Nimai Gautam Shah vs Zep Infratech Limited

The case is fixed for pronouncement of order. The order is pronounced in the open court, vide separate sheet.

The present application, being IA(Plan)/26(AHM)2024 in Company Petition (IB) No. 69 of 2023, is filed on 03.06.2024 by Mr. Nimai Gautam Shah, the Resolution Professional (hereinafter referred to as "RP") of the Corporate Debtor-M/s. Zep Infratech Limited, under Section 30 read with Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "IBC, 2016"), seeks the following prayers: -

The Financial Creditor, Raj Radhe Finance Ltd., had filed Company Petition No. 69 of 2023 on 10.03.2023, seeking the initiation of the Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor, Zep Infratech Limited. The Corporate Debtor was admitted in CIRP by order of this Adjudicating Authority dated 31.07.2023, and Mr. Nimai Gautam Shah was appointed as IRP.

Prior to the filing of the instant application, IA(Plan)/26(AHM)2024, an application was filed seeking approval of the Resolution Plan, IA(Plan)/1(AHM)2024. This Adjudicating Authority vide its order dated 30.04.2024 returned the said application, i.e., IA(Plan)/1(AHM) 2024, to the Applicant with some directions. The order dated 30.04.2024 records as under:-

Thereafter, the Applicant filed IA/26(AHM)2024 on 03.06.2024 seeking approval of the plan.

The brief facts as contained in IA/26(AHM)2024 are stated as under:-

In addition to the above, the Applicant had also received claims from the following entities:-

- (i) M/s. Deepvir Enterprise jointly with M/s. Kanha Ventures; - (ii) M/s. Kalyan Toll Infrastructure Limited; - (iii) M/s. Inderdeep Construction Company ; and - (iv) M/s. Eagle Infra India Limited.

(The copies of the Valuation Reports received from the aforementioned Registered Valuers are marked and annexed hereto as ANNEXURE - H Colly).

In compliance whereof, the Applicant filed an additional affidavit dated 29.01.2024.

In compliance of the aforementioned directions, the Applicant had duly filed an additional affidavit dated 24.04.2024.

A copy of the bank statement showing receipt of EMD is attached in Annexure-V.

XXVIII. The RA shall pay, an aggregate amount of Rs.7,75,00,000/-. The tabular summary of the payments to the creditors contemplated to be made under the approved plan is as follows:-

Note 1: As on date of Approval of the Resolution Plan, the unpaid CIRP Cost is NIL. Further, the Corporate Debtor has a bank balance of more than Rs. 70 lakhs. It is pertinent to submit that the entire CIRP cost till filing of the present application has already been paid and the future CIRP costs till the approval of the Resolution Plan are expected to be below Rs. 20 lakhs. Hence, the CIRP costs shall be paid from the existing bank balance. In view whereof, the Applicant herein had informed the Resolution Applicant that the unpaid CIRP costs are estimated to be NIL.

Be that as it may, Clauses 3.1.1 and 3.1.2 under the Resolution Plan duly provides that "Any unpaid Insolvency Resolution Process Costs and Standstill Period Costs shall be paid by way of Upfront Fund Infusion made by the Resolution Applicant and shall be adjusted from the Upfront Cash Recovery." and that "The Insolvency Resolution Process Costs will be paid in priority to any payment to any Creditors."

Be that as it may, it is relevant to submit that till the filing of the present application, a total amount of Rs. 39,46,295 (Rupees Thirty nine lakhs, forty six thousand, two hundred and ninety five Only) is incurred towards the CIRP cost and the same has been duly approved or ratified by the members of the CoC and has also been

specified in this Clause 3.3 (Implementation Steps and Schedule). The Plan Approval Order shall have deemed to approve the simultaneous issue and allotment of Securities by the Corporate Debtor for such Upfront Fund Infusion.

The Upfront Fund Infusion may be infused in the Corporate Debtor through equity or equity linked instruments and, if necessary, other financial instruments (including equity shares, preference shares, debentures and loans).

After the completion of actions listed out in Step 7 (infusion of Upfront Fund Infusion in ZIL), the issued equity and preference share capital of ZIL held by the existing shareholders of ZIL (including any part of the Financial Creditor Debt which has been converted to equity) and any right to subscribe to, or be allocated such equity shares, including any employee stock options, preemptive subscription rights or convertible instruments held by any person; but other than the Securities that are issued to the Implementing Entity pursuant to the terms of this Resolution Plan above shall be reduced to NIL and extinguished and cancelled ("Capital Reduction"), without payment of any price to the shareholders. For avoidance of any doubt, the Securities held by the Implementing Entity pursuant to Step 7 (Equity Contribution in ZIL) above shall not be cancelled and extinguished as part of the Capital Reduction.

The share capital of ZIL shall stand cancelled / extinguished and the resultant amount on such cancellation / extinguishment to be credited to capital reserve in the financial statements of ZIL.

The Capital Reduction shall not require the consents of any of the creditors of ZIL or approval of any of the shareholders of ZIL, or any other person having security interest over such shares and the approval of the NCLT (pursuant to Section 31 of the IBC) to the Resolution Plan shall constitute approval of the reduction of share capital and shall be binding on ZIL and its stakeholders (including its creditors and shareholders).

ZIL shall record reduction in the issued equity share capital of ZIL by way of cancellation of all of its existing issued share capital (which, for the avoidance of any doubt, shall not include shares which have been issued to the Resolution Applicant pursuant to Step 7 (Infusion of Equity Contribution in ZIL) above).

The shareholding pattern of ZIL after completion of Step 8 (Capital Reduction) shall be:

Considering Corporate Debtor is Public Limited Company hence in order to fulfil the minimum 7 members requirements as per the provision of the Companies Act, 2013 / 1956, existing partners of Deepvir Enterprise i.e., Deepti Virangbhai Shah, Virang Arvindbhai Shah and Kunal Virang Shah and Kanha Ventures i.e., Anita K. Patel and Niyati K. Patel shall hold one equity shares each as nominee of Deepvir Enterprise and Kanha Ventures respectively. It is clarified that 100% beneficial shareholders of Corporate Debtor post implementation of Resolution Plan is Deepvir Enterprise (50%) and Kanha Ventures (30%).

