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Judgment
Per: Rajeswara Rao Vittanala, Member (J)
I.A.No.349/2019 in C.P.(IB)No.69/BB/2018 is filed Shri B. Parameshwara Udpa ('Applicant/Resolution Professional') U/s. 30(6) of the IBC, 2016 R/w Regulation 39(4) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, by inter alia seeking to approve the final Resolution Plan dated 08.07.2019 submitted by M/s. Bhadrashree Steel and Power Ltd in the interest of justice and equity.
Brief facts of the case, which are relevant to the issue in question, as mentioned in the Application, are as follows:
C.P. (IB)No.69/BB/2018 is filed by M/s. Shantha Projects Limited (Corporate Applicant) U/s.10 of the IBC, 2016, R/w Rule 7 of the I&B(AAA) Rules, 2016, was admitted by an order dated 10.10.2018, by initiating CIRP, appointing Shri B. Parameshwara Udpa, as Interim Resolution Professional, imposing moratorium etc. Subsequently, the Committee of Creditors of the Corporate Debtor, in