Oriental Bank of Commerce vs Mangal Iron Pvt Ltd

Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Bench by an order dated 19.07.2018 under section 7 of the Insolvency and Bankruptcy Code 2016 (hereinafter referred to as ‘the Code’) (Admission Order) and Mr. Anuj Bajpai was appointed as Interim Resolution Professional. The COC in its 1^st meeting held on 16.07.2018 appointed (the present Applicant) as the Resolution Professional (RP). The IRP published a public announcement on 27.07.2018 inviting claims from the creditors of the Corporate Debtor.

The status of claims of Financial Creditors, Operational Creditors and Employees & Workmen and class creditors as existed on the date of filing the present application is as follows:

Thereafter, Resolution Professional upon verification of the same, constituted the CoC. Pursuant to the public announcement RP received one Expression of Interest from the Prospective Resolution Applicant (PRA).

The Applicant in compliance of the provisions of the Code and Rules framed there under conducted the CIRP of the Corporate Debtor.

Radha Industries Pvt. Ltd.

Mohit Steel Industries Pvt. Ltd.

A. The Resolution Applicant M/s Mohit Steel Industries Pvt. Ltd. was incorporated under the provisions of the Companies Act, 1956 in the year 1998. At the time of incorporation the Resolution Applicant was involved in the business of manufacturing Mild Steel Ingots. Since the year 2015, the Resolution Applicant has also started manufacturing MS-Billets which is much more superior to ingots and is widely accepted in the market. The group turnover of the Resolution Applicant, comprising of M/s Hare Krishna Metalllics Pvt. Ltd., M/s Mandovi Castings Pvt. Ltd. and the Resolution Applicant Company, has increased by 40% year-over-year. The Resolution Applicant in their plan has stated that the situation is likely to improve further in the coming three (3) to four (4) years.

B. It was also submitted by the authorized representative of the Resolution Applicant during the COC meetings that the Resolution Applicant company, previously had taken over M/s Mandovi Castings Pvt. Ltd. from Economic Development Corporation of Goa which was an NPA asset. Within a year, the Resolution Applicant has effectively turned around the output of the Company wherein Mandovi Castings Pvt. Ltd. is now a successfully running entity under the umbrella of the Resolution Applicant’s group of companies.

C. The Corporate Debtor is registered at ROC, Goa on 16.09.1997 as a Non-govt. company. The Company’s authorised share capital is Rs. 16,000,000/- and its paid-up capital is Rs.15,175,000/-. It is involved in manufacturing of MS ingots.

D. The existing shareholders of Corporate debtor will make way for Mohit Steel. As per the Resolution Plan, Mohit Steel will contribute for upfront payment (Rs. 472.55 Lacs) and additional margin contribution (Rs. 300 Lacs) for availing loans towards refurbishment and working capital needs. Thus, the company’s new capital structure will be Rs. 772.55 Lacs as against the existing capital of Rs. 151.75 Lacs.

E. The Resolution Plan proposes a total consideration of Rs. 4.72 Crores for the settlement of claim by the Resolution Applicant.

The actual Corporate Insolvency Resolution Process Cost (hereinafter referred to as ‘CIRP’). CIRP Costs as determined by RP and payable, would be paid in priority to all other dues

a. The funding arrangement is also supported by the financial institution i.e. PNB Goa against letter dated 8^th March 2019 for the full amount of Rs. 472 Lacs. There are no outstanding CIRP cost as on the day of submission of this Resolution Plan.

Section 30(2)(a) of the Code provides for the payment of the CIRP in priority to the payment of other debts of the Corporate Debtor.

The Resolution Plan provided one time upfront settlement amount of Rs.3.90 Crores to OBC being the only secured financial creditor for the Corporate Debtor, within 60 days of the Adjudicating Authority’s approval, approving the Resolution Plan.

The Resolution Plan retains the two unsecured financial creditors namely State Bank of India (SBI) and Bank of Baroda (BOB). An amount of Rs. 36 Las (BOB-Rs. 6 Lacs & SBI-Rs. 30 Lacs) or 0.4% of the admitted claims is provided in the Resolution Plan which will be paid by RA within 60 days of the Adjudicating Authority’s approval, approving the Resolution Plan.

The Resolution plan provided a nominal amount of Rs. 2.13 Lacs, although no claims were raised by the State electricity department. Electricity deposit of Rs. 9.65 lakhs already with the Electricity Department is likely to be forfeited by the Department.