The Resolution Plan shall be deemed to be implemented on payment of the FC Discharge Amount to the Unsecured Financial Creditors (who are last in line to receive from the resolution amount).

XXXII. Clause 3.4 of the said Resolution Plan provides that implementation of the Resolution Plan shall commence immediately from the receipt of an order of this Adjudicating Authority, and the SRA intends to implement the entire Resolution Plan within a period of 90 days of receipt of a plan approval order.

XXXIII. It is submitted that even Clause 4 of the Resolution Plan provides thus:

XXXIV. The Applicant states that the Resolution Plan also provides for Performance Security as per sub-regulation (4A) of Regulation 36B of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

XXXV. Resolution Professional, the Applicant, has already filed five applications under Section 7 of the IBC, 2016 against different debtors of M/s. Zep Infratech Limited, namely (i) M/s. Star Line Leasing Limited (C.P (I.B) No. 247 of 2023); (ii) M/s. Opel Securities Private Limited (C.P. (I.B.) 257 of 2023); (iii) M/s. Kolon Investment Private Limited (C.P. (I.B) No. 259 of 2023); (iv) M/s. Gabriel Ventures India Private Limited (C.P (I.B) No. 251 of 2023) and (v) M/s. BVM Finance Private Limited (C.P. (I.B) No. 66 of 2024). The said five applications have been allowed by this Adjudicating Authority vide order dated 27.10.2023, 23.11.2023 and 08.02.2024.

XXXVI. The Applicant herein has duly lodged the claim of M/s. Zep Infratech Limited with the IRP/RP of the respective Debtors and the same have also been admitted. Apart from this, the Corporate Debtor has 2 (two) personal guarantees of Mr. Amit Patel and Mr. Rahul Patel and the RP has already lodged claim in the said matter with the Mr. Sunil Kumar Kabra, being the RP appointed in the matter of proceedings under section 95 of the IBC Code as filed by State Bank of India against Mr. Amit Patel and Mr. Rahul Patel.

XXXVII. That as per the Resolution Plan, any proceeds received/ recovered from the aforementioned Section 7 of the IBC, 2016 cases as well as from the Personal Guarantees of Mr. Amit Patel and Mr. Rahul Patel would go to the Unsecured Financial Creditors, up to a maximum amount of claims of such Financial Creditors admitted by Applicant herein less the amount recovered by such Financial Creditors under the Resolution Plan. Also, the Successful Resolution Applicant has undertaken in the Resolution Plan that the Financial Creditors shall be entitled to all cash and bank balance, including bank term deposit balance available with the Corporate Debtor, and the SRA shall not have any right over them.

XXXVIII. Clause 3.1.6 of the Resolution Plan provides for the Source of Funds and the mechanics of payment of funds to various creditors. It is provided that the partners of the SRA have sufficient net worth to implement the Resolution Plan. The following is the list indicating the net worth of the partners of the SRA:

XXXIX. Since the Resolution Plan results the change in the management or control of the Corporate Debtor, according to Section 32A of the IBC, 2016, notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a Corporate Debtor for an offence committed prior to the commencement of CIRP shall cease, and the Corporate Debtor shall not be prosecuted for such an offence from the date of the Resolution Plan has been approved by the Adjudicating Authority under Section 31 of the IBC, 2016 and any instrument executed by the Corporate Debtor under the Negotiable Instrument Act, 1881 including but not limited to post-dated cheques, demand promissory notes, etc., prior to the approval order passed by the Adjudicating Authority shall in no manner be the liability of the Resolution Applicant and all such instruments to be treated as null and void ab-initio.

XL. With the subscription of the Equity Shares by the RA and its affiliates/nominees, the entire Equity Shares held by the Existing Shareholders shall stand fully extinguished as a part of this Resolution Plan.

XLI. It is further submitted that nothing contained in this Resolution Plan shall affect the rights of the Corporate Debtor to recover any amounts due to the Corporate Debtor from any third party including any related parties of the Corporate Debtor, under proceedings initiated by the Corporate Debtor and there shall be no set-off of any such amounts recoverable by the Corporate Debtor against any amount paid/payable by the Corporate Debtor or any liability discharged, satisfied or extinguished pursuant to this Resolution Plan.

XLII. The Applicant has not filed any other application concerning the subject matter of this application before any Court.

Thereafter, this Adjudicating Authority vide its order dated 03.06.2024 in IA/812(AHM)2024 extended the period of CIRP by 30 days from 03.06.2024.

At Paragraph No.6 of the Resolution Plan, the Resolution Applicant had sought the various reliefs and concessions from this Adjudicating Authority:-

During the course of hearing on 02.07.2024, this Adjudicating Authority directed the Applicant to serve upon the Income Tax Department and further made the following observations on the plan:-

In compliance with the order dated 02.07.2024, a further affidavit on behalf of the Applicant was filed under inward diary no D6697 dated 30.08.2024. In the said affidavit, it is stated that:-

The Income Tax Department filed under inward diary no. R444 dated 04.09.2024. In the said reply, the Income Tax Department has stated as under:-

In compliance of the order dated 04.10.024, an additional affidavit with revised Form-H was filed under inward diary no. D8243 dated 08.11.2024. In the said affidavit, it is stated that:-

The Corporate Debtor had given a guarantee of Rs.1,50,00,000/- in favour of M/s Shree Ram Cottex Industries Private Limited, which is also undergoing CIRP. The Resolution Plan in the case of M/s. Shree Ram Cottex Industries Private Limited is yet to be approved and the amount to be recovered by M/s. Raj Radhe Finance Limited from the proceedings initiated against M/s. Shree Ram Cottex Industries Private Limited is yet to be ascertained. M/s. Raj Radhe Finance Limited has unequivocally agreed to reduce its claim in the present proceedings initiated against M/s. Zep Infratech Limited to the extent of an amount to be recovered from the CIRP of M/s. Shree Ram Cottex Industries Private Limited.

