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Judgment
Per: Balraj Joshi, Member (Technical)
This Interlocutory Application i.e., IA (IBC)(Plan)/2/GB/2024 has been filed by Sandeep Khaitan("Resolution Professional/RP"), who is the appointed Resolution Professional of P.L Industries Private Limited("Corporate Applicant/CA"), under Section 30(6) read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016("Code"). In CP (IB) No. 32/GB/2022, this Tribunal vide order dated 12.01.2024 admitted the above Petition and initiated Corporate Insolvency Resolution Process ("CIRP") against the Corporate Applicant. The Resolution Plan dated 15.07.2024 (as amended on 16.09.2024) submitted by Mr. Arup Kumar Sarma (the Successful Resolution Applicant, "SRA") has been approved by the Committee of Creditors ("CoC") through e-voting held after the 9th CoC meeting, securing "100% voting share". The Applicant through the present Application prays for the following reliefs to-
a. Allow the present Application and approve the CoC approved resolution plan dated 15.07.2024 (as amended on 16.09.2024) submitted by Mr. Arup Kumar Sarma;
b. Direct that the Resolution plan so approved be binding on the Corporate Debtor, its employees, members, shareholders, creditors, guarantors and other stake holders;
c. Issue appropriate direction for implementation of the Resolution Plan;
d. Pending hearing and final disposal of this Application and till the Resolution Plan is approved or rejected by this Hon'ble Adjudicating Authority and for such further time as this Hon'ble Adjudicating Authority may specify, this Hon'ble Adjudicating Authority be pleased to pass appropriate orders/directions such as but not limited to:
i. Allowing the Applicant to manage the affairs of the CD; ii. Allowing the CoC of the CD to function with the same rights and obligations as were available to the CoC during the CIRP period under the Code and other applicable laws; iii. That restrictions imposed upon the suspended board of directors of the CD shall remain in force.
e. Pass any other or further order/order(s) as may be deemed fit and proper in the facts and circumstances of the present matter.
The relevant submissions of the Applicant made vide this Application is extracted hereunder:
2.1In CP(IB)/32/GB/2022, the CA was admitted into CIRP on 12.01.2024 and this Tribunal vide Order dated 12.01.2024 and in light of further events, this present Application is being filed by the RP in terms of Section 30(6) read with Section 60(5) of the Code. By virtue of the order dated 12.01.2024, Mr. Ujwal Kumar Kalita was appointed as Interim Resolution Professional ("IRP"), who, as mandated under the Code, issued a public announcement in FORM A on 17.01.2024, thereby inviting the submission of claims from creditors in accordance with the provisions of the Code. FORM A was published on the website of the Insolvency and Bankruptcy Board of India and also two newspapers in Meghalaya being "The Rupang" and "The Meghalaya Guardian". A copy of FORM A as published on 17.01.2024 is annexed as Annexure A-6 to the Application.
2.2Thereafter, the CoC was constituted on 07.02.2024 and the first meeting of the CoC was held on 13.02.2024. The CoC consisted of only one Financial Creditor with voting rights, i.e. Canara Bank. Pursuant thereto this Tribunal vide its Order dated 07.03.2024 replaced the IRP and appointed the Applicant herein as the Resolution Professional. 2.3 Upon the Applicant's appointment, the Applicant issued an Invitation for Expression of Interest ("EOI") in Form G on 27.04.2024, which was published in two widely circulated new papers in Meghalaya being "The Rupang", "The Meghalaya Guardian" as well as two widely circulated newspapers in Assam being "The Times of India" and "D. Barta". True and correct copy of FORM G published on 27.04.2024 in The Rupang, The Meghalaya Guardian, The Times of India and D. Barta is annexed to the Application as Annexure A-8. 2.4 After publishing the EOI, the Applicant received interest from the following parties, i.e. Prospective Resolution Applicants ("PRA").
i.Mr. Rakesh Nahta ii. Mahalaxmi Agro Impex Pvt. Ltd.; and iii. Mr. Arup Kumar Sarma
2.5The approved Request for Resolution Plan & Evaluation Matrix along with the Information Memorandum was circulated to the PRAs on 12.06.2024 and the last date for submission of the Resolution Plan was 15.07.2024. All the aforementioned PRA submitted their resolution plans before the last date of submission of plans, being 15.07.2024. Mr. Rakesh Nahta, submitted his plan on 12.07.2024; Mahalaxmi Agro Impex Pvt. Ltd. submitted its plan on 15.07.2024; and the SRA submitted his plan on 15.07.2024. 2.6 The said plans were opened during the (7^{\text{th}}) CoC meeting held on 03.07.2024 whereafter the Applicant carried out the necessary code compliance checks to ensure that the plans met the required legal and procedural standards. Following this thorough review, a comprehensive compliance report was prepared and circulated to the PRAs and the Committee of Creditors (COC) on 30.07.2024. Subsequently, the defects in the Resolution plans were corrected and the revised plans were submitted by the PRAs on or before 05.08.2024, which were found to be compliant with the necessary requirements.
