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Judgment
PER: SHRI RATAKONDA MURALI MEMBER (JUDICIAL )
1. FACTUAL MATRIX LEADING TO FILING OF THE PRESENT APPLICATION
The Company Petition bearing CP (IB) No. 249/7/HDB/2018 filed by the Financial Creditor i.e. Power Finance Corporation Limited under Section 7 of the IBC, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against Krishna Godavari Power Utilities Limited/ Corporate Debtor was admitted by this Tribunal on 04.12.2018 and appointed Mr. Sanjay Kumar Dewani, the Applicant herein as Interim Resolution Professional (IRP) who has been later confirmed as Resolution Professional (RP).
After assuming charge of IRP / RP, the Applicant herein managed the affairs of the Corporate Debtor in terms of the applicable provisions of the IBC for which he convened 11 Committee of Creditors (CoC) meetings.
This Interlocutory Application is filed by the Resolution Professional of KRISHNA GODAVARI POWER UTILITIES LIMITED ("Corporate Debtor"), under Section U/s 31(1) of Insolvency & Bankruptcy Code (IBC) 2016, read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons), 2016, seeking directions to approve the resolution plan submitted by the Resolution Applicant viz. Karthik Rukmini Energy Limited ('KREL') which is approved by the members of CoC with 100% voting share in its 11th meeting dated 14.11.2019.
2. AVERMENTS:-
The averments germane to the Application in brief are:-
Pursuant to appointment of Applicant as IRP of the Corporate Debtor vide aforesaid order, Public Announcement dated 07.12.2018 was issued under Section 15 of the Code inviting claims from the creditors of the Corporate Debtor. After collating and verifying the claims received, the IRP constituted a Committee of Creditors ('CoC') of Corporate Debtor, comprising of two Financial Creditors i.e. Asset Reconstruction Company (India) Ltd. (presently having 58.66% of voting share) and Power Finance Corporation Limited (presently having 41.34% of voting share).
In the 1st meeting of the CoC held on 03.01.2019, Applicant was appointed/ confirmed as the Resolution Professional ('RP') of the Corporate Debtor.
In the 2nd CoC meeting convened on 12.02.2019, the Applicant was advised by the CoC to issue Form G (Invitation for Expression of Interest (EoI) and accordingly action was initiated by the Applicant for publication of Form-G in terms of Regulation 36A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 in "Business Standard" (English) and "Andhra Bhoomi" (Telugu) newspapers on 16.02.2019.
The 3rd CoC meeting was convened on 15.03.2019, wherein CoC was apprised by the Applicant about receipt of four Expression of Interests ('EOIs') from various Prospective Resolution Applicants.
The 4th CoC meeting was convened on 24.04.2019, wherein the Applicant apprised the members of the COC that he had received Resolution Plans from three Prospective Resolution Applicants but without Earnest Money Deposit and further apprised the CoC that Resolution Plan submitted without EMD is non-responsive under Clause 1.9.1 of the Request for Resolution Plan Document (RFRP Document). Despite request for deferment of condition of EMD, from all the three Resolution Applicants, the members of CoC declined the request of the Resolution Applicants. The decision of the CoC has been communicated to all the Resolution Applicants by the Applicant vide email dated 26.04.2019.
In the 5th CoC meeting convened on 06.05.2019, in the interest of all the stakeholders, the CoC instructed the Applicant to initiate action for issuing fresh Form-G in newspapers inviting Prospective Resolution Applicants for the resolution of the Corporate Debtor on the same eligibility criteria as approved by the members of the COC in the meeting held on 12.02.2019.
In the 6th CoC meeting convened on 15.07.2019, the Applicant herein apprised the members of CoC about receipt of one new Resolution Plan from Karthik Rukmini Energy Limited, consequent to publication of fresh Form-G on 11.05.2019. The CoC then deliberated on the financial proposal and terms mentioned in the Resolution Plan and CoC was apprised about receipt of Earnest Money Deposit (EMD) dated 30.04.2019, for an amount of Rs.1 Crore in the form of Bank Guarantee from Andhra Bank, Seethammadhara Br, Visakhapatnam, which is stated to have been amended on 29.06.2019 and valid till 30.09.2019.