M/s. Sixvents Power and Engineering Limited owned 99.997% shares of M/s. Shirpur Power Private Limited. M/s. Sixvents Power and Engineering Limited was later amalgamated with M/s. Zep Infratech Limited vide order of the NCLT dated 05.06.2018. These 99.997% shares held by M/s. Sixvents Power and Engineering Limited in Shirpur Power were pledged in favour of M/s. SBICAP Trustee Company Limited against a loan availed by M/s. Shirpur Power Private Limited in the month of March, 2016.

M/s. Shirpur Power Private Limited was admitted into CIRP on 04.03.2020. In the liquidation, M/s Shirpur Power Private Limited was sold as a going concern to M/s. Jindal Power Limited. All the pledged shares held by M/s. Zep Infratech Limited i.e., the Corporate Debtor (earlier M/s. Sixvents Power and Engineering Limited) in Shirpur Power were cancelled and extinguished. Therefore, M/s. SBICAP Trustee Company Limited does not have any claim or charge against the assets of the Corporate Debtor, in so far as the said underlying asset being the shares held in M/s. Shirpur Power Private Limited which were pledged to M/s. SBICAP Trustee Company Limited have already been cancelled and extinguished.

The Corporate Debtor has a land situated at Lunsapur, Jafrabad, Amreli and the Corporate Debtor has taken full control over the said land bearing Revenue Survey Nos. 147/2, 147/2 paiki 1, 262 and 299/3. There are disputes in the title/ownership of the said land. The RP has submitted that the registered valuers have valued the said land at its book value in accordance with their valuation guidelines.

SBICAP Trustee is acting as Security Trustee for the benefit and on behalf of SBI, BOI and IDBI Bank Limited for financial assistance aggregating to Rs.1514 crores sanctioned to Shirpur Power Pvt. Ltd. To secure the aforesaid credit facilities granted to Shirpur Power Pvt. Ltd., the Zep Infratech Limited (before amalgamation) who is pledger has pledged their respective holding in the Borrower Company i.e., Shirpur Power Pvt. Ltd., in favour of STCL and charge has been created and registered with RoC:

I. The STCL has already released its charge of Shirpur Power Pvt. Ltd., and has handed over original title deeds to Jindal Power Limited as per the instruction of the lenders. As per security trustee agreement dated 08.10.2012 executed among the Shirpur Power Limited, SBI, BOI and IDBI Bank Limited (Lenders), SBI, as Lenders Agents, and STCL, prior to release of charge the STCL is required to obtain written instruction from the Lenders as per Clause 3.1(i) of the said agreement.

II. In view of the above facts and circumstances, it is stated that pending confirmation from Lenders, STCL would not be in a position to release the pledge of shares pledged by Zep Infratech Limited, and satisfaction of charge ID 10623683 with MCA portal.

The facts discussed above indicate that this Adjudicating Authority had several concerns in regard to the Resolution Plan submitted by the RP for its approval. The facts indicate that the RAs submitted the Plan but they intend that the implementing entity could be some other person which was not identified at the time of submission of the Plan. The RA were to identify entity or entities to acquire the corporate debtor. This suggested that the RA were to act as an intermediary entity only.

During the course of hearing on 28.04.2025, the Bench raised specific queries, and in response to those, the applicant filed an affidavit on 06.05.2025. The facts emerging from the Affidavit are summarised below:

I. The Corporate Debtor was admitted to the CIRP vide order dated 31.07.2023.

II. The original primary business of the CD pertained to real estate-related activities.

III. Prior to FY 2022-23, the CD did not have any material business operations, and its annual income from the sale of certain miscellaneous services was merely Rs 10 lakhs. For FY 2021-2022, the CD had ongoing business operations on a diminished scale, with a gross annual sale of pre-fabricated panels and engineering products of about Rs 12 crores.

IV. On account of persistent losses being incurred in the said line of business as well as due to the major loss of investment (more than Rs 700 crores) in the subsidiary company, i.e. M/s Shirpur Power Private Limited, the CD discontinued the business of prefabricated panels in the FY 2021-2022.

V. During the CIRP, the CD had no business activities.

VI. Regarding the proposed business to be carried out by the SRA, it has been submitted that, "the SRA was given to understand that the Corporate Debtor had no major business operations in the FY 2022-23 and even during the CIRP. However, prior to that, the CD had a good marketing and distribution network for the marketing of pre-fabricated panels. The SRA has submitted a Resolution Plan with an intent to take over the CD in order to have a ready-made presence in the said field".

VII. The CD's Balance Sheet for the financial year ended on 31.03.2021 shows non-current assets of Rs 10.01 crores (Property, Plant and equipment of Rs 8. 29 crores and financial investments of Rs 1.71 crores). Equity capital is only Rs 7 lakhs. Current liabilities are Rs 764 crores.

VIII. The CD showed a net loss of Rs 24.35 crores in FY 2020-2021 and a profit of Rs 8.12 crores in FY 2021-2022. The profit during FY 2021-2022 was due to a gain on slump sale of Rs 9.56 crores.

IX. The CD has not audited financial accounts for FY 2023-2024 and FY 2024-2025, and the same are in the process of finalization with the CD's statutory auditors.

X. Among tangible assets, the CD had only one office in Ahmedabad, one residential flat in Ahmedabad, one Villa in Dabolim, Goa, one open piece of land in Amreli without any clear boundary and without a clear title, and one vehicle (Bolero Car). It has been submitted that apart from these assets, there are no other immovable or movable assets in the CD's books of account.

XI. The Applicant has filed claims to recover dues from five companies, all of which are undergoing CIRP.

XII. The CD had an average of 70 to 80 employees and workers during FY 2021-2022, and there were no employees/workers in the financial years ended 31.03.2023 and thereafter. During the CRP proceedings the CD has no employees.

