RBL Bank Ltd vs Geeta Refinery Pvt. Ltd.

This IA (I.B.C) (Plan) No. 39/MB/2024 is filed by Mr. Hari Kishan Bhoklay, the Applicant/Resolution Professional (RP) on behalf of the Committee of Creditors (CoC) of Geeta Refinery Pvt Ltd, the Corporate Debtor (CD), seeking approval of the Resolution Plan (Plan), under Section 30(6) read with Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC) and Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), submitted by M/s. Varad Ferro-Alloys Private Limited, i.e., Successful Resolution Applicant (SRA) and duly approved by 100% e-voting share of the CoC in its meeting held on 25.02.2024.

This Adjudicating Authority (AA) vide order dated 03.03.2023 in C.P.(IB) No.2/MB/2022, admitted the CD into CIRP filed by RBL bank Ltd. in respect of the CD, under Section 7 of the IBC. The Applicant was appointed as the Interim Resolution Professional and later confirmed as the RP for conducting CIRP of the CD.

Public announcement as per Regulation 6 of the CIRP Regulations in Form A was made on 06.03.2023 in the Free Press Journal and in Navshakti for inviting claims from creditors, workers and employees of the CD under Section 15 of the IBC. Based on the claims received, CoC was constituted on 24.03.2023.

Form G, for Expression of Interest (EoI), was invited on 18.04.2023 in Financial Express; The Economic Times All India Edition; and Lokmat (All Maharashtra) pursuant to the resolution of the 2^nd CoC meeting dated 13.04.2023. The last date for submission of EoI was 03.05.2023. Pursuant to the publication of Form G, the CoC, in its 3^rd meeting dated 11.05.2023 was informed that the Applicant/RP had received 4 EoIs from 4 Prospective Resolution Applicants (PRAs). In the 4^th meeting of the CoC held on 22.05.2023, following detailed deliberations and discussions, it directed the Applicant to republish Form G in widely circulated newspapers in Hindi and Marathi, specifically targeting the States of Madhya Pradesh and Maharashtra. In compliance with the said direction, the Applicant republished Form G on 23.05.2023, in Dainik Bhaskar (Hindi) and Loksatta (Marathi), specifying 17⁰⁶2023 as the last date for submission of EoI by interested parties. Pursuant to the fresh publication of Form G, enquiries were received from six entities; however, none of these entities submitted their EoI. In contrast, in response to the initial publication of Form G, the Applicant received EoIs along with the required documents, including the Earnest Money Deposit (EMD) of ₹15,00,000/-.

Further, upon scrutiny of the EoIs received, the Applicant/RP issued a provisional list of PRAs on 14.06.2023, wherein four 4 PRAs were found to be qualified, as under:

The Applicant/RP received resolution plans from all the above PRAs, along with a Bid Bond Guarantee (BBG) of ₹50,00,000/-. These plans were presented before the CoC during the 6^th meeting held on 07.08.2023. The Applicant submits that the 180-day period CIRP of the CD, commencing from 03.03.2023, ended on 30.08.2023. Pursuant to the CoC decision to seek extension of CIRP period, in its 7^th meeting on 22.08.2023, I.A. No. 4036 of 2023 was allowed by the Bench for a 90-days' extension, on 06.09.2023, for a period until 28.11.2023.

The Applicant/RP submits that the resolution plans of the PRAs were discussed by the CoC in the 8^th meeting held on 25.09.2023 and in the 9^th meeting held on 10.10.2023. During these meetings, the CoC proposed a revision in the offered plan value. However, out of the four PRAs, only one, M/s Varad Ferro Alloy Private Limited, submitted a revised resolution plan, increasing the resolution amount by ₹25 lakh and reducing the payment terms to 180 days, as opposed to the 360 days in the original plan.

The Applicant/RP further submits that RBL Bank Limited raised concerns regarding the inadequate amount offered to unsecured financial creditors in the revised resolution plan. Consequently, a discussion was scheduled with the resolution applicant, and the CoC meeting was adjourned to 23.10.2023. On that date, Ms. Neha Agarwal, Authorised Representative of M/s. Varad Ferro-Alloys Pvt Ltd, attended the meeting. The CoC expressed its concerns and requested a revision of the amount offered, particularly to unsecured financial creditors. Initially reluctant, Ms. Agarwal eventually agreed to increase the resolution amount by ₹3,67,634. The Applicant/RP then presented the resolution plan to the CoC for approval by e-voting.