In the 7th CoC meeting convened on 25.07.2019, the Applicant informed the CoC about the Observation/ Infirmities noticed in the Resolution Plan and advised the Resolution Applicant to again submit fresh Resolution Plan after addressing the observations as discussed in the CoC meeting along with a possible improvement in financial offer.
In the 8th CoC meeting convened on 13.08.2019, Resolution Applicant was requested to re-consider and improve its financial offer and submit the revised/ updated Resolution Plan after addressing all the issues which were not addressed in the Resolution Plan dated 08.08.2019, latest by 16.08.2018.
In the 9th CoC meeting held on 19.08.2019, the Resolution Applicant was again requested to improve the payment offer for creditors in the Resolution Plan, for which, the Resolution Applicant requested for some additional time from the members of the CoC to respond on the same.
In the 10th CoC meeting convened on 27.08.2019, the Applicant apprised the CoC about receipt of revised Resolution Plan from the Resolution Applicant on 21.08.2019 after enhancing the offer, equivalent to Rs. 32.10 crores. Nonetheless, the CoC after deliberation sought some clarification/confirmation on various observations / points on the revised Resolution Plan as submitted by the Resolution Applicant on 21.08.2019. It was also decided to put the Resolution Plan for e-voting as prescribed under Section 30 of the IBC and applicable Regulations thereof.
It is submitted that vide email dated 27.08.2019 the Resolution Applicant provided clarification as sought for. The Resolution Plan was put through e-voting from 11 pm on 27.08.2019 to 11:00 PM on 28.08.2019. On the request of Financial Creditors E-Voting was extended till 29.08.2019. Applicant submits that 41.34% of CoC voted in favour of approval of the Resolution Plan, whereas 58.66% of the members voted against the approval of the Resolution Plan.
In the meantime as CIRP period of the Corporate Debtor i.e. KGPUL was expiring on 31.08.2019 and no Resolution Plan was approved by the CoC, it became incumbent upon the Resolution Professional to file IA 764/2019 under Section 33(1) read with Section 60(5) of IBC, seeking initiation of liquidation of the Corporate Debtor.
Subsequently, IA No. 841/2019 was preferred by the unsuccessful Resolution Applicant informing the Tribunal that the Resolution Applicant is negotiating with a member of CoC for considering the Resolution Plan. This IA was heard on 30.10.2019 and Order was passed by this Tribunal on 30.10.2019, directing the Applicant herein to convene one more meeting of the CoC for the purpose of considering the Resolution Plan submitted by the Resolution Applicant with any revised terms and later listed the matter for consideration on 21.11.2019.
Pursuant to the order dated 30.10.2019, 11th CoC meeting was convened by the Applicant on 14.11.2019 and deliberated upon the revised Resolution Plan. Thereafter, item no B1 (a), B1(b) along with other agendas were put for e-voting from 06:30 PM on 16.11.2019 to 10:00 PM on 18.11.2019. CoC with 100% voting share approved the Resolution Plan submitted by Karthik Rukmini Energy Limited.
It is submitted that the Successful Resolution Applicant i.e. Karthik Rukmini Energy Private Limited has furnished a Performance Bank Guarantee of Rs. 5 Crores in accordance with the requirements of RFRP. Copy of the receipt of Performance Bank Guarantee submitted by the Successful Resolution Applicant is annexed and marked as ANNEXURE A-20.
3. CONTOUR OF THE RESOLUTION PLAN:
The Resolution Plan approved by CoC in favour of Karthik Rukmini Energy Limited ('KREL') in a nutshell is as follows:-
3.1 Financial plan:
The Resolution Applicant propose to fund Rs.32.10 Crores (including interest of Rs.1 Crore on 12 instalments) as detailed below:
The Resolution Applicant propose to pay Rs.13.10 Crores as down payment within 30 days from the date of vesting date towards Financial Creditors, CIRP cost and workmen/employees.
The balance of Rs.18.00 Crores in 12 monthly installments with interest bearing at (10%) per annum on diminishing balances starting from the expiry of 30 days of date of down payment.