XIII. The other information provided by the RP is extracted below:

As directed by this Tribunal vide order dated 07.05.2025, the Applicant has filed Form H in the revised Format prescribed by the IBBI. Information, other than discussed above and other important information, as available in this Form, is summarised below:

I. The RA, namely Deepvir Enterprise jointly with Kanha Ventures are engaged in the business of vehicle bodies, frames, panels, boxes etc.

II. Members of CoC are Rajendra M. Thakkar (Revasia) and Sons Private Limited (90.5% voting rights), and Raj Radhe Finance Limited (9.5% voting rights).

III. The total admitted claims are of Rs 1,47,86,567 as corporate guarantee claims and Rs 265, 92, 21,210 for other than corporate guarantee claims. The Plan value results into realization of 2.90% of the Principal Amount and 2.90% of the total admitted claims.

IV. The Resolution Plan value is Rs 7,75,00,000, against a fair value of Rs 10,27,30,410 and a liquidation value of Rs 6,86,13,165.

V. The Plan amount of Rs 7,75,00,000 will be distributed between unsecured financial creditors (Rs 7,20,00,000) and operational creditors (Rs 50,00,000).

VI. The Plan results into realization of 46.44% for the unsecured financial creditors (members of CoC) against claims of Rs 15,61,11,567.

VII. The government claims are of Rs 251,78,66,710, and the Plan provides for recovery of only Rs 49,99,941, which is 0.20%. After payment of these, the Plan leaves nothing for the Corporate Debtor.

VIII. The other operational creditors' claims were of Rs 29,500 and Rs 59, which is 0.20% of their claim amount.

IX. The RP has not identified any Preferential, Undervalued, Fraudulent and Extortionate transactions.

X. The CD has a business loss of Rs 376.62 crores and long-term capital loss of Rs 202.09 crores for the assessment year 2023-2024, and the expiry year is 2031-2032. The CD also has carried forward loss as per tax return of Rs 0.20 crores for Assessment Year 2018-2019 and Rs 1.19 crores for Assessment Year 2020-2021.

As per the revised Form-H dated 08.05.2025, the list of Financial Creditors, being members of CoC and distribution of voting share among them is as under:-

The list of financial creditors of the CD being members of the CoC and distribution of voting share among them is as under:

As per the revised Form-H dated 08.05.2025, the amounts provided for the stakeholders under the Resolution Plan is as under:-

7B. Details of Realisable amount:

As per the revised Form-H dated 08.05.2025, the details of Income Tax losses carry forward under Section 79(2) (c) of Income Tax Act, 1961, if any, are as under:-

As per the revised Form-H dated 16.10.2024, the compliances of the Resolution Plan are as under:-

The RP vide Affidavit dated 24.02.2025 filed in this Tribunal on 25.02.2025 vide Diary No D 1260 has submitted a copy of part of Form G is submitted as Annexure R-4. Under the heading of "Company overview including snapshot of business performance" the Affidavit notes that major assets of the company as on 31.07.2023 are House Property at Goa (Net Book value Rs 3,34,78, 421), House Property at Delhi (Rs 24,77,02), and various land parcels at Lunsapur Amreli. However, Form G makes no reference to office at Ahmedabad and therefore Form G misses out an important office premises of the CD.

As per the revised Form-H, no Section 66 or avoidance application is pending.

Before adverting to the Application filed by the RP and the submitted Resolution Plan, we consider it appropriate to state some facts about the case as available in the records.

- The CD has investments of which fair value is determined differently at Rs 1,68,57,758 and Rs 100 by two valuers and liquidation value at NIL and Rs 100. It has a cash and bank balance of Rs 17,26,514, and, apart from these two types of assets, there are no other securities or financial assets. - The CD has only one Bolero Car, and it has no other plant and machinery. - The CD has a residential house comprising of basement and a ground floor in Anand Niketan, Near Motibagh, New Delhi, one Villa with swimming pool at Dabolim in Goa, one office in Ahmedabad, and some land in the District Amreli. It has no other tangible or immovable properties. The fair value of all these properties is worked out at Rs 9,20,22,446 and Rs 9,21,23,099 by two valuers. The liquidation values are worked out at Rs 6,82,09,152 and Rs 6,49,90,099 by two valuers. The value of land in Amreli is taken at book value, rather than fair or market value.

- The Resolution Plan is submitted by two entities, namely M/s Deepvir Enterprise and M/s Kanha Ventures. These entities, together, have five partners, and their combined net worth is Rs 16,93,97,296 (as per the Resolution Plan filed on 19.06.2024). The same is shown as increased to Rs 18,77,56,359 as per the Application filed by the RP on 06.05.2025.

- There are only two unsecured financial creditors, namely Rajendra M. Thakkar (Ravasia) and Sons Limited, of Rs 14,13,25,000 for a loan and Raj Radhe Finance Limited for Rs 1,47,86,567 for corporate guarantee.

- The Balance Sheet of CD as of 31.03.2022 shows that it had property, plant, and equipment of Rs 15.06 crores as of 31.03.2021, which decreased to Rs 8.29 crores as of 31.03.2022. The reduction is under the categories of land, buildings, plant and machinery, and vehicles. This meant that the company had sold these assets in the 2021-2022 fiscal year. The balance sheet of the CD as on 31.03.2023 show that the book value of non-current assets in the form of property, plant and equipment has reduced to Rs 3.76 crores as on 31.03.2023 from Rs 8.29 crores as on 31.03.2022. Therefore, the CD has been selling its assets on regular basis.

- The CD had intangible assets of Rs 8.77 lakhs as on 31.03.2021 that were reduced to NIL.

- The CD had inventories of Rs 2.92 crores as on 31.03.2021, which decreased to Nil as on 31.03.2022.

- The CD had cash and bank balance of Rs 3.14 crores and 1.68 crores as on 31.03.2021, which got reduced to Rs 14.21 lakhs and 0.77 lakhs as on 31.03.2022.

- Other current assets of the CD increased to Rs 21.60 crores as on 31.03.2022 from Rs 69 lakhs as on 31.03.2021. The increase of Rs 21.26 crore was due to a slump sale. There is no information about the slump sale. These assets were of Rs 21.22 crores as on 31.03.2023.

