Resolution Professional, A & I Hospitality Private Limited vs Small Industries Development Bank Of India & Ors.

[Per se: Ms. Manorama Kumari, Member (Judicial)]

The instant application (IA) No. 73 of 2018 in CP(IB)No. 166/2017, is filed by the applicant, the Resolution Professional of Corporate Debtor M/s. A & I Hospitality Private, under Section 30(6) read with 31 of the Insolvency and Bankruptcy Code, 2016 (as amended up to date), read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (as amended), for submission and approval of the Resolution Plan submitted by Respondents No. 2 to 5 in respect of the Corporate Debtor with the following prayers:

For the sake of convenience, it is mentioned herein that:

CP(IB)No. 166/2017 was filed by Deep Constructions Company, the Operational Creditor (Applicant) under section 9 of the Code read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authorities) Rules, 2016 seeking initiation of Corporate Insolvency Resolution Process against A& I Hospitality (hereinafter referred to as "Corporate Debtor") having registered office at "Ashirwad" Complex, Plot No. 334, Ward 12B, Gandhidham – 370 201.

The said CP(IB) No. 166/2017 was admitted on 18.01.2018 by this Adjudicating Authority and proposed appointment of Mrs. Hema Manoj Shah, as "Interim Resolution Professional" (hereinafter referred to as "IRP"). This Tribunal also directed listing of the said matter on 22.01.2018 for the purpose of filing of declaration and Disclosure Statement. Since Mrs. Hema Manoj Shah did not take up the assignment as "Interim Resolution Professional", this Adjudicating Authority appointed the Applicant as "Interim Resolution Professional" vide its order dated 24.01.2018

The Interim Resolution Professional, so appointed, made public announcement as per the provisions of section 15 of the Code in "Times of India", English Newspaper (Rajkot Split Edition) and "Kutch Mitra – Bhuj" having wide circulation at the location of the registered office of the Corporate Debtor on 26.01.2018 and invited claims from creditors till 06.02.2018.

The Interim Resolution Professional, so appointed, appointed two registered valuers in accordance with Regulation 35 to determine the fair value and liquidation value of the Assets of the Corporate Debtor.

The Interim Resolution Professional thereafter constituted the Committee of Creditors (hereinafter referred to 'CoC') on 16.02.2018 and prepared Interim Information Memorandum (IM) on the basis of information collected in relation to the financial position and operations of the Corporate Debtor and provided to the CoC.

It is stated that IRP was confirmed as RP in the first meeting of CoC dated 19.02.2018. The second meeting of CoC was convened on 12.03.2018 and it was decided to invite Expression of Interest (In short Eol) through Paper Advertisement in Form G and as per the minimum criteria and evaluation matrix as approved by the CoC on 12.03.2018. The said details were also uploaded on the website of Sun Resolution Professionals Private Limited. As per the publication dated 15.03.2018 and corrigendum published thereto published on 17.03.2018, the last date for submission of Resolution Plan was fixed as 17.04.2018.

It is stated that in response to invitation for EoIs, two EoIs were received one from Mr. Ramesh Sorathia jointly with Mrs. JayshreeSorathia and second joint application from Mr. Ram Issrani, Harshad D Gandhi and HareshBulchandani. However, before the last date of submission of Resolution Plan i.e. 17.04.2018, only one Resolution Plan was received.

The Resolution Professional convened the third meeting of CoC on 23.04.2018 to discuss the Resolution Plan received as mentioned in Para 4. However, on examination of the Resolution Plan, it was found that though the Resolution Applicant qualified as per minimum criteria so approved by the CoC in its second meeting, the Resolution Plan required several improvements in order to ensure that the Resolution Plan is acceptable to all its stakeholders of the Corporate Debtor. Accordingly, the Resolution Applicant undertook to make the requisite changes and submit the revised Resolution Plan within 10 days. However, the revised Resolution Plan received on 30.04.2018 also suffered from defects that were required to be rectified. The Resolution Applicant was addressed letter dated 01.05.2018 and the revised Resolution Plan received on 12.05.2018 still contained defects.

In the meantime, the Resolution Professional submitted a Status Report dated 07.05.2018 on CIRP to this Adjudicating Authority. In the said Status Report, the RP stated that he has received many claims even after the last date of receipt of the claims and accordingly, Information Memorandum (IM) is updated with the latest claim position. Since there were material changes in the list of claims, the said list of claims was submitted before this Adjudicating Authority as annexure to Status Report on CIRP.

It is stated by the RP that with respect to the claim of the Operational Creditor i.e. Deep Constructions Co., who initiated the CIRP of the Corporate Debtor submitted the claim in Form B dated 08.02.2018 for an amount of Rs. 5,82,37,579/- and for interest at 18% per annum amounting to Rs. 2,04,51,432/- and against that claimed amount, the audited accounts of the Corporate Debtor as at 31.03.2018 showed the amount payable as Rs. 2,55,84,059/-.

It is stated by the RP that another Resolution Plan was received after the last date of submission had passed from Mr. Ram Issrani, Harshad D Gandhi and Haresh Bulchandani, and the same was not considered since it did not meet the criteria as to the last date of submission of the Resolution Plan.

The fourth meeting of CoC was held on 16.05.2018 to consider the Resolution Plan submitted by Mr. Ramesh Sorathia jointly with Mrs. Jayshree Sorathia. However, it was observed that in spite of two opportunities given, the Resolution Plan submitted by Mr. Ramesh Sorathia jointly with Mrs. Jayshree Sorathia contained several defects. Being unable to recommend any Resolution Plan received from Mr. Ramesh Sorathia jointly with Mrs. Jayshree Sorathia and the other from Mr. Ram Issrani, Harshad D Gandhi and Haresh Bulchandani, for consideration before the CoC, the CoC resolved to issue fresh invitation to call EoIs.

It is stated that as per the decision of the CoC in its fourth meeting held on 16.05.2018, public advertisements in Times of India, Kutch Mitra and Gujarat Samachar were made in Form G and was also uploaded on the designated website of IBBI and the website of Insolvency Professional Entity viz. www.sunresolution.in. In response to that invitation, two EOIs and thereafter two Resolution Plans were received before the last date fixed for submission of Resolution Plans i.e. 5 PM 18.06.2018 from (a) Mr. Naresh H Bulchandani jointly with Mr. Harshad D Gandhi and Ms. Sapna Ram Issrani named as Plan -1 and (b) Mr. Ramesh Sorathia jointly with Ms. Jayshree Sorathia named as Plan - 2. Thus, second process of calling EoIs was commenced.

It is stated that being aggrieved for their Resolution Plan not being considered by the CoC in the first process of calling EoIs, Mr. Ramesh Sorathia jointly with Mrs. Jayshree Sorathia filed an Interlocutory Application No. 233 of 2018. However, the same was dismissed by this Adjudicating Authority on 12.10.2018 as withdrawn.

The fifth meeting of CoC was held on 26.06.2018 when Resolution Plan - I and the Resolution Plan - 2 received in the second process of calling EoIs were discussed. It was observed by the CoC that Resolution Plan -2 submitted by Mr. Ramesh Sorathia jointly with Ms. Jayshree Sorathia was better than the Resolution Plan - I submitted by Mr. Naresh H Bulchandani jointly with Mr. Harshad D Gandhi and Ms. Sapna Ram Issrani. The Resolution Applicant of Resolution Plan - I was conveyed by CoC that certain changes will have to be incorporated by them by way of supplying an addendum by 27.06.2018. The Resolution Applicant of Resolution Plan - I sought permission to file a revised Resolution Plan but the same was rejected by the CoC. The next and the sixth meeting of CoC was scheduled to be held on 29.06.2018.

The sixth meeting of CoC was held on 29.06.2018 to approve the Revised Resolution Plan - 2 with Addendum received on 27.06.2018. Accordingly, the Resolution Plan - 2 with Addendum was resolved and approved by the CoC. It is stated by the RP that before the start of the sixth CoC meeting, the RP was handed over a letter dated 29.06.2018 by one of the Resolution Applicants Mr. Naresh H Bulchandani and another Resolution Applicant Ms. Sapna R Issrani proposing improvement in the Resolution Plan submitted by them. However, these letters were replied by the RP vide his letter dated 02.07.2018.

The Resolution Professional, accordingly, submitted application under Section 30(6) read with Section 31 and other relevant provisions of the IBC, 2016 and regulations framed thereunder seeking approval of the Resolution Plan - 2 dated 18.06.2018 along with Addendum dated 29.06.2018 submitted by Mr. Ramesh Sorathia jointly with Ms. Jayshree Sorathia. The said application was numbered as IA 297 of 2018 and listed for hearing on 16.08.2018. On the said date of hearing i.e. on 16.08.2018, this Adjudicating Authority directed the RP to issue a fresh notice to the Suspended Management of the Corporate Debtor and the matter was posted for next hearing on 30.08.2018. However, the matter was further adjourned to 12.10.2018 as the Respondent No. 4 and 5 through their lawyer prayed for some more time. The matter was further adjourned to 15.10.2018. On 15.10.2018, the IA No. 233 of 2018 filed by the Resolution Applicants in the first process of calling EoIs was sought to be withdrawn and a Revised Resolution Plan submitted by all the directors of the Suspended Management was sought for consideration by them by CoC. The matter stood further posted/adjourned to 24.10.2018, 02.11.2018 and finally on 19.11.2018, this Adjudicating Authority directed the RP to place the modified Resolution Plan submitted by the directors of the Suspended Management before CoC for consideration. Accordingly, IA 297 of 2018 stood disposed of.

The seventh meeting of CoC was held on 30.11.2018 to consider the Resolution Plan dated 15.10.2018 submitted jointly by all the directors of the Suspended Management. Since the said Resolution Plan contained some technical defects, the Resolution Applicants assured the CoC of the rectifications and the eighth meeting of CoC was held on 10.12.2018 to consider and approve the Resolution Plan dated 15.10.2018 along with an Addendum dated 30.11.2018 to the Resolution Plan dated 15.10.2018. The said Resolution Plan along with Addendum was approved by the CoC with 100 per cent voting and in view of the aforesaid facts and circumstances of the case, the RP, the applicant preferred this application IA 73 of 2018 before this Adjudicating Authority seeking approval of the Resolution Plan dated 15.10.2018 along with an Addendum dated 30.11.2018 submitted by all the directors of the Suspended Management of the Corporate Debtor, as approved by the CoC in its meeting held on 10.12.2018.

The Resolution Professional has submitted detailed Table showing the compliances of the Resolution Plan with the mandatory requirements under the Code and CIR Regulations. The Table showing the compliances is given hereunder:

The Resolution Professional has annexed with the IA, number of documents to substantiate that Resolution Plan submitted for approval by this Adjudicating Authority complies with all the mandatory requirements of Insolvency and Bankruptcy Code and CIR regulations and the said Plan has also been approved by the CoC in their seventh meeting having 100.00 per cent of voting in favor of the Resolution Plan. The documents annexed with the IA are as under:

The Resolution Plan dated 15.10.2018 and the Addendum dated 30.11.2018

Minutes of the meeting of the CoC held on 10.12.2018 approving the Resolution Plan dated 15.10.2018 and the Addendum dated 30.11.2018.

Affidavit under section 29A of the Code by all the Resolution Applicants affirming that they meet the mandatory criteria of eligibility as Resolution Applicants.

Confidential Report on compliance of the Resolution Plan dated 15.10.2018 along with the Addendum dated 30.11.2018.

Report by the Resolution Professional on the eligibility of the Resolution Applicants under section 29A of the IBC 2016 read with regulations as amended from time to time till date.

Certificate under section 39(2) of the IBBI (IRP for CP) Regulations 2016.

Affidavit dated 20.10.2018 from the earlier Resolution Applicants Mr. Ramesh Sorathia and Ms. Jayshree Sorathia stating that they have no objection to the Resolution Plan and to consider their EMD of Rs. 120 Lakhs towards the new Resolution Plan submitted by the directors of the Suspended Management of the Corporate Debtor.

Agreement dated 22.10.2018 between the Resolution Professional and the Resolution Applicants for implementation of the Resolution Plan dated 15.10.2018 and the Addendum dated 30.11.2018.

Clarification letters dated 22.10.2018 and 25.10.2018 signed by all the Resolution Applicants on various provisions of the Resolution Plan and as to the date of Resolution Plan.

Affidavit dated 26.10.2018 by Mr. Ramesh Naran Sorathia jointly with Ms. Jayshree Sorathia, partners of Deep Constructions Co., the Operational Creditor giving their consent for waiver of their rights to receive their dues in priority to the Financial Creditors.

Undertaking received on 08.12.2018 from the Unsecured Financial Creditors of the Corporate Debtor stating that the amount considered for payment in the Resolution Plan is as per the consent of all the related Unsecured Financial Creditors.

Letter dated 01.12.2018 signed by all the four Resolution Applicants, being the directors of the Suspended Board of Management of the Corporate Debtor withdrawing unconditionally the complaint of theft made by them vide their letter dated 22.10.2018.

Letter dated 01.12.2018 addressed to Mr. P. Venugopal appointing him as Supervisor of the Resolution Plan along with his acceptance and his brief profile.

In between the initiation of CIRP proceedings and the approval of the Resolution Plan, following IAs were filed which are as under:

IA233 of 2018 in CP(IB) No. 166 of 2017

IA 297 of 2018 in CP(IB) No. 166 of 2017

IA 161 of 20198 in IA 73 of 2018 in CP(IB) No. 166 of 2017

All the above IAs have been destined to the dust of records of the Registry as either dismissed or withdrawn.

The present application has been filed for approval of the Resolution Plan under section 30(6) read with section 31(1) of the Code (as amended) read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (as amended) for submission and approval of Resolution Plan submitted by the directors of the Suspended Management of the Corporate Debtor M/s. A & I Hospitality Private Limited. However, their eligibility under Section 29A r/w Section 240A(1) of the IB Code has been looked into and the said facts have been clarified by filing a certificate of registration from the Ministry of Micro, Small & Medium Enterprises dated 26.02.2007 stating the Enterprise type as "Micro", and the same is annexed with the IA.

The Corporate Debtor is an MSME Unit. Therefore, the erstwhile promoters/directors of the Corporate Debtor are made eligible to submit Resolution Plan in respect of the Corporate Debtor by the introduction of Section 240A (Application of the IB Code to Micro, Small and Medium Enterprises enforced w.e.f. 06.06.2018 prescribed therein that in spite of anything to the contrary contained in the IB Code, the provisions of Clause (c) and (h) of Section 29A shall not apply to the Resolution Applicant in respect of Corporate Insolvency Resolution Process of any Micro, Small and Medium Enterprises. As a consequence, the Promoters/Directors are not disqualified from submission of the Resolution Plan of the Corporate Debtor of which they are/were the Promoter/Directors under Section 29A of the IB Code. These Applicants to be considered as eligible as Qualified Resolution Applicants.

IA 73/2019 was listed for clarifications on 18.06.2019 wherein this Adjudicating Authority granted time to the applicant to provide clarifications regarding the eligibility of the Resolution Applicants to file the aforesaid Resolution Plan dated 15.10.2018 and the addendum dated 30.11.2018 being a MSME.

In view of the above, it is submitted by the Resolution Applicants that the Corporate Debtor is a Micro Enterprise and hence, under Section 8 of the Micro Small and Medium Scale Enterprise Act, 2006 (hereinafter referred as "MSME Act"), filing of Memorandum is not mandatory.

To make the provision clear, Section 8 of the MSME Act is reproduced hereunder:

The said position is further cleared by the Ministry of Micro Small and Medium Scale Industries vide clarification dated 14.03.2018 based on the Judgement of Hon'ble Andhra Pradesh High Court in the case of The Indur District Cooperative Marketing Society Ltd. Vs. Microplex (India), Hyderabad and Ors. And Hon'ble Allahabad High Court in the case of Hameed Leather Finishers Vs. Associated Chemicals Industries Pvt. Ltd. stating that the registration under MSME Act, 2006 is not mandatory for the purpose of claiming status of Micro and Small Enterprise. It is further held by the Hon'ble Supreme Court of India in Swiss Ribbons Pvt. Ltd. vs. Union of India and Ors. [Writ Petition (Civil) No. 99 of 2012] while recognizing the importance of adding MSME friendly provisions in the Code, that the court found no fault in the exemption of MSME units under Section 29A of the Code. The Court further perceived the business of an MSME to attract interest from a promoter of an MSME and may not be of interest to other resolution applicants.

Recognizing the importance of MSME sector in the Indian economy and with the aim to enable MSME Units sail smoothly, the amendment inserted Section 240A in the Code which specifically dispenses with the applicability of Section 29A clause (c) and (h) of the Code, in case the Corporate Debtor is an MSME Unit, which relates to such promoters who have become NPA can also bid for their companies. Moreover, any bidder who is otherwise disqualified on the ground that its account has become an NPA can also bid for an MSME Unit. In other words, resolution applicants for MSMEs including the promoters of such MSMEs can now bid, even if they have provided guarantees that have been invoked by the lenders. The said amendment also empowers the Central Government to allow further exemptions or modifications with respect to the MSME Sector, if required, in public interest.