The detailed proposal for payment to Financial Creditors and others is as follows:
Rs. in Crores
| S.L. No | Name of the Financial Creditors | Amount Claim | Admitted Claim | Proposed Payment to FCs | Upfront Payment |
|---|---|---|---|---|---|
| 1 | Power Finance Corporation Limited (PFC) | 161.98 | 161.10 | 12.40 | 4.96 |
| 2 | Asset Reconstruction Company India Limited (ARCIL) | 230.71 | 228.63 | 17.60 | 7.04 |
| Sub-total | 392.69 | 389.73 | 30.00 | 12.00 | |
| 3 | Workmen/Employees Claims | 1.16 | 1.00 | 0.10 | 0.10 |
| 4 | Related Party | 3.84 | 3.84 | - | - |
| Sub total | 5.00 | 4.84 | 0.10 | 0.10 | |
| Grand Total | 397.69 | 394.57 | 30.10 | 12.10 | |
| 5 | Resolution Professional Cost | 1.00 | 1.00 | 1.00 | 1.00 |
| 6 | Interest on 12 instalments | - | - | 1.00 | - |
| Total amount proposed | 398.69 | 395.57 | 32.10 | 13.10 |
The allocation of fund of Rs. 32.10 crores (including Rs. 1 crore) towards interest on instalments) for discharge of Financial Creditors and for other existing liability stakeholders / CIRP cost is as under:-
| Sl. No | Type of Creditors / Payment | Rs./ Cr. | Remarks |
|---|---|---|---|
| 1 | Corporate Insolvency Resolution Process (CIRP) cost. | 1.00 | Of this amount of Rs.1 Crore provided towards CIRP cost, if any amount is left unutilized, then such amount shall be available for payment to Financial Creditors If the CIRP cost incurred more than Rs.1 Crore the Resolution applicant will bear the said additional amount. |
| 2 | All Financial Creditors | 30.00 | This amount is towards full and final settlement for all the Financial Creditors whose claims have been admitted. Therefore, the Resolution Applicant's liability is limited to Rs.30 Crores only to Financial Creditors. No other liability whether claimed or not, shall fall on the resolution applicant (KREL). Accordingly, Resolution Applicant is not responsible for any other liability other than the amount of Rs.32.10 Crores offered towards full and final settlement of all admitted claims including operational creditors and also any liability which is arising in future in the name of KGPUL. |
| 3 | Financial creditors (related parties) | 0.00 | No amount proposed |
| 4 | Employees Dues | 0.00 | No amount proposed apart from point No.6 of the table. |
| 5 | Workmen and Employee dues | 0.10 | No amount proposed apart from point No.6 of the table. |
| 6. | Operational Creditors Claims as admitted (excluding workman and employees dues) | 0.00 | To be paid to all the Operational Creditors whose claims are admitted, in proportion to their admitted claim amounts. |
| 7. | Government dues | 0.00 | No amount proposed apart from point No.6 of the table. |
| 8 | Claims by other creditors | 0.00 | No amount proposed apart from point No.6 of the table |
| 9 | Railways dues, power dues, revenue dues | 0.00 | No amount proposed apart from point No.6 of the table |
| 10 | Un accepted claim | 0.00 | No amount proposed apart from point No.6 of the table |
| 11 | Any claims not received | 0.00 | No amount proposed apart from point No.6 of the table |
| 12 | Any other creditors / existing liability / stakeholders / CIRP cost | 0.00 | No amount proposed part from point No.6 of the table |
| 13 | Interest @ 10% per annum as per statement mentioned above. | 1.00 | The interest @10% per annum works out to Rs.0.98 crores (say Rs.1.00 crore) |