- The CD had short term borrowings of Rs 443.35 crores and Rs 443.44 crores as on 31.03.2021 and 31.03.2022, respectively. These were loans repayable on demand but no information on these loans is given in any document.

- The CD had total outstanding dues of creditors other than micro enterprises of Rs 287.65 crores and Rs 286.21 crores as on 31.03.2021 and 31.03.2022, respectively. This is reduced to Rs 2.01 crores, but no information is provided on the change.

- The CD had other current financial liabilities of Rs 34.11 crores and Rs 34.02 crores as on 31.03.2021 and 31.03.2022, respectively. This is reduced to Rs 10.71 lakhs, but no information on the change is provided.

- The CD had other current liabilities of Rs 1.19 crores and Rs 0.31 crores as on 31.03.201 and 31.03.2022, respectively.

- The Profit and Loss account of the CD for FY 2021-2022 shows a gain on slump sale of Rs 9.56 crores.

- The audited accounts of CD for the year 2021-2022 show that it had a revenue of Rs 12.68 crores and Rs 0.84 crores from the sale of shelters and towers and trading of yarn and other products, and this is apparently different from what is stated by the RP.

- The Audited Accounts of the CD for FY 2021-2022 show that it had loan transactions with related parties, namely BVM Finance Private Limited and Healwell International Limited.

- The balance sheet of the CD as on 31.03.2023 shows that other equity has changed from (Rs 736.11 crores) as on 31.03.2022 to Rs 5.90 crores, but no information on the change is provided.

- M/s Sixvents Power and Engineering Limited owned 99.997% shares of M/s Shirpur Power Private Limited, and Sixvents was amalgamated into CD in the year 2018, and therefore, CD became the owner of Shirpur Power. These shares of M/s Sirpur Power were pledged with M/s SBICAP Trustee Company Limited against a loan availed by M/s Sirpur Power Private Limited in the month of March 2016. All shares held by the CD in M/S Shirpur Power were cancelled in 2023, subsequent to the sale of M/S Shirpur Power under the liquidation process.

- The CD did not have any business activity and did not have any employees since 2022.

- The minutes of the first CoC show that the representatives of two unsecured financial creditors had no knowledge about the CD.

- The CD had granted unsecured loans to various parties and was overdue for payment. These were Starline Leasing Limited Rs 8.40 crores, Kolon Investment Private Limited Rs 7.80 crores, Opel Securities Private Limited Rs 7.80 crores, and Gabriel Ventures India Private Limited Rs 2.30 crores.

- The Affidavit filed by the RA, along with the IA filed on 06.05.2025, states that the CD had no major business operations in FY 2022-2023 and even during the CIRP. However, prior to that, the CD had a good marketing and distribution network in the market of pre-fabricated panels. The RA proposes to diversify its business into the field of pre-fabricated panels.

- The Income Tax Department had filed a claim of Rs 251,78,66,270 before the RP. The demand pertains to Assessment Year 2021-2022.

- The RP vide additional affidavit filed on 25.11.2024 (Inward Diary No. 8532) has provided a chart indicating summary of business loss, unabsorbed depreciation and long-term capital loss. As per Income Tax Return filed for Assessment Year 2023-2024, the business loss for AY 2023-2024 are of Rs 376.62 crores and the claim would expire in AY 2031-2032. The unabsorbed depreciation claim for AY 2021-2022 is of Rs 1.04 crores and set off can be claimed during indefinite period. The long-term capital losses are of Rs 0.20 crores, Rs 1.19 crores, and Rs 202.09 crores for Assessment Years 2018-2019, 2020-2021, and 2023-2024 respectively. These are available for set off up to Assessment Years 2026-2027, 2028-2029, and 2031-2032 respectively.

The RP submitted the Resolution Plan vide Affidavit filed on 03.06.2024 (Diary No. E 1419). A copy of Form-G dated 23.09.2023 appears on page 65 of the Application. It notes that the company has no manufacturing operations and that the company has no material business operations in the last financial year. The company has no employees. It notes that further details, including last available financial statements (with schedules) of two years, a list of creditors, and relevant dates for subsequent events of the process, are available at [email protected] or [email protected]. It is not clear whether the audited financial statements were requested by any of the prospective resolution applicants. The financial statements for the financial years 2021-2022 and 2022-2023 have been provided to this Tribunal after the RP was directed to furnish the same. As discussed above, the RP did not include the Ahmedabad office (Office No.2, Navrang Apartments Owners Association, Opp. Asia School, Swastik Char Rasta, Navrangpura, Ahmedabad) in the Information Memorandum, a part of which was provided to this Tribunal and is discussed above. This omission violates Regulation 36(2)(a) and (c) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which mandate the inclusion of details of all tangible and immovable assets in the Information Memorandum.

The RP failed to submit a complete copy of the Information Memorandum to the Tribunal, and it is unclear whether the IM provided to prospective resolution applicants included audited financial statements for FY 2021-22 and FY 2022-23 or detailed asset schedules, as required under Regulation 36(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The Corporate Debtor was initiated into CIRP based on the petition under section 7 filed by Raj Radhe Finance Limited on 10.03.2023. The Corporate Debtor had registered office at Abhijit, 7th Floor, Mithakali Six Roads, Ellisbridge, Ahmedabad, Gujarat 380006. No valuation report has been obtained for this office building, and no documents have been filed to explain the reasons for not carrying out the valuation of this office and for not including the office in the assets of the CD.

The Petition filed by Raj Radhe Finance Limited states that it had advanced a loan of Rs 1,50,00,000 to Shree Ram Cotex Industries Private Limited (sanctioned on 11.04.2022). The loan was secured by way of hypothecation of book debts and stocks at factory premises of the borrower (Survey No. 39, Opposite Biliyala Bus Stop, National Highway 8-b, Gondal, Rajkot 360311). M/s Zep Infratech Private Limited had provided corporate guarantee dated 08.04.2022. The loan was to be repaid in 24 monthly instalments and these were to start from August 2022 and ending in July 2024. The loan was disbursed to the borrower on 21.07.2022. The borrower failed to pay instalments since October 2022. The Corporate Guarantee recall notice was issued on 02.12.2022 on default committed by the Borrower. The Financial Creditor invoked the Corporate Guarantee given by Zep Infratech Limited vide recall notice dated 02.12.2022 and the Corporate Guarantor (present CD) was asked to pay the outstanding amount. A Petition under section 7 of the IBC, 2016 against the borrower has been admitted on 17.07.2023. The present CD (the Corporate Guarantor), during the proceedings under section 7, admitted to have defaulted in repaying the financial debt and stated to have been facing financial crunch and therefore it is not possible to repay the debts. Based on these facts, the petition under section 7 was admitted. After considering all the facts together (at the time of admission and that leading to filing of Resolution Plan) these revelations now surprise us. There cannot be two views that Zep Infratech Limited was passing through severe financial crisis during the relevant time. It had no proper business and also no employees. What prompted it to be the guarantor of the loan to a Rajkot based party with whom it apparently had no relationship. It was neither in the business of financing nor a money surplus company. It stood a guarantor for a company which defaulted in the loan repayment as soon as it was granted. Infratech Limited had a short-term borrowing of Rs 443.44 crores, dues to creditors of Rs 286.21 crores, financial liabilities of Rs 34.02 crores as on 31.03.2022. No information is available about these dues and liabilities. What happened to these? We could not understand any reasons for none of these parties filing an application for initiation of CIRP in the case of CD but Raj Radhe filing to whom it has given a corporate guarantee of Rs 1.50 crores.

The Resolution Plan application provides that the claim of Rajendra M. Thakkar (Ravasia) and Sons Private Limited for Rs 14,13,25,000 was received on 7.8.2023. No information is provided, including when, about the receipt of loan by the CD and whether it is part of short-term borrowings of Rs 44.44 crores.

Regulation 6A to the IBBI (Resolution Process for Corporate Persons) Regulations, 2016 requires the IRP to send a communication along with a copy of public announcement made under Regulation 6, to all the creditors as per the last available books of account of the corporate debtor through post or electronic means wherever the information for communication is available. We do not find any evidence of sending this communication by RP to all creditors including to the persons who had granted the loans.

The RP had appointed two valuers for valuing the immovable properties. A summary of value is given at page 6 of the Affidavit filed by RP to the Resolution Pan filed on 03.06.2024. The fair value of the Delhi Residential property as per one valuer is Rs 5,57,66,147 and by the other is Rs 5,53,30,000. The liquidation values are Rs 3,90,36,303 and Rs 3,87,31,000. The fair value for Goa Villa are Rs 3,01,43,000 and Rs 3,06,35,000 and liquidation value is Rs 2,41,14,000 and Rs 2,14,45,000. The fair value of Ahmedabad office is Rs 44,35,000 and Rs 44,80,000. The valuation figures being so close by both independent valuers cannot be a coincidence.

The CD had assets and liabilities in hundreds of crores as on 31.03.2021 and these got drastically reduced as on 31.03.2023. The Company sold various assets during this period. The business undertaking was sold on slump sale basis. It carried out trading in goods which was not its business. Neither the RP nor the CoC enquired about the same. It is not demonstrated that these facts were part of the information memorandum. The CoC apparently had no idea about the business of the CD and it never asked any questions or raised any doubts about the transactions undertaken by the CD. The CD was neither subjected to any forensic audit nor the transaction audit nor the transactions were referred to any auditor for identifying the preferential transactions under section 43, undervalued transactions under section 45, extortionate transactions under section 50, and fraudulent transactions under section 66 of the IBC, 2016.

On being directed by this Adjudicating Authority, an Affidavit to reply the queries raised has been filed on 06.05.2025 and relevant information is extracted below:

The RP has filed an affidavit and revised Form-H, based on the IBBI Notification No. IBBI/2025-26/GN/REG 124, dated 03.04.2025, in this Tribunal on 09.05.2015 (Inward Diary No. 3092). Additional information provided is extracted below:

49,99,941 as against claim of Rs 251,78,66,710 which is 0.20% of the claims received from the government.

- A claim of Rs 29,500 was made by other operational creditors and an amount of Rs 59 is provided which is (0.20%) of the claims made. No PUFE applications are made or pending. Contributions under Regulation 39B are NIL. The Committee has not recommended sale of corporate debtor as a going concern. The Committee has not recommended the sale of business of corporate debtor as a going concern. The Resolution Plan is not subjected to any conditions.

Section 31 of the IBC deals with the approval of the resolution plan. Section 31 reads as follows:

If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section

of section 30 meets the requirements as referred to in sub- section (2) of section 30, it shall by order approve the resolution plan which 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.

Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.

Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.

To our understanding, section 31 requires satisfaction of the Adjudicating authority on two issues:

Section 30 (2) of the IBC reads as below:

As far as effective implementation is concerned, the Plan only provides that the payment to the SCC members and others will be made within 30 days of the approval of the Plan by the NCLT. There is nothing in the plan about running the Corporate Debtor the RAs. No plans or planning for the business. No money is provided for working capital. Therefore, the question of any effective implementation of plan does not arise.

This Tribunal is fully conscious of the principle that judicial intervention by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, must be limited and restrained. As reiterated in a catena of decisions by the Hon'ble Supreme Court, including in K. Sashidhar v. Indian Overseas Bank [2019] 102 taxmann.com / 12 SCC 150, Committee of Creditors of Essar Steel Ltd. V. Satish Kumar Gupta 8 SCC 531, Ebix Singapore (P) Ltd v. Committee of Creditors of Educomp Solutions Ltd [2021] 130 taxmann.com 208, Vallal RCK v. Siva Industries &Holding Ltd ((2022) 9 SCC 803), the commercial wisdom of the CoC is not to be interfered with, save in exceptional circumstances. However, this Tribunal cannot remain a mute spectator where the very anchor of the insolvency resolution process, the bona fide, and the commercial judgment of the CoC - is corroded by patent arbitrariness and opacity.