The applicant/the Resolution Professional, deliberating the sequence of events right from calling Eol up to approval of the Resolution Plan by the CoC in its eighth meeting held on 10.12.2018 submitted the Resolution Plan duly approved by the CoC and affirming that he has verified the contents of the Resolution Plan and confirmed that it complies with the requirements envisaged under Regulation 38 of the CIR Regulations as well as Section 30 of the Code, and sought for approval of the Resolution Plan by this Adjudicating Authority.

The Resolution Applicants in pursuance to the directions of this Adjudicating Authority dated 16.08.2018 submitted the Plan relating to the insolvency resolution process of A & I Hospitality Private Limited (Company)/Corporate Debtor under the provisions of Insolvency and Bankruptcy Code, 2016 and the rules and regulations issued thereunder.

On perusal of the records it is found:

- The Resolution Professional has taken into consideration, the interest of all the stakeholders of the Corporate Debtor to the extent possible and to ensure continuity of the business of the Corporate Debtor as a going concern with optimum use of the assets of the Corporate Debtor. - Liquidation value of the Corporate Debtor has been presumed at Rs. 1600.00 Lakh as per details given below:

➤ As per Information Memorandum (IM), the amounts claimed and the amounts admitted are as under:

Amounts shown as payable within 30 days of order of the NCLT will be provided from the income generated from the business operations of the Corporate Debtor and the balances, deficits, if any, will be brought in to the company by equal contributions by all the four Resolution Applicants. The entire amount payable to the Secured Creditor SIDBI will be paid in full within 90 days from the date of order passed by NCLT. The amount payable to the SIDBI will be paid as per the working of the Financial Creditor SIDBI till the payment is made. The deficit, if any, of the amount provided by the Resolution Applicants due to difference in calculations by SIDBI and the Resolution Applicants will also be met out of the earning from the Corporate Debtor or from the additional fund that will be brought in by the Resolution Applicants in equal proportions.

Amounts shown as payable within 90 days of order of the NCLT will be provided from the income generated from the business operations of the Corporate Debtor and the balances, deficits, if any, will be brought in to the Company by equal contributions by all the four Resolution Applicants.

Amounts shown as payable within 150 days of order of the NCLT will be provided from the income generated from the business operations of the Corporate Debtor and the balances, deficits, if any, will be brought in to the Company by equal contributions by all the four Resolution Applicants.

Amounts shown as payable within 210 days of order of the NCLT will be provided from the income generated from the business operations of the Corporate Debtor and the balances, deficits, if any, will be brought in to the Company by equal contributions by all the four Resolution Applicants.

Sources of funding the Resolution Plan:

CIRP cost which is estimated to be Rs. 25,54,163/- as per Addendum to the Resolution Plan, will be paid from the EMD deposit and interest accrued thereon.

The amount due to workers and employees of Corporate Debtor as per claim admitted by RP of Rs. 58,194/- shall be made by the Resolution Applicants on priority basis as per section 53(1) of IBC, 2016. The same shall be payable within 30 days from the Effective Date.

All workers and employees of the Corporate Debtor will cease to be employees of the Corporate Debtor in terms of this Resolution Plan and they will not be entitled to claim any continuity of their employment. However, the Resolution Applicants in their absolute discretion will consider their reemployment in case they are found to be physically and technically competent. In case, the Resolution Applicants so decide to re-employ some of the workmen, their new employment would become effective with new employment letter and from new employment date with new terms and conditions of the employment.

The payment to the Secured Financial Creditors shall be funded/arranged by way of future revenue of Corporate Debtor and Resolution Applicants' own sources. If need be, the Resolution Applicants will avail loan from outsider Financial Institution.

Payment proposed to be made to Secured Financial Creditors as envisaged in this Resolution Plan is guaranteed by the Personal guarantee of the Resolution Applicants Mr. Ramesh Sorathia, Mr. Ram Issrani, Mr. Naresh Bulchandani and Mr. Harshad Gandhi.

All charges of Secured Financial Creditors will be automatically stand modified in terms of this Resolution Plan as envisaged in the Resolution Plan with effect from the Effective Date. The Financial Creditor shall re-execute the requisite documents as per the applicable laws for giving effect to the modification of charges envisaged in the Resolution Plan within 30 days of the Effective Date.

Rs/Lakhs

Simple interest @10.5% from 18.01.2018 to 31.07.2018 is considered. Entire amount paid or payable to the Secured Financial Creditors shall be brought by all the four Resolution Applicants in equal proportion.

Financial Creditors SIDBI shall continue to retain the securities of the assets created in their favor with them till the entire debt of the Financial Creditor is fully paid as per the terms of the Resolution Plan.

With the consent of all the Resolution Applicants, after due reconciliation of the accounts of the Unsecured Financial Creditors, the outstanding Unsecured Loan to remain as deposit in the books of accounts of the Corporate Debtor is mentioned hereunder and the same will be paid to the concerned Loan/Deposit holders only out of the profits of the Corporate Debtor as and when earned:

Further following balance of Unsecured Financial Creditors shall be paid by the Corporate Debtor in the manner as given hereunder:

The total amount of Rs. 44.80 Lakhs is to be paid to both the Unsecured Financial Creditors in four equal installments in the following manner:

For the payment of Rs. 44.80 lakhs to both the Unsecured Financial Creditors, all the four Resolution Applicants shall bring the equal amount on or before due date of payment of each installment.

The remaining amount of Rs. 137.06 lakhs payable to the Unsecured Financial Creditors shall be extinguished as per Extinguishment of Claim (Part L of Chapter IV of this Resolution Plan)

The amount due to the Operational Creditors as per Information Memorandum (other than government and statutory dues) is as detailed below:

The creditors who have not filed their claims but appearing in the books of accounts of the Corporate Debtor as admitted liabilities have been taken into consideration as outstanding dues as per provisional balance sheet.

After reconciliation of books of accounts for amount due to Deep Constructions Co, all the partners amicably settled and came to the conclusion to consider the sum of Rs. 500.00 Lakhs as full and final payment and same will be paid on priority basis as per Table A

Payment to Dipak Renukumar Jogi and Hirandani & Co. shall be made within 30 days from the date of approval of the Resolution Plan.

Payment to Deep Constructions Co. shall be made in four installments as under for pending construction work.

Following terms shall be attached with aforesaid schedule of payment:

Postdated cheques for the amount payable to the Operational Creditor viz. Deep Constructions Co. are provided by all the Resolution Applicants in the name of the Corporate Debtor and the same will be realized as per payment terms decided hereinabove. In the event of failure of Resolution Applicant(s) to make payment as envisaged in this Resolution Plan, consequences as per Section 33(3) of IBC, 2016 shall apply on the defaulting Resolution Applicant(s).

Compliance of Section 30(2)(b) r.w. Regulation 38(1)(b) of IBBI (Insolvency Resolution Process for Corporate Persons), 2016

As per the requirement of Section 30(2)(b) read with regulation 38(1)(b), the liquidation value due to the operational creditors is required to be paid in priority to any financial creditor which shall in any event be made before expiry of 30 days after approval of the Resolution Plan by this Adjudicating Authority.

Further, under the requirement of Regulation 38(1)(c) of IBBI Insolvency Resolution Process for Corporate Persons) Regulations, 2016 the Operational Creditor Deep Constructions Co. waives its right to receive the liquidation value due to Operational Creditor within a period of 30 days to the extent of amount above Rs. 125 Lakhs. Copy of waiver letter received from the Operational Creditor Deep Constructions Co. is duly received and attached with the Resolution Plan as Annexure C.

As per the Information Memorandum, there are no statutory dues outstanding as on the date of commencement of CIRP and the RP has not received any claim from any of the Government Departments.

However, the Corporate Debtor has received letter No. F.No. IV/06-28/CEP/Kutch/2016-17 dated 21.12.2018 issued from the office of the Commissioner of Central Excise and Service Tax, Kutch (Gandhidham) and subsequent summons. However, it appears that no amount of tax is determined and the details are yet to be obtained. The Resolution Applicants provide for Rs. 40.00 Lakhs being the Service Tax principal amount and receipt of demand notice from the said department subject to right of appeal. Any interest, penalty or any other amount on Service Tax shall stand waived off.

Thus, Section 53 of the Code lists the priorities to be given to the beneficiaries, of liquidation value of the assets of the Corporate Debtor. The provisions of Section 53 make it amply clear that Operational Creditors are at the end of the list of beneficiaries as the Secured Financial Creditors have edge over the others.