| of all-inclusive amount for Financial creditors / and any other existing liability / stakeholders /CIRP cost | 32.10 (Rs. Thirty Two Cr Ten lakhs only) | The total liability of the Resolution applicant towards full and final settlement of all the claims of Financial and Other creditors is restricted to Rs.32.10 Crores only. |
3.4 Source of Fund:
The break-up of source of fund is as under:-
Source of fund Equity Unsecured loan / inter corporate deposit / other loan Bank Borrowing Total Utilization Within 1 month of vesting period 13.10 - 13.10 Towards upfront payment to Financial creditors / Workmen / Employees CIRP cost. Within 12 months of 30 days from vesting date 18.00 - - 18.00 Towards payment of balance amount with interest of 10% per annum on diminishing balances due to Financial Creditors in 12 monthly instalments as full and final settlement of their dues. Interest 1.00 1.00 Interest @10% per annum Within 12 months of vesting period 20.00 - 30.00 50.00 Towards refurbishment cost of plant to restart operation. Within 18 months of vesting period 24.00 - 36.00 60.00 Towards refurbishment cost of plant to restart operation. Within Two months from the date of CoD - 15.00 - 15.00 Working Capital Margin Money After Two months from the date of CoD - - 45.00 45.00 Working Capital funding 76.10 15.00 111.00 202.10 A special purpose vehicle will be incorporated which will subscribe to the capital of KGPUL. Fund will be infused by KREL / SPV through contribution to Equity and borrowings. 3.5 Resolution amount brought in Schedule:
| Period of payment | Amount | Remarks |
|---|---|---|
| Within 1 month of vesting date | 12.00 | Upfront payment to Financial creditors |
| Within 1 month of vesting date | 1.00 | If CIRP cost is not incurred fully, the balance amount will be utilized for payment to Financial Creditors. |
| Within 1 month of vesting date | 0.10 | Amount for payment to Employees/ Workmen |
| 12 monthly installments commencing from the expiry of 30 days from down payment date | 18.00 | For making balance of due to Financial Creditors in installments. |
| Interest @ 10% per annum as per statement mentioned above. | 1.00 | The interest @ 10% per annum on Rs.18 crores calculated on diminishing balance works out to Rs.0.98 Crores (say Rs.1.00 crore). |
| Sub-total (A) | 32.10 | Rupees Thirty Two Crores and Ten Lakhs only. |
| Within 12 months of vesting date | 50.00 | For refurbishment, repairs and capital expenditure to start the plant. |
| Within 18 months of vesting date | 60.00 | For refurbishment, repairs and capital expenditure to start the plant. |
| Within 18 months of Vesting Date | 60.00 | Working capital requirements |
| Sub-total (B) | 170.00 | |
| Grand Total (A+B) | 202.10 | Total Resolution cost including working capital borrowings. |
FINDINGS
We have heard the Counsel for Resolution Professional. This Application is filed under Sections 30 (4) and 31 (1) of Insolvency & Bankruptcy Code, 2016 (herein after referred to as "CODE") for approval of the Resolution Plan submitted by Karthik Rukmini Energy Limited (KREL/"Resolution Applicant").
The Learned Counsel for Applicant stated that, two Registered Valuers were appointed on 15.01.2019 to determine the fair value and liquidation value of the Corporate Debtor. The Fair value was fixed at Rs. 44.62 crores and the Liquidation value at Rs. 29.11 crores. In all, the Applicant conducted 11 CoC meetings. After granting extension of 90 days beyond 180 days, the CIRP ended on 31.08.2019.