2.7In furtherance, on 07.08.2024, the Applicant prepared and circulated a detailed summary and comparison of the three resolution plans to the members of the CoC. Additionally, the Applicant drafted a Process Note, which was shared with the voting members of the CoC via email on 08.08.2024, for their consideration and approval. The Process Note was duly approved on 17.08.2024. Following this, negotiations with the PRAs were conducted during the 8th CoC meeting on 21.08.2024, where efforts were made to secure the best financial offer. Notably, after the 8th CoC meeting, one of the PRAs -Mahalaxmi Agro Impex Pvt. Ltd. - chose to withdraw from the process and informed the Applicant about the same via their email dated 28.08.2024.
2.8Moving forward, during the 9th CoC meeting held on 11.09.2024, the remaining PRAs were informed of the updated CIRP costs and were given a final opportunity to submit their best "no regret" financial offer by 17.09.2024 after provisioning for the updated CIRP Cost. After this deadline, the plans were scheduled for a vote. Additionally, the feasibility and viability of the resolution plans were evaluated by the CoC during this meeting, as documented in the minutes under the heading "Voting Item No.B-3". The Applicant received final revised plans from the remaining two PRAs and then proceeded to review them and issued Eligibility & Compliance Certificates on 18.09.2024.
2.9The Resolution Plan dated 15.07.2024 (as amended on 16.09.2024) submitted by Mr. Arup Kumar Sarma/SRA has been approved by the Committee of Creditors of the Corporate Debtor vide the e-voting held pursuant to the 9th CoC meeting by 100% of voting share. A copy of the CoC approved Resolution Plan is attached to the Application as Annexure A-1. The minutes of the 9th CoC Meeting dated 11.09.2024 are annexed to the Application as Annexure A-2. Copy of e-voting result and copy of Form H are annexed as Annexure A-3 and Annexure A-4 respectively.
2.10However, it is to be noticed that the initial completion date for the CIRP was 10.07.2024. For this reason, the Applicant sought a 90-day extension and an exclusion of 9 days, as detailed and for the reasons set out in the Application filed by the Applicant bearing no IA(IBC)/135/GB/2024. This Tribunal vide its order dated 11.07.2024 allowed the abovementioned application and the CIRP expiry date stood at 18.10.2024.
Heard the Counsel for the Applicant and perused the material available on record along with the Resolution Plan approved by the CoC ("CoC Approved Resolution Plan").
It is seen that the Applicant has collated claims received by him and accordingly a list of creditors has been prepared, which was updated from time to time. The final list of creditors was published on 17.05.2024. It would be helpful to publish a summary of claims filed, and amounts admitted by the Applicant and the same is reproduced below:
| Sl. No. | Category of Stakeholder | Amount Claimed (In INR) | Amount Admitted (In INR) |
|---|---|---|---|
| 1. | Secured Financial Creditors (other than financial creditors belonging to any class of creditors) | 1,46,88,217.19 | 1,46,88,217 |
| 2. | Operational Creditors (Government Dues) | 21,73,217 | 2,51,849 |
| 3. | Operational Creditors (other than Workmen and Employees and Government Dues) | 4,19,90,970.75 | 4,15,72,672.75 |
| Grand Total | 5,88,52,404.94 | 5,65,12,738.94 | |
Against the forestated claims, the amounts provided under the Resolution Plan is as under:
| Sl. No. | Category of Stakeholder | Amount Admitted (In INR) | Amount Provided under the Plan (In INR) | Percentage of the Amount provided under the Plan | Remarks |
|---|---|---|---|---|---|
| 1. | Secured Financial Creditors (other than financial creditors belonging to any class of creditors) | 1,46,88,217 | 39,00,000/- | 26.55% | |
| 2. | Operational Creditors (Government Dues) | 2,51,849 | 38,777/- | 15.40% | Towards full settlement of EPFO dues |
| 3. | Operational Creditors (other than Workmen and Employees and Government Dues) | 4,15,72,672.75 | 3,61,223/- | 0.86% | Additionally, if any payments are to be made to the ESIC department, the same will be made from the proceeds payable to the Operational creditors |
| Total | 43,00,000/- | - | |||
The financial proposal as mentioned in resolution plan which indicates the payments to be made under the resolution plan by the Resolution Applicant is summarised in the table below, as extracted from the Petition:
SUMMARY OF THE FINANCIAL PROPOSAL
| Payment within | Item of payment | Amount (Rs.) |
|---|---|---|
| Within 90 days (Upfront) | CIRP Expenses | 35,00,000 |
| OC / Statutory Claims | 361,223 | |
| Other Creditors i.e. EPFO Department | 38,777 | |
| Workmen & Staff claims | NIL | |
| Upfront payment of FC | NIL | |
| Payment to secured FC | 39,00,000 | |
| Total | 78,00,000 |
Should the CIRP costs be lower than Rs. 35 lacs the balance amount will be offered to the secured financial creditors as a part of payments against their claim.