There will not be any change in the existing shareholding pattern and the paid up capital of the Corporate Debtor. Existing shareholders shall continue to hold the shares held by them without any change. Paid up share capital of the Corporate Debtor shall remain as it is i.e. Rs. 8,00,00,000/- of 80,00,000 Equity Shares of Rs. 10/- each.

The management and control of the Corporate Debtor shall be handed over in the name of the Resolution Applicants who are the existing Directors of the Suspended Board. The Resolution Applicants shall consist and constitute the Board and will look after for proper running and operation of the warehouses of the Corporate Debtor subject to approval of CoC and this Adjudicating Authority. This, the objective of the I&B Code is.

Thus, the preamble of the I&B Code aims to promote resolution over liquidation.

The purpose of resolution is for maximization of value of assets of the ‘Corporate Debtor’ and thereby for all creditors. It is not maximization of value for a ‘stakeholder’ or ‘assets of a stakeholder’ such as creditors and to promote entrepreneurship, availability of credit and balance the interests. The first objective is ‘resolution’. The second objective is ‘maximization of the value of assets of the ‘Corporate Debtor’ and third objective is ‘promoting entrepreneurship, availability of credit and balancing the interests’. This objective of the I&B Code is sacrosanct.

The said objective of the I&B Code is also affirmed by Hon’ble Supreme Court in Arcelor Mittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors wherein the Hon’ble Supreme Court observed that “the Corporate Debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP. If there is resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible.

In the backdrop of the object of the IBC, it is amply clear that the “Resolution is Rule and the Liquidation is an Exception”. Liquidation brings the life of a corporate to an end. It destroys organizational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only if there is any surplus after satisfying the claims of a prior set of stakeholders fully. 'The IB Code', therefore, does not allow liquidation of a corporate debtor' directly. It allows liquidation only on failure of corporate insolvency resolution process'. It rather facilitates and encourages resolution in several ways.

Keeping in view such object behind the enactment of the Code, intention of the Legislature is, that the priority is to be given to the resolution than liquidation in the larger interests of the public, workmen, stakeholders and the other employees of the corporate debtors in the interest of justice and in order to achieve the object of the Code and liquidation of a company can be only as a last resort, wherein, all efforts for brining Resolution Plan were failed or it cannot be found workable in the larger public interest.

On perusal of the records, it is found that the Resolution Plan confirms to the criteria as provided under clauses (a) to (f) in section 30(2) of the Code and the CoC approved the Resolution Plan by 100.00 per cent majority of voting share. The Resolution Plan also confirms to such other requirements as may be specified by the Board.

On perusal of the Resolution Plan, it is found that it meets the requirement of Section 31 r/w Section 30(2) of the Code. Therefore, the present application IA 73 of 2018 is allowed subject to certain observations.

To make the provisions clearer, Section 30 of the IBC is reproduced hereunder:

However, Part K of the Resolution Plan for concessions and relief sought from the Kandla Port Trust and the State Government and extinguishment/settlement and abatement of claims/proceedings cannot be allowed as these are the subject matter of the various Competent Authorities having their own jurisdiction. Hence Resolution Applicants have liberty to approach the different competent authorities as per the requirement.

This Adjudicating Authority would like to make it clear to the public at large that approval of the Resolution Plan by NCLT is not a vaccination for immunity from the proceedings/abatements/settlements pending with the various statutory authorities and the Government Departments. Approval of the Resolution Plan does not mean automatic waiver or abetment of any legal proceedings which are pending by or against the Company/Corporate Debtor as those are the subject matter of the concerned Competent authorities having their proper/own jurisdiction to pass any appropriate order as the case may be. The Resolution Applicants on approval of the Plan may approach those Competent Authorities/Courts/Legal Forums/Offices - Govt. or Semi Govt. / State or Central Govt. for appropriate relief(s) sought for in Part K of the Resolution Plan for concessions and relief sought from the Kandla Port Trust and the State Government(s). You can sail in one boat across the sea. You cannot sail in one boat on seven seas across the globe.

It is further directed that:

We, the Adjudicating Authority, are of the considered opinion and also being satisfied that the Resolution Plan dated 15.10.2018 and the addendum dated 30.11.2018 as approved by the Committee of Creditors (CoC) in their seventh meeting held on 30.11.2018 meets the requirements as referred to under section 30(2) of the Code. Accordingly IA 73 of 2018 is allowed with the above said observations and directions.

Any other IA(s), if pending, also stand(s) infructuous and disposed of in view of the above order.