Prashant Jain RP of Diamond Power Infrastructure Ltd vs COC of Diamond Power Infrastructure Ltd

The case is fixed for pronouncement of order. The order is pronounced in open Court vide separate sheet.

[Per: MADAN B. GOSAVI, MEMBER (J)]

This application under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016”) is filed by Mr. Prashant Jain-Resolution Professional of the Corporate Debtor – M/s. Diamond Power Infrastructure Limited for approval of the resolution plan submitted by M/s. GSEC Ltd. in consortium with one Mr. Rakesh Shah.

The Corporate Debtor was admitted in the Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) on 24.08.2018. Mr. R. D. Choudhary was appointed as an IRP on 24.08.2018. The IRP made a public announcement of the CIRP of the Corporate Debtor and called upon its creditors to submit claims with requisite proof. He collated the claim. On 17.09.2018 the IRP formed the CoC consisting of the following financial creditors having voting percentage right as stated below:

During the CIRP of the Corporate Debtor, the Committee of Creditors (in short “COC”) received the resolution plans in pursuance of the publication of Form-G dated 14.08.2019 and 28.02.2019 respectively. The plans were discussed on 13.11.2019 in the 11^th COC meeting wherein the COC rejected both the plans and passed a resolution to liquidate the Corporate Debtor.

The Suspended Management of the Corporate Debtor had filed IA No. 701 of 2019 before this Adjudicating Authority requesting therein to quash and set aside the proceeding and minutes of the meetings of the COC relating to 9^th, 10^th and 11^th COC’s meeting on the ground that they were not served with the notices of those meetings. This Adjudicating Authority vide order dated 22.09.2020 rejected that application. The Suspended Management filed an appeal before the Hon'ble NCLAT. Hon'ble NCLAT vide order dated 08.04.2020 allowed the appeal and quashed the proceedings of 9^th, 10^th , and 11^th COC meetings. Later on, Mr. Prashant Jain was appointed as the RP by replacing Mr. Bhuwan Madan and this Adjudicating Authority vide order dated 04.05.2021 in IA No. 306 of 2021 approved the replacement of the RP.

On 26.03.2018 the C.B.I. has registered an FIR, bearing no. 0292018A0006 against the Managing Director and Joint Managing Director of the Corporate Debtor and also against several public servants under various provisions of the Indian Penal Code and Prevention of Money Laundering Act, 1988 because it was noticed that consortium of eleven Banks were cheated to the tune of Rs. 2654.40 Crores by the Suspended Management of the Corporate Debtor. On the basis of that F.I.R, the Enforcement Directorate ( in short “ED”) registered the case, bearing case no. ECIR/AMZO/03/2018 and attached the assets of the Corporate Debtor and its sister concern. That attachment was confirmed by the Adjudicating Authority under the PMLA-New Delhi Bench in original complaint no. 977 of 2018 vide order dated 01.10.2018. The Resolution Professional preferred an appeal before Hon'ble Appellate Authority under the PMLA and Appellate Tribunal vide order dated 08.06.2019 quashed and set aside the order of attachment of the assets of the Corporate Debtor. Against that order, Enforcement Directorate filed an appeal before the Hon'ble Gujarat High Court. On 02.12.2020, the Hon'ble Gujarat High Court again confirmed the attachment. Against that order, the RP filed Special Leave Petition, bearing no. SLP(C) No.12468 of 2021 before the Hon'ble Supreme Court. The Hon'ble Supreme Court passed interim order directing to maintain status-quo relating to the attachment of the assets of the Corporate Debtor and that proceeding is still pending before the Hon'ble Supreme Court.

On 07.07.2021, the COC held 14^th meeting and passed a resolution to request this Adjudicating Authority to exclude 187 days from the CIRP period because of the pendency of various litigations above and in the same meeting the COC resolved to publish Form-G. Following that the RP published Form-G on 18.08.2021 thereby calling again the resolution plans from the prospective resolution applicants. The last date of submission of the resolution plan was extended upto 10.09.2021.

On 07.11.2021, the CIRP period for 60 days was extended considering the fact that in pursuance to the publication of Form-G, one M/s. GSEC Ltd. has submitted a resolution plan and it was then pending for consideration of the COC. On 04.01.2022, the RP again moved this Adjudicating Authority to exclude 35 days from the CIRP period on the ground that the COC was yet to take a decision on the plan submitted by the resolution applicant. This adjudicating Authority directed the RP to complete the entire process within 14 days. Against that order, the RP filed an appeal before the Hon'ble NCLAT and the Hon'ble NCLAT vide order dated 18.01.2022 in Company Appeal (AT) (Ins) No. 41 of 2022 granted the extension of 35 days as prayed by the RP.

The resolution plan submitted by M/s. GSEC Ltd. was discussed and deliberated by the COC in their 19^th, 20^th, 21^st , and 22^nd meetings, and in 23^rd meeting held on 06.01.2022, the resolution plan submitted by the M/s. GSEC Ltd. in consortium with Mr. Rakesh Shah has been approved by the COC with 89.46% votes. The same plan has been submitted before us for our approval under Section 30(6) of the IBC, 2016. The liquidation value and fair value of the CD is reported at Rs. 364.53 crores and Rs. 587.76 crores respectively.