CIRP and Compliances
The Application submits that in terms of the provisions of Section 25(2)(h) of the Code read with Regulation 36A(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulations, 2016, invitations in Form 'G' for Expression of Interest("EoI") from potential resolution applicant was issued on 27.04.2024 in Meghalaya and Assam, with the newspapers being "The Rupang", "The Meghalaya Guardian" in Meghalaya, and "The Times of India" and "D.Barta", in Assam, wherein the last date of receiving EoI was 15.07.2024. The notices were also published on the website of the Insolvency and Bankruptcy Board of India ("IBBI").
The Applicant received interest from three Prospective Resolution Applicants ("PRA") and the approved Request for Resolution Plan & Evaluation Matrix along with the Information Memorandum was circulated to the PRAs on 12.06.2024 and the last date for submission of the resolution plan was 15.07.2024. As per regulation 35(2) of the CIRP Regulations, after receipt of the Resolution Plan, the RP informed the fair value and liquidation value of the Corporate Debtor to the CoC.
Evaluation and Voting
Two PRAs finally submitted the Resolution Plans viz. Mr. Rakesh Nahta and Mr. Arup Kumar Sarma as Mahalaxmi Agro Impex Pvt. Ltd. - chose to withdraw from the process. The plans were opened during the (7^{\text{th}}) CoC Meeting held on 03.07.2024 whereafter the Applicant carried out the necessary code compliance checks to ensure that the plans met the required legal and procedural standards. Following this thorough review, a comprehensive compliance report was prepared and circulated to the PRAs and the Committee of Creditors (COC) on 30.07.2024
After receiving the final revised plans from the PRAs, the Applicant reviewed them and issued the Eligibility & Compliance Certificates on 18.09.2024. A copy of the Eligibility & Compliance Certificate dated 18.09.2024 is annexed to the Application as Annexure A-9. During the (9^{\text{th}}) CoC Meeting dated 11.09.2024, the remaining PRAs were apprised of the last opportunity to file their best "no regret" financial offer by 17.09.2024. After this deadline, both the plans were put to vote by the CoC and the plan submitted by Mr. Arup Kumar Sarma("SRA") dated 15.07.2024(as amended on 16.09.2024) was approved with (100%) voting share on 27.09.2024.
It is pertinent to note that vide order of this Tribunal dated 11.07.2024 in IA(IBC)/135/GB/2024, the CIRP expiry dated stood at 18.10.2024 and the present application for the approval of the resolution plan was filed before the expiry of the CIRP period.
Pursuant to the approval of the Resolution Plan, the Applicant has issued the Letter of Intent to the SRA on 30.09.2024 which was accepted by the SRA on 30.09.2024. Further, as per the RFRP, the SRA was also required to submit a performance guarantee of an amount equal to 30% of the total resolution plan value, which has been duly complied by the SRA. The SRA has on 02.10.2024 transferred the entire amount of performance guarantee to the CD. We also note that the Applicant has thereafter converted the performance guarantee into a Fixed Deposit.
Compliance of the approved Resolution Plan with various provisions of the Code
The compliance of the Resolution Plan is set out in the Compliance Certificate/Form H which has been filed by the Applicant as required under Regulation 39(4) of the IBBI(Insolvency Resolution Process for Corporate Persons) Regulations, 2016("CIRP Regulations"). The Applicant, for sake of convenience, has submitted details of various compliances as envisaged within the Code and the CIRP Regulations which a Resolution Plan should adhere to, which is reproduced hereunder:
| Section of the Code/Regulation | Requirement with respect to Resolution Plan | Clause of Resolution Plan | Compliance(Yes/No) |
|---|---|---|---|
| 25(2)(b) | Whether the Resolution Applicant meets the criteria approved by the CoC having regard to the complexity and scale of operations of business of the CD? | The Applicant meets the eligibility criteria set out by the Member of the CoC. | Yes |
| 29A | Whether the Resolution Applicant | Submitted along with the | Yes |
| is eligible to submit the resolution plan as per the final list of Resolution Profession or Order if any, of the Adjudicating Authority? | Resolution Plan as Annexure B. | ||
| 30(1) | Whether the Resolution Applicant has submitted an affidavit stating that it is eligible? | Submitted along with EOI as Annexure C(Undertaking) | Yes |
| 30(2) | Whether the Resolution Plan: a) Provides for the payment of insolvency resolution process costs? b) Provides for the payment to the operational creditors? c) Provides for the management of the affairs of the corporate debtor? d) Provides for the implementation | a) Section VII, Point 1 b) Section VII, Point 2 c) Section IX, Point 2(a) d) Section IX, Point 2(b) | a) Yes b) Yes c) Yes d) Yes e) Yes f) Yes |
| and supervision of the resolution plan? e) Does not contravene any of the provisions of the law for the time being in force? f) Conforms to such other requirements as may be specified by the Board | |||
| 30(4) | Whether the Resolution Plan: a) Is feasible and viable, according to the CoC? b) Has been approved by the CoC with 66% voting share? | a) Section VIII b) Approved in the 9th CoC Meeting with 100%. | Yes |
| 31(1) | Whether the Resolution Plan has provisions for its effective | Part IX of the Plan. | Yes |
| implementation plan, according to the CoC? | |||
| 35A | Where the resolution professional made a determination if the corporate debtor has been subjected to any transaction of the nature covered under sections 43, 45, 50 or 66, before the one hundred and fifteenth day of the insolvency commencement date under intimation to the Board? | Final Transaction Report received on September, 10, 2024. After proper consideration by the RP, he is in the process of filing the avoidance application. | Yes |
| 38(1) | The amount payable under the resolution plan: a) To the operational creditors shall be paid in priority over financial creditors; b) To the financial creditors, who have a right to vote under sub-section(2) of Section 21 and did | a) Section X b) Section X | a) Yes b) Yes |
| not vote in favour of the resolution plan, shall be paid in priority over the financial creditors who voted in favour of the plan. | |||
| 38(1A) | Whether the resolution plan included a statement as to how it has dealt with interests of all stakeholders? | Section X(Summary of financial proposal) | Yes |
| 38(1B) | Whether the resolution plan includes a statement giving the details regarding if the Resolution Applicant or any of its related parties failed to implement or contribute to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past? | Section XI, Serial No.3 | Yes |
| 38(2) | Whether the Resolution Plan provides: a) the term of the plan and its implementation schedule? b) For the management and control of the business of the corporate debtor during its term? c) adequate means for supervising its implementation? d) Provides for the manner in which proceedings in respect of avoidance transaction, if any, under Chapter III or fraudulent or wrongful trading under Chapter IV of part II of the Code, will be pursued after the | a) Section IX(1) b) Section IX(2)(a) c) Section IX(2)(b) d) Section XI(1) | a) Yes b) Yes c) Yes d) Yes |
| approval of the resolution plan and the manner in which the proceeds, if any, from such proceedings shall be distributed | |||
| 38(3) | Whether the Resolution Plan demonstrates that: a) It addresses the cause of default? b) It is feasible and viable? c) It has provisions for its effective implementation? d) It has provisions for approvals required and the timeline for the same? e) The resolution applicant has the capability to implement the Resolution Plan? | a) Section IV, Point 2 b) Section VIII c) Section IX(2)(b) d) Section IX(1) e) Section III | a) Yes b) Yes c) Yes d) Yes e) Yes |
| 39(2) | Whether the RP has filed applications in respect of transactions observed, found or determined by him? | The RP is in the process of filing the same. | Yes |
| 39(3) | The Committee shall- a) Evaluate the resolution plans received under sub-regulation(2) as per evaluation matrix; b) Record its deliberations on the feasibility and viability of each resolution plan; and; c) Vote on all such resolution plans simultaneously. | a) The EM was prepared and considered for all plans. b) During the 9th CoC meeting, the feasibility and viability was deliberated by all CoC members. c) All plans were simultaneously put to vote. | a) Yes b) Yes c) Yes |
| 39(4) | Provide the details of performances security received, as referred to in sub-regulation(4A) of regulation 36B. | PBG submitted as on October 2, 2024 and FD made on October 3, 2024 | Yes |
Further, it is also clarified that the source of funds is set out in Section XII of the Resolution Plan. To this effect, it is seen that that the Resolution Plan provides for the payment of Rs. 78 Lakh with an additional Rs. 25 Lakh expected to be allocated for repair, maintenance, and restarting the CD's operations. Funding will be provided by the SRA, with support from friends and family. Additionally, the liquidation value of the CD is Rs. 46 Lakh, however, the Resolution Plan approved by the CoC proposed to pay a sum of Rs 78 Lakh as the resolution value.
We find that the Resolution Plan filed by Mr. Arup Kumar Sarma has been approved by the CoC with (100%) voting share. As per the CoC, the plan meets the requirement of being viable and feasible for revival of the Corporate Debtor. By and large, all the compliances have been done by the Resolution Professional and the Resolution Applicant for making the plan effective after approval by this Bench.
On perusal of the documents on record and the replies to the clarifications sought by us, we are satisfied that the Resolution Plan is in accordance with sections 30 and 31 of the IBC and also complies with regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
As far as the question of granting time to comply with the statutory obligations or seeking approvals from authorities is concerned, the Resolution Applicant is directed to do so within one year from the date of this order, as prescribed under section 31(4) of the Code.
We have perused the reliefs, as given in Section XIII at pages 55- of the Resolution Plan. We have also gone through the waivers and concessions as sought and as provided in the Resolution Plan. It is evident that some of the reliefs, waivers and concessions sought by the Resolution Applicant come within the ambit of the I&B Code and the Companies Act 2013, while many others fall under the power and jurisdiction of different government authorities/departments. This Adjudicating Authority has the power to grant reliefs, waivers and concessions only concerning the reliefs, waivers and concessions that are directly with the I&B Code and the Companies Act (within the powers of the NCLT). The reliefs, waivers and concessions that pertain to other governmental authorities/departments may be dealt with by the respective competent authorities/forums/offices, Government or Semi-Government of the State or Central Government concerning the respective reliefs, waivers and concession, whenever sought for. The competent authorities including the Appellate authorities may consider granting such reliefs, waivers and concessions keeping in view the spirit of the I&B Code, 2016 and the Companies Act, 2013.
It is trite law and fairly well-settled that the Resolution Plan must be consistent with the extant law. The Resolution Applicant shall make necessary applications to the concerned regulatory or statutory authorities for the renewal of business permits and supply of essential services, if required, and all necessary forms along with filing fees etc. and such authority shall also consider the same keeping in mind the objectives of the Code, which is essentially the resolution of the insolvency of the Corporate Debtor.
It is pertinent to refer to Section 31 of the Code and the law laid down by the Hon'ble Supreme Court in Ghanshyam Mishra and Sons Pvt Ltd v Edelweiss Asset Reconstruction Company Ltd.(2021 SCC OnLine SC 313) wherein the Hon'ble Supreme Court has held that once a resolution plan is duly approved by the Adjudicating Authority under subsection (1) of section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Govt, any State Govt or any local authority, guarantors and other stakeholders.
Reliance can also be placed on the recent judgement of the Hon'ble High Court of Rajasthan in the matter of EMC v State of Rajasthan, wherein it has been, inter-alia held that:
"Law is well-settled that with the finalization of insolvency resolution plan and the approval thereof by the NCLT, all dues of creditors, Corporate, Statutory and others stand extinguished and no demand can be raised for the period prior to the specified date".
On the date of approval of 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 Hon'ble Supreme Court also held that all the dues including the statutory dues owed to the Central Govt, any State Govt or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under section 31 could be continued.
As far as the specific concessions, reliefs and waivers are concerned, the SRA is granted liberty to file an application for the same and it would be dealt accordingly by this Tribunal in light of existing precedent and judicial discretion.
With the above-mentioned observations, findings and judicial precedents, IA (IBC)(Plan)/2/GB/2024 is APPROVED and disposed of.
The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.
Certified Copy of this order may be issued, if applied for, upon compliance of all requisite formalities.
File be consigned to records.