plan to IBBI to be recorded at its database.

The approved ‘Resolution Plan’ shall become effective from the date of passing of this order.

C.A. 889 (PB) 2019, I.A. 5129/ 2020 and CP No. (IB) 560 (PB)/ 2018 are disposed of accordingly.

Let the copy of the order be served to the parties.