The Resolution Plan submitted by Karthik Rukmini Energy Limited (KREL) was presented before the CoC for its voting at the (10^{\text{th}}) CoC meeting dated 27.08.2019 but was not approved by CoC as it failed to meet the minimum requirement of approval of (66%) of members of CoC as prescribed under Section 30 (4) of IBC, 2016. As CIRP was coming to an end on 31.08.2019 and no resolution plan was approved by the CoC, the Resolution Professional preferred an Application under Section 33 (1) R/w Section 60 (5) of the Code seeking an order for liquidating the Corporate Debtor Company. Meanwhile, the unsuccessful Resolution Applicant (KREL) moved an Application before this Tribunal, inter-alia seeking to declare the Applicant as Successful Resolution Applicant and not to pass liquidation order in respect of Corporate Debtor. This Tribunal directed the Resolution Professional vide order dated 30.10.2019 to convene one more CoC meeting for the purpose of considering the Resolution Plan submitted by KREL with any revised terms and report back the decision taken by the CoC by 21.11.2019. The Resolution Plan with revised terms submitted by KREL on 08.11.2019 was approved by CoC with 100% voting share in its 11th meeting held on 14.11.2019. The minutes of the 11th meeting of the COC held on 14.11.2019 is annexed and marked as Annexure A-17. The list of Financial Creditors of the Corporate Debtor and their distribution of voting share is as under:-
| Sl. No. | Name of Creditor | Voting Share (%) | Voting for Resolution Plan (Voted for / Dissented / Abstained) |
|---|---|---|---|
| 1. | Asset Reconstruction Company (India) Limited (ARCIL) | 58.66 | Voted for Resolution Plan |
| 2. | Power Finance Corporation Limited (PFC) | 41.34 | Voted for Resolution Plan |
| Total | 100.00 |
The amounts provided for the stakeholders under the Resolution Plan are as under:-
| Sl. No. | Category of Stakeholder | Sub-Category of Stakeholder | Amount Claimed (Rs. In lakhs) | Amount Admitted (Rs. In lakhs) | Amount Provided under the Plan# (Rs. In lakhs) | Amount Provided to the Amount Claimed (%) |
|---|---|---|---|---|---|---|
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
| 1 | Secured Financial Creditors | (a) Creditors not having a right to vote under sub- section (2) of section 21 | NA | NA | NIL | NIL |
| (b) Other than (a) above: (i) who did not vote in favour of the resolution | NA | NA | NIL | NIL |
| Plan (ii) who voted in favour of the resolution plan | 39269.66 | 38974.58 | 3100.00 | 7.89% | ||
| Total[(a) + (b)] | 39269.66 | 38974.58 | 3100.00 | 7.89% | ||
| 2 | Unsecured Financial Creditors | (a) Creditors not having a right to vote under sub-section (2) of section 21 | NA | NA | NIL | NIL |
| (b) Other than (a) above: (i) who did not vote in favour of the resolution Plan (ii) who voted in favour of the resolution plan | NA | NA | NIL | NIL | ||
| Total[(a) + (b)] | NA | NA | NIL | NIL | ||
| 3 | Operational Creditors | (a) Related Party of Corporate Debtor | NA | NA | NIL | NIL |
| (b) Other than (a) above: | ||||||
| (i) Government | 21.04 | 21.04 | NIL | NIL | ||
| (ii) Workmen | NA | NA | NIL | NIL | ||
| (iii) Employees | 116.02 | 99.84 | 0.10 | 8.62% | ||
| (iv) Other Operational Creditors | 6034.12 | 123.95 | NIL | NIL | ||
| Total[(a) + (b)] | 6171.18 | 244.83 | NIL | NIL | ||
| 4 | Other debts and dues | NA | NA | NIL | NIL | |
| Grand Total | 45440.84 | 39219.41 | 3100.00 | |||
Implementation schedule:
| Particulars | Time from vesting date (i.e., date of receipt of final approved order of NCLT) |
| Upfront cash payment (Down payment) Rs.12.00 Crores to Financial Creditors | Within one month |
| Payment for Insolvency Resolution Process Cost of Rs.1.00 Crores | Within one month |
| Payment for Workmen / Employees of Rs.0.10 Crores | Within one month |
| Balance payment of Rs.18.00 Crores to Financial Creditors. | 12 monthly installments with 10% interest per annum on diminishing balances of dues starting from the |
ans
| expiry of 30 days of date of down payment. | |
| Interest @ 10% per annum. (A statement showing interest calculation on diminishing balance is enclosed) | An amount of Rs.1.00 crore is provided towards interest on diminishing balance of Rs.18 crores. The interest for each month shall be paid along with the instalments. |
| Further payment for refurbishment, repairs of the plant (Rs.110.00 Crores) further infusion for loans from Banks / Financial Institutions. (minimum amount) | Within 12 - 18 months from date of receipt of final approved order of NCLT |
| Additional fund infusion for Working Capital as Unsecured Loan Rs.15.00 Crores (minimum amount) | After 12 months from the date of vesting date. |
| Start of operation of Power Plant | On or before March 2021. |
| Initial Working capital borrowing Rs.45.00 Crores (minimum amount) | After 12 to 18 months from the date of vesting date. |
The Resolution Professional would contend that the interests of existing shareholders were altered by the Resolution Plan as under:-
| Sl. No | Category of Share holder | No. of shares held before CIRP | No. of shares held after the CIRP | Voting share (%) held before CIRP | Voting share (%) held after CIRP |
|---|---|---|---|---|---|
| 1 | Equity | 7,66,30,000 | NIL | 100% | Nil |
| 2 | Preference | Nil | Nil | Nil | Nil |
We perused the Performance Bank Guarantee of Rs. 5 Crores obtained from Andhra Bank SCF Branch furnished by the Successful Resolution Applicant i.e. Karthik Rukmini Energy Limited in accordance with the requirements of RFRP, copy of which is annexed and marked as ANNEXURE A-20.
The Resolution Professional filed Form-H, which is annexed and marked as Annexure-A-19 and further 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 )CIRP Regulations( and does not contravene any of the provisions of the law for the time being in force.
The Resolution Applicant / Karthik Rukmini Energy Limited has submitted an affidavit in terms of section 30 )1( of the Code confirming its eligibility under section 29A of the Code to submit resolution plan. The contents of the said affidavit are in order.
The implementation of the plan until the final payment shall be jointly supervised by the Monitoring Committee comprising of one representative nominated by ARCIL, one representative nominated by PFC, the Resolution Professional and one representative nominated by the Resolution Applicant.
The Resolution Plan has been approved by the CoC in accordance with the provisions of the Code and the CIRP Regulations made thereunder. The Resolution Plan has been approved by (100%) of voting share of financial creditors after considering its feasibility and viability and other requirements specified by the CIRP Regulations. Further the Learned Counsel for the Applicant stated that the Resolution Plan takes care of the interest of the stakeholders concerned which includes Financial Creditors, Operational Creditors as well as workmen and employees of Corporate Debtor and a provision is made for payment of CIRP costs. The bid amount is above the Liquidation Value. The Learned Counsel for Applicant further stated that the Resolution Applicant sought certain exemptions/or reliefs in the Resolution Plan which are essentially required for effective implementation of the Resolution Plan. In this connection, we are of the view that these exemptions can be granted in view of Insolvency & Bankruptcy Code (Amendment) Act 2019 which came into effect from 06.08.2019. As per the amendment of Section 31 (1), the Resolution Plan is binding on the central Government, any State Government or any Local Authority to whom a debt in respect of the payment of due arising under any law for time being in force such as authorities to whom statutory dues are owed. So, the exemptions sought in the Resolution Plan are subject to the provisions of Section 31 (1) of the Code as amended wherever applicable.
ORDER
As a sequel to above, the, Resolution plan DATED 08.11.2019 submitted by KARTHIK RUKMINI ENERGY LIMITED ("Resolution Applicant") which is approved by members of CoC having 100% voting share stands approved as per Section 31 (1) of the Code. In other words we are satisfied with the Resolution Plan as approved by Committee of Creditors under Section 30 (4) of the Code and it meets the requirement as referred to in Section 30 (2) of IBC, 2016. Accordingly, the Resolution Plan stands approved and the same is binding on 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, such as authorities to whom statutory dues are owed, Guarantors and stakeholders involved in the Resolution Plan in terms of Section 31 (1) of the Code.
The moratorium order passed under Section 14 shall cease to have effect from today.
The Resolution Professional shall forward all records relating to the conduct of the Corporate Insolvency Resolution Process and the Resolution Plan to the Board to be recorded on its database.
The Resolution Applicant shall obtain necessary approval required under any law for the time being in force within a period of one year from the date of approval of the Resolution Plan or within such period as provided for in such law.
The Registry is directed to communicate this order to the Registrar of Companies, Hyderabad for updating the master data and to IBBI.
In terms of above, IA 1172/2019 filed by Resolution Professional under Section 30 (6) and 31(1) of IBC, for approval of Resolution Plan submitted by KARTHIK RUKMINI ENERGY LIMITED stands disposed of.