Operational Creditors- Raw material M/s. Hare Krishna Metalliks Pvt. Ltd. supplier of raw material has raised claim of Rs. 41.40 Lacs, for which Rs. 3.48 Lacs has been provided as full and final settlement. The said amount to be paid without interest, within 60 days of Adjudicating Authority’s order, approving the Resolution plan.

There is Income tax liability of Rs. 30 lacs. However, no provisions is made towards any payment to the tax Authority within the Resolution Plan.

As per the audited financial statement of FY-2014, central excise duty is payable by the Corporate Debtor on finished goods of value Rs. 194 Lacs under the statute of Central Excise and custom, 1944. Deposit (assets) worth Rs. 35.30 Lac with Govt. Department assumed to be forfeited and will not be carried forward in company’s accounts.

Resolution applicant has provisioned to fully pay the Employers contribution to EPF amounting to Rs. 3.35 Lacs based on the last audited balance sheet for the year ended 31.03.2014.

No Employee or workmen have filed any claim with the RP. However, an amount of Rs. 1.16 Lacs towards ‘provisions for employee benefits under the head ‘other current liabilities’ has been accepted as resolution cost.

a. The Resolution Plan explicitly states that:

b. Further, as a Margin contribution, for availing bank facilities, the Resolution Applicant shall infuse Rs. 3 crores in the first year of the Company’s operations over and above the upfront payment of Rs 4.72 crores as per the Resolution Plan. Therefore, the Company’s new capital structure will be Rs. 7.72 crores as against the existing capital of Rs. 1.51 crores.

c. All payments of Rs.4.72 Crores shall be paid by Resolution Applicant within 60 days of approval of Resolution Plan by this Adjudicating Authority.

Payment of CIRP cost will be made in priority over Financial Creditor (Regulation 38(1)(a)).

That the Resolution Applicant or any of its related parties has never failed to implement or contributed to the failure of implementation of any other Resolution Plan approved by the Adjudicating Authority at any time in the past. This is in compliance of Regulation 38(1)(b) of the Regulations.

Declaration has been given by the Resolution Applicant that the Resolution Plan has considered the interest of all the stakeholders of the Corporate Debtor, keeping in view the objectives of the Code (Regulation 38(1A)).

Declaration has also been given by the Resolution Applicant that neither the Resolution Applicant nor any of his related party has either failed or contributed to the failure of the implementation of any other approved Resolution Plan.

The Miscellaneous Application No. 1099 of 2019 is allowed. The Resolution Plan submitted by M/s. Mohit Steel Industries Pvt. Ltd. is hereby approved. It shall become effective from this date and shall form part of this order. It shall be binding on the Corporate Debtor, 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 is due, guarantors and other stakeholders involved in the Resolution Plan.

The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the Registrar of Companies (RoC), concerned for information and record. The Resolution Applicant, for effective implementation of the Plan, shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed.

This Bench hereby directs Goa Electricity Department and Public Works Department to reconnect power and continue supply the utilities (water/sanitation) in an uninterrupted manner to the Resolution Applicant. It should grant necessary reliefs. Both the departments shall not insist the Resolution Applicant for payment of minimum demand charges/delayed penalties raised during non-operational period till the date of reconnection.

The Resolution Applicant shall obtain necessary approvals under the law time being in force within a period of one (1) year from the date of receipt of the order approving Resolution Plan.

The Goa Electricity Department shall provide necessary power connection to the Resolution Applicant in required power capacity i.e. 10 MW against the existing connection of 3MW.

It is seen that the Resolution Plan seeks several dispensations, concessions and waivers. Approval of Resolution Plan does not mean automatic waivers. The Resolution Applicant on approval of the Plan may approach those competent authorities/ courts/ legal forms/ office(s) Government or Semi-Government/State or Central Government for appropriate relief’(s) sought in the plan.

The moratorium under Section 14 of the Code shall cease to have effect from this date.

The Applicant and the Monitoring Committee shall supervise the implementation of the Resolution Plan and the Applicant shall file status of its implementation before this Authority from time to time, preferably every quarter.

In terms of the judgement of Hon’ble Supreme Court in the matter of Ghanshyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited, “on the date of approval of the Resolution Plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in, respect to a claim, which is not part of the resolution plan.”

The Applicant shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the IBBI along with copy of this Order for information.

The Applicant shall forthwith send a copy of this Order to the CoC and the Resolution Applicant for necessary compliance.

The Miscellaneous Application No. 1099 of 2019 is accordingly allowed and disposed of.