Hon'ble Madras High Court in the matter of Writ Petition No. 29845 of 2022 has observed in para 52.3 as under:

The relevant facts as discussed in this order are again summarised below:

- The Corporate Debtor had hundreds of crores of assets and liabilities as on 31.03.2021, 31.03.2022, and 31.03.2023 but the RP has identified only four immovable properties (two of these are residential premises at Delhi and Goa, one office at Ahmedabad and one land at Amreli. The RP has received claims from only two unsecured financial creditors (one of them is financial creditor to whom corporate guarantee was provided by the CD) and from Income Tax Department.

- The issue of corporate guarantee by the CD to Raj Radhe Finance Limited raises serious doubts about its genuineness because it was issued to guarantee a loan given by the FC to another third party, with whom the CD had no relation, and the defaults occurred very quickly and Raj Radhe Finance Limited filed petitions under section 7 to bring both the CD and loan recipient to the CIRP. Raj Radhe otherwise has no business or financing dealings with the CD. The petition under section is not brought by any person who had advanced loans of hundreds of crores and these persons have not even filed the claims. There is noting on records to demonstrate who were those parties. Neither the RP nor the CoC took pains or even inquired about anything noted in the audited accounts for financial years 2021-2022 and 2022-2023. No financial accounts are prepared for later years.

- Neither the RP nor CoC recommended for forensic audit of the CD or audit for identifying the PUFE transactions in the circumstances that the CD had sold assets and business on slump sale basis and what business has been sold no information is available.

- RP did not follow the requirements of Regulation 6A of the IBBI Regulations for CIRP as discussed above and did not identify the real creditors.

- The RP has not demonstrated that it had taken steps to provide correct information along with full details of assets (it omitted to provide information about Ahmedabad office) in Form G to attract as many as PRAs as possible. Yes, it stated that the CD has no business and no employees but it is unclear whether the audited accounts were shared. The facts indicate that it was a very closed group which was knowing about the proceedings. The RP did not submit a copy of Information Memorandum to understand what information was provided in that. There are no IAs by the third parties.

- The Income Tax Department had raised a huge demand against the CD and it appears that the reasons for raising the demand were not discussed in any of the CoC meetings.

- The CD has carried forward business loss of Rs 376.62 crores, carried forward unabsorbed depreciation of Rs 1.04 crores and carried forward long term capital loss of Rs 203.48 crores. Though, the SRA has asked for a prayer from this Adjudicating Authority to approve affording a reasonable opportunity of being heard by the jurisdictional principal commissioner of income tax in accordance with section 79 (2) of the Income Tax Act, 1961 to allow carry forward of losses of the previous year. However, these intangible assets have not been considered while valuing the CD or while submitting the Resolution Plan. It is made clear that this Adjudicating Authority has no power to decide the issue of carry forward of losses/depreciation and the same will be subjected to the provisions of the Income Tax Act, 1961.

- The CD had advanced loans to various parties and it had huge trade receivables but the same were not taken into account by the CoC while approving the Resolution Plan amount quoted by the SRAs.

- The Resolution Plan only provide for payments to the two unsecured financial creditors and their recovery is more than 44% whereas the Income Tax Department gets only 0.2%.

- Whole money provided in the Plan will go the creditors and there is no provision for the working capital, equity capital, and for running the expenses of the CD.

- There is no provision for CIRP cost as it will be met by the cash available with the CD.

- The CD neither has plant and machinery nor employees and it only has one office building, two residential building, and one land at Amreli. The value of Plan is less than even the fair value of the properties that were valued in the year 2023. The land at Amreli is valued at Book Value.

- The financial capacity of the RAs is not convincing. As discussed in this order, the net worth certificates of five individuals also include immovable property and other illiquid assets, which will not be available for the CD. Based on the records available in this Tribunal, it has come to our notice that the same RA has submitted resolution plan in the case of Opel Securities Ltd, in which CIRP was initiated on the application of Zep Infratech Ltd (CD in this case) and the funds available with the RA will also be used in that case, if the plan is approved, further limiting the availability of liquid funds for this case. It appears that the RA did not share this information with the CoC.

The above facts raise serious doubts about the whole process being carried out by the RP under the direction and control of the CoC. The purpose is not to resolve the insolvency faced by the CD as no genuine creditor has come forward to take the CD to CIRP. The apparent purpose is to take control and ownership of immovable properties, as there is nothing else in the CD. The plan's focus on acquiring immovable properties at a value below their fair market price (assessed in 2023) and seeking reliefs under Section 32A and other concessions raises concerns about its alignment with the IBC's objective of genuine insolvency resolution.

There is no material in the Plan underpinning the feasibility and viability of the Resolution Plan. The Form H clearly notes that the Plan does not provide for the sale of the corporate debtor or its business as a going concern.

The Corporate Debtor has no plant and machinery and no employees. Currently, CD is not conducting any business and is not a going concern or in operation. None will benefit, other than the two unsecured financial creditors, who constitute the CoC, from the approval of the Plan.

The RP has not filed any IA before this Tribunal regarding non-co-operation from the CD. The RP has neither proposed nor initiative is taken by the CoC for identifying the avoidance transaction. There are no accounts of the CD after 01.04.2023 and this indicates that the RP did not have the full information to be provided in the Information Memorandum and therefore in absence of the same, the Resolution Plan submitted by the RA can not be considered to have taken into account the full picture of the CD as on the date of submission of the Plan.

The fulcrum on which the Resolution Process under the Code proceeds is the full and correct knowledge of the affairs of the CD; however, in the present case, full information about the CD was not available. Therefore, the CoC could not be said to have exercised its commercial wisdom while approving the resolution.

The objective of the IBC for value maximization has not been considered under the shield of the commercial wisdom of CoC.

Commercial wisdom of the CoC: The role of CoC is questionable. The decision of the CoC to approve everything put up to it with a 100% majority and without raising any pertinent questions/clarifications on anything during the whole CIRP indicates a behaviour not of prudent decision makers and at arm's length. The CoC's approval of the resolution plan with 100% majority, without questioning significant asset sales (Para 26.8), financial discrepancies, or the absence of audited accounts for FY 2023-24 and FY 2024-25, reflects arbitrary and irrational conduct. Such failure to exercise due diligence violates the CoC's duty to maximize value under Section 30(4) and undermines the IBC's objectives. The facts indicate that their decisions were motivated with the sole intention of getting the approval of this Tribunal and get the all types of benefits, reliefs and concessions available due to the approval of the plan to all involved in the transactions. There appears to be no intention to resolve the insolvency, as the CD has no ongoing business and no party is interested other than two CoC members.

In the case of Vallal RCK v. Shiva Industries (supra) the Hon'ble Supreme Court has also held that:

In view of the facts discussed above, the CoC not only acted in a "capricious, arbitrary, irrational" manner but also approved the plans that contravene the provisions of IBC and the Regulations. In that regard, the CoC has failed to exercise its commercial wisdom in deciding on the Resolution Plan, which, in a real sense, does not take into account the ground realities of the CD and is not commercially feasible and viable. It does not lead to value maximisation from the assets of the CD.

Therefore, we are of the view that the resolution plan has no provisions for its effective implementation as required by Section 31 (1) of the IBC, as there is nothing in the plan except payment to CoC members and others out of plan value of Rs 7.75 crores. Whole money goes to the stakeholders and nothing remains for the CD not even for equity capital contribution.

The Tribunal would also like to mention that the underlying purpose of a resolution plan is not merely the settlement of claims but the revival of the Corporate Debtor as a going concern in a manner that is commercially viable and legally compliant. In this regard, Regulation 38(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, outlines key parameters that every resolution plan must comply with. The said regulation reads as under:

In the present case, upon a detailed consideration of the material on record, it is evident that the resolution plan fails to satisfy the benchmarks laid down in the above regulation. Further, section 30 (2) of the IBC, 2016 requires that the plan provides for the implementation and resolution of the Plan. As discussed in this order, the business of the CD was of real estate and did some trading in the year 2022 and now has no business. The Plan does not provide for any funds to carry out the business of the CD. The RA has no plans to provide a resolution to the corporate insolvency. As discussed in detail with cogent reasons, the Plan fail to meet the requirements of clauses ( c), (d), (e ), and (f) of section 30 (2) of the IBC, 2016.

The plan has not even identified, in any meaningful manner, the root causes of financial distress faced by the Corporate Debtor. The plan lacks financial depth and strategic clarity to justify its feasibility and viability, as it provides no working capital, equity infusion, or business projections to revive the Corporate Debtor, which has no ongoing operations, employees, or plant and machinery. The resolution applicants' net worth, including illiquid assets, does not demonstrate sufficient liquid funds to implement the plan. Moreover, there is no demonstrable vision to restart the business of the CD and no capability is shown on the part of the Resolution Applicant to implement the plan. In fact does not provide any information on the business projections of the CD and how will it be achieved.

Thus, in substance and spirit, the resolution plan does not comply with Regulation 38(3), and the manner in which it has been approved without these essential elements being satisfied raises serious questions about the integrity of the resolution process as a whole.

The Hon'ble Supreme Court in the case of Pratap Technocrats (P) Ltd. v. Monitoring Committee of Reliance Infratel Ltd. 10 SCC 623, under the Heading: Balancing the goals and key objectives of insolvency law in paragraph 46 of the order noted that, " since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made while designing the insolvency law relate to the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interest of creditors. Encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. The Hon'ble Court in paragraph 47 further notes that, "Hence, once the requirements of IBC have been fulfilled, the adjudicating authority and the appellate authority are duty-bound to abide by the discipline of the statutory provisions. It needs to be emphasised that neither the adjudicating authority nor the appellate authority have an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.

As discussed in this order, currently there is no business in the CD, CD has no employees, the creditors other than the unsecured security creditors have not even filed any claim, all pointing to the conclusion that the plan submitted by the RA does not meet the goals of the IBC law.

Accordingly, and in view of the discussion above, the relying on the provisions of Section 31 (2) of IBC, 2016, the Resolution Plan in question is hereby rejected by this Adjudicating Authority following the contravention of the provisions under Regulation 38(3) of the CIRP Regulations, 2016.

The provisions under Section 33(1)(b) of the Code are reproduced below: -

The Hon'ble Supreme Court in the case of Ramkrishna Forging Ltd (supra), in paragraph 29 referred to the decisions in the cases of Innovative Industries Ltd. v. ICICI Bank Ltd. [2017] 84 taxmann.com 320/ 1 SCC 407 and Swiss Ribbons (P) Ltd. v. Union of India [2019] 101 taxmann.com 389/4 SCC 17 in which it was explained that the Code was specifically introduced by the Parliament for ensuring quick and time bound resolution of insolvency of corporate entities in financial trouble, by first attempting to revive the Corporate Debtor, failure whereof would entail liquidation of the corporate debtor's assets.

As a consequence, following the rejection of the resolution plan under Section 31(2) for non-compliance with statutory requirements, and given the expiry of the extended CIRP period on 03.07.2024, the Tribunal, pursuant to Section 33(1)(b), orders the liquidation of the Corporate Debtor to maximize creditor value and conclude the insolvency process.

IBBI vide its circular number Liq-12011/214/2023-IBBI/840 dated 18.07.2023 in the exercise of its powers conferred under section 34(4)(b) of the Code, had recommended that an IP other than the RP/IRP may be appointed as liquidator in all the cases where liquidator (read liquidation) order is passed henceforth.

In view of the above, it is hereby ordered as follows: -

Accordingly, IA(Plan) No. 26 of 2024 in CP(IB) No. 69 of 2023 stands dismissed and disposed of.

The Registry is also directed to send e-mail copies of the order forth with to all the parties and their Learned Counsel for information and for taking necessary steps. Files be consigned to the record.