The Applicant informed the CoC during the 10^th CoC meeting on 21.10.2023 which continued on 23.10.2023, that e-voting on the above resolutions would be open from 27.10.2023 to 17.11.2023.

However, the CoC members requested more time for e-voting due to pending internal approvals and advised filing application for a 60-day CIRP extension, which was granted by the Tribunal on 04.12.2023. E-voting was extended until 19.02.2024, but on 18.01.2024, State Bank of India (having 98.74% voting share) requested another extension. The Applicant/RP, therefore, filed I.A. No. 2709138/01131/2024 for a 60-days' CIRP extension, which was allowed and disposed of vide order dated 05.04.2024 by this Tribunal.

The resolution plan submitted by M/s. Varad Ferro-Alloys Private Limited was placed before the CoC in its 10th CoC meeting and the same was approved by it by 100% voting share, through e-voting on 25.02.2024, thus M/s. Varad Ferro-Alloys Private Limited emerging as the Successful Resolution Applicant (SRA).

The SRA has provided to the Applicant/RP affidavit dated confirming its eligibility under Section 29A of the IBC for the purpose of submitting the resolution plan. The Applicant/RP issued letter of intent dated 27.02.2024 in favour of the SRA and confirmed that the EMD of Rs.15,00,000/- submitted at the time of EoI and BBG of Rs. 50,00,000/- would be treated as part of performance guarantee / security and additional Performance Guarantee of Rs. 85,00,000/- shall be submitted in the form of bank guarantee / demand draft in favour of the CD within 10 days of approval of the resolution plan by the CoC.

For the plan approval, the voting lines were opened during the 10th CoC meeting on 21.10.2023 and remained open till 25.02.2024. At the end of the e-voting, the Resolution Plan was approved by the CoC with 100% voting share. The Applicant/RP has undertaken that he has complied with all the requirements under Section 30(2)(a) to (f) of the IBC and Regulations 38(1)(a), 38(1A), 38(2)(a) to (c) and 38(3) of the CIRP Regulations. The RP has also provided compliance certificate in "FORM H" as mandated under Regulation 39(4) of the CIRP Regulations in seeking approval of the Plan by us. The Applicant/RP has submitted that no application under Sections 43, 45, 47, 49, 50 or 66 of the IBC is pending.

In order to assess the CD's assets, it was resolved during the 1st CoC meeting held on 31.03.2023 to appoint two Registered Valuers and they were appointed on 18.04.2023. The Fair Value (FV) and Liquidation Value (LV) of the assets of the CD were determined by the Valuers as follows:

The list of the CD's creditors, uploaded on the website of Insolvency and Bankruptcy Board of India (IBBI), based on the claims received by the Applicant is as under:

It is submitted that there are no dues outstanding towards the employees and workmen of the CD and no claims have been received from them. Thus, the SRA does not propose any pay-out to the employees. However, any payment due to the employees of the CD shall be deemed to made immediately from the Effective Date.

The CD was incorporated on 24.08.1998 as a Private Limited Company. The CD was engaged in the business of refining of edible oils - crude soya oil, crude palm oil, crude sunflower oil and washed cotton seed oil. The CIN of the CD is U31410MH1998PTC 116338 and its registered address is UT No. 175, Rammurthi Village, Mantha Road, Jalna, Maharashtra.

M/s. VARAD FERRO-ALLOYS PRIVATE LIMITED [CIN No. CIN U27310MH2017PTC297429] was incorporated on 17.07.2017 as Private Limited Company. It is involved in the business of trading in scrap, TMT bars, wire, and other related commodities on a retail basis. The registered office is at Santosh Hybrid Seeds Co. Pvt. Ltd., Survey No. 137 Part, Jalna Bhokardan Road, Opp. Dhawleshwar Temple, Jalna, Maharashtra- 431203.

The net worth of the SRA is Rs.4.37 Core for the financial year 2020-2021 and Rs.16.04 Core for the financial year 2021-2022, as stated in the Resolution Plan.

The summary of the payments to be made under the Plan dated 23.07.2024 as proposed by the SRA is as follows:

a. CIRP Cost shall be paid at actuals. This amount is estimated to be Rs.5,00,000/-;

b. The resolution applicant proposes to run the business by inducting Rs.2,00,00,000/- (Rupees Two Crores) and out of the current working capital of the company. The net receipts from the successful resolution of the material litigations filed by the company shall also be utilised towards working capital;

c. The Tribunal, by order dated September 2, 2024, directed the Resolution Professional to admit the claim of M/s. ADM Agro Industries Kota & Akola Pvt. Ltd. The claim of INR 78,55,630/- was admitted on September 3, 2024, with a proposed payment of INR 13,355/- (0.17% of the admitted claim) from the contingency fund within 90 days).

It is submitted that the terms of the Plan and its implementation schedule shall be within a period of 180 (One Hundred Eighty Days) days from the date of approval of the Plan by this Bench. It is submitted that the Plan provides for effective implementation as per the timelines set out, which is in compliance with Regulation 38(2)(a) of the CIRP Regulations.

In Section 5 B 'MANDATORY CONTENTS OF THE RESOLUTION PLAN', the SRA has stated the causes for default committed by the CD, and has thus complied with the provisions of Regulation 38(3)(a) of the CIRP Regulations.

As far as the source of funds for the implementation of the Plan is concerned, the SRA has provided the following details of the Resolution Plan:

Fund infusion into the CD has been described in Section 4 of the Plan. The Implementation Schedule is at Clause B under Section 4 of the Plan.

It is submitted that the Plan shall be implemented through the following structure:

As per regulation 38(1), CIRP cost will be paid in priority to any Financial Creditor. - (As approved by Based on information received from the IRP/RP, the CIRP costs incurred are paid from the operations of the Corporate Debtor. In the event of any unpaid CIRP cost, the Resolution Applicant shall make full payment for such total unpaid CIRP cost only. The CIRP cost shall be paid against the GST invoice in the name of the CD received from vendors so that Input Tax Credit of GST amount paid on the said invoices can be availed by the Company in future

The RA proposes to set aside a sum of Rs. 5,00,000/- (Rupees Five Lacs only) for payment of pending CIRP Cost which will be paid upon Resolution Plan becoming effective in terms of Section 30(2)(a) of the Code and Regulation 38(1)(a) of the CIRP Regulations. However, if CIRP cost duly approved by CoC exceeds Rs. 5 Lacs, then any such shortfall amount will be additionally paid by Resolution Applicant. The Resolution Applicant will infuse additional funds (if needed), by way of equity or any other appropriate means, to meet the pending CIRP Costs. If unpaid CIRP cost is less than Rs. 5 Lacs, Resolution Applicant shall pay such lesser amount to meet the CIRP cost. CIRP cost already paid through the revenue of the Business during CIRP, shall not be paid by the Resolution Applicant. Only pending CIRP cost shall be paid by the Resolution Applicant.

As per the Information Memorandum, the total amount of claims admitted relating to Financial Creditors is Rs.2,15,13,03,701/-. The Plan proposes to pay Rs.10,38,98,139 /- in a span of 180 days from the Effective Date as per schedule provided in Section 4 of the Plan. The SRA proposes to make the payment as follows: no payment is to be made within the first 90 days, and a payment of Rs. 7,82,29,422/- will be made between the 91st and 180th days, bringing the total amount to Rs. 7,82,29,422/. On payment of aforesaid dues, all the dues of Financial Creditors including interest, penalty and charges (if any) would be deemed to have been settled/ paid. It would be full and final settlement of dues with no right to claim further. No further liabilities/claims would be payable.

The financial creditor shall release / vacate the charge on all immovable assets of the Corporate Debtor with ROC and CERSAI (if any) as per the schedule of release of assets. They shall issue a No- Due Certificate stating that there are no dues from the CD after the receipt of last instalment payment as proposed.

Against the admitted debt for Unsecured Financial Creditors, the SRA shall make payment of Rs.2,56,38,212/- (Two Crore Fifty-Six Lakh Thirty-Eight Thousand Two Hundred and Twelve Rupees) from the total outlay and towards full and final commitment of the Total Resolution Amount of Rs.12,53,67,634/- (Twelve Crore Fifty-Three Lacs Sixty-Seven Thousand Six Hundred and Thirty-Four Rupees) (Resolution Amount/Financial Plan Amount) which will be paid within 180 days of the receiving approval of the Resolution Plan by the Bench. On approval of the Resolution Plan, the Financial Creditors have to withdraw all the notices of wilful default, if any, including those reported to RBI, if any, and all the credit rating agencies for the CD. The bank account of the Financial Creditors to be treated as Standard Account.

The SRA shall take all the necessary approvals as and when required. At present, as the operations of the company are ongoing, all the approvals and licences are in place. Any other approval from any of the authorities shall be taken as and when needed for effective implementation of the Resolution Plan.

The SRA has undertaken that implementation of the Plan will be managed and controlled by it under the guidance and supervision of a Monitoring Committee (MC) upon approval of the Plan by this Bench. 7.2 The MC shall be formed within 15 days from the Effective Date consisting of the Secured Financial Creditor (one member), SRA and will be chaired by the Applicant/RA for the effective implementation of the Resolution Plan. The remuneration of the Applicant/RA for acting as Chairperson shall be Rs.50,000/- per month and the same shall be borne by the SRA.

It is submitted that the SRA has deposited Rs. 50,00,000/- (Rupees Fifty Lakhs Only) along with the Resolution Plan as BBG. Within 10 days of approval of the Plan by the CoC, the amount deposited along with Expression of Interest (Rs. 15,00,000/-) (Rupees Fifteen Lakhs Only) and BBG of Rs. 50,00,000/- (Rupees Fifty Lakhs Only) shall be converted to Performance Security and the Resolution Applicant had brought additional Rs. 85,00,000/- (Rupees Eighty-Five Lakhs Only) towards Performance Security on 06.03.2024. This was done in compliance with the RFRP.

The SRA has sought various reliefs and concessions based on the clean slate concept laid down by the Hon'ble Supreme Court in various judgements, which are necessary to keep the CD as a going concern; release the CD from any and all liabilities/proceedings, disputes and noncompliance prior to the date of approval of the Plan by us and extended period for renewal or revival of licences for running the business of the CD.

It is submitted that the Applicant/RP has not filed any avoidance transactions during the CIRP of the CD.

The compliance of the Resolution Plan reported by the Applicant/RP is as under:

We have heard the Ld. Counsel for the Applicant/RP and perused the Plan and related documents submitted along with the I.A.

It is submitted by the Applicant/RP that the CoC has considered the feasibility and viability of the Plan and approved the same by 100% of the voting shares of the Financial Creditors. We notice that the Plan is in compliance of Section 30 of the IBC in that it provides for-

a. priority of payment of CIRP cost to the payment of other debts of the CD;

b. payment of debts of the OCs;

c. the management of the affairs of the CD after approval of the Plan; and

d. the implementation and supervision of the Plan.

In K Sashidhar Vs. Indian Overseas Bank and Ors. (Civil Appeal No. 10673/2018), the Hon'ble Supreme Court held that if the CoC approves a resolution plan by the requisite percentage of voting share under section 30(6), it is imperative for the resolution professional to submit the plan to the AA. The AA is then required to satisfy itself that the resolution plan, as approved by the CoC, meets the requirements specified in Section 30(2). The law is now settled that the role of the AA is no more and no less than the above. The role of the AA with respect to a resolution plan is limited to the matters specified in Section 30(2) of the IBC. Further, the AA is not required to interfere with the commercial wisdom of the CoC.

We find that the Plan meets the requirements under Section 30(2) of the IBC and that it is not in violation of provisions of any law for the time being in force.

In the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory Vs. Satish Kumar Gupta and Ors, [Civil Appeal No. 8766-67 of 2019], the Hon’ble Apex Court clearly held that the Adjudicating Authority would not have the power to modify the Resolution Plan which the CoC in their commercial wisdom has approved. The Hon’ble Supreme Court in the matter of Ghanshyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited, [Civil Appeal No. 8129 of 2019] held that on the date of the approval of the resolution plan by the AA, all such claims which are not a part of the resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect of a claim which is not a part of the resolution plan. There is no pending application before us for preferential transaction under Section 43, undervalued transaction under Section 47, fraudulent transaction under Section 49, extortionate credit transaction under Section 50 or fraudulent trading or wrongful trading under Section 66 of the IBC.

In view of the above discussions and the law thus settled, we are of the considered view that the Plan meets the requirements of Section 30(2) of the IBC and Regulations 37, 38, 38(1A), and 39(4) of the CIRP Regulations. The Plan is not in contravention of any of the provisions of Section 29A of the IBC, as undertaken by the SRA, and is in accordance with law. We are satisfied that the Plan has provisions for its effective implementation. In view of factual and legal considerations, we find that the present application deserves to be allowed.

The IA (I.B.C.) (Plan) No. 39 of 2024 in C.P.(IB) 02 of 2023 is allowed and the Resolution Plan submitted by 'M/s. VARAD FERRO-ALLOYS PRIVATE LIMITED' is hereby approved in terms of Section 31(1) of the IBC.