The resolution applicant-M/s. GSEC Ltd. in consortium with Mr. Rakesh Shah has proposed to pay a sum of Rs. 501.00 Crore against the total admitted claim. The details are as follows: (Rs. in Crores)

In the resolution plan, the resolution applicant claimed various reliefs and concessions relating to the applicable provisions of the Security Exchange Board of India, Mumbai Stock Exchange, and National Stock Exchange without levying any fees, penalties etc. The relief is also claimed relating to the release of attachment by SFIO, CBI, Income Tax Department, Stock Exchanges etc. The relief is also claimed relating to some litigations pending before the Labour Court. Relief is also sought relating to the GST Credit during CIRP and also relating to certain pending investigations.

It is categorically stated in the resolution plan that if the resolution plan is approved by this Adjudicating Authority then COC and resolution applicant will jointly work together to get release the attachment of ED. The resolution applicant will make an application to the Hon'ble Supreme Court requesting therein to allow him to take part in the hearing of SLP(C) 12468 of 2021 obviously subject to the approval of the Hon'ble Supreme Court. It is clearly stated by the resolution applicant that the resolution plan is submitted under the assumption that it will get unobstructed possession of the assets of the Corporate Debtor.

On 22.02.2022 this Adjudicating Authority issued notice to the Suspended Management and the Income Tax Department. In response thereto the Income Tax Department on 02.03.2022 filed its report that the Income Tax Department had certain demands against the Corporate Debtor pending since 2009 till the date. It has to be held that the Income Tax Department, being an Operational Creditor must have submitted its claim to the IRP. Provision is made in the plan for payment of a certain sum of money to the operational creditor.

The resolution plan submitted before us has been examined in view of the provisions of Section 30(2) of the IBC, 2016. The plan amount is more than the liquidation value of the assets of the Corporate Debtor. In the plan, the provision for payment towards CIRP costs, payment towards workmen and employees, and payment towards claim submitted by the Operational Creditor has been made. Thereby, the provision of Section 30(2)(a) has been complied with. It is also seen from the material on record that the State Bank of India, having 8.33% voting share objected to the approval of the resolution plan. The State Bank of India appears to be dissenting Financial Creditor. However, we note that in the plan equal treatment is given in payment of the claim submitted by the State Bank of India though it is a dissenting Financial Creditor. The State Bank of India has not filed any objection before this Adjudication Authority against the approval of the resolution plan. We hold that provisions of Section 30(2)(b) have been complied with.

The mechanism for management and control of the affairs of the Corporate Debtor after approval of the resolution plan has been provided in the resolution plan itself whereby the Monitoring Committee along with the Resolution Professional will look after the management of the Corporate Debtor after approval of the resolution plan and till plan being implemented fully. We hold that thereby provisions of Sections 30(5) and 30(2)(c) have been complied with.

Section 30(2)(d) speaks about the implementation and supervision of the resolution plan whereas Section 30(2)(e) speaks about whether the plan contravenes any provisions of law for the time being in force. The RP has certified that plan does not contravene any provisions of law. We also do not find any condition set out by the resolution applicant in the resolution plan which is against the provisions of law. But one question we have to consider very seriously that the assets of the Corporate Debtor are attached by the ED and that proceeding is still pending before the Hon'ble Supreme Court. It appears to us that the resolution applicant was aware of this fact that assets of the Corporate Debtor are attached by the ED and despite that it has submitted the plan. The statement made in the plan stating that the successful resolution applicant will appear in the SLP pending before the Hon'ble Supreme Court and would show that the attachment is illegal. Be that as it may, that controversy is still pending before the Hon'ble Supreme Court and we have nothing to say about it. Suffice to say that in spite of the fact that litigation relating to assets of the Corporate Debtor is still pending before the Hon'ble Supreme Court, the resolution applicant has submitted the resolution plan of approval being fully aware of this fact. We do not see any reason per se to hold that plan is against provisions of law. We have to consider whether the plan could be implemented because the assets are under the attachment of ED. It is seen from the evidence on record that the resolution applicant is ready to make payment to the extent of Rs. 501.00 Crores that within a maximum period in between six months to sixty months and the COC in their commercial wisdom has approved this plan. If the resolution applicant fails to implement the plan then certainly prejudicially affected person will invoke provisions of Section 33(3) of IBC, 2016 which state that “where the resolution plan approved by the Adjudicating Authority is contravened by concerned Corporate Debtor, any person other than the Corporate Debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clause (i), (ii) and (iii) of Clause (b) of sub-section (1). In short, the resolution applicant has to comply the agreed payment schedule to the various creditors of the Corporate Debtor as stated in the plan. The resolution applicant submitted the resolution plan, being fully aware that assets of the Corporate Debtor are attached by the ED and the proceeding is still pending before the Hon'ble Supreme Court. The resolution applicant is carrying the risk that in case of his failure in implementing the resolution plan, he would face consequences under Section 33(3) and Section 30(4) of the IBC, 2016 including forfeiture of EMD. The plan does not per se contravene any provisions of law as stated above. The plan is in compliance of the provisions stated in Regulations 38 and 39 of IBBI(CIRP) Regulations, 2016.

As far as reliefs and concessions claimed by the resolution applicant, the law has been well settled by the Hon'ble Supreme Court in the case of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited and Ors. reported in MANU/SC/0273/2021 in the following words:

In view of the above, all past claims would stand extinguished. However, as far as various statutory rights vested with the Corporate Debtor in form of various licenses, leases, and others alike matter, we make it clear that the successful resolution applicant has to approach the concerned statutory authority for those concessions and those authorities will consider the same as per their established procedure.

With these directions, we approve the resolution plan submitted by M/s. GSEC in consortium with one Mr. Rakesh Shah and proceed to pass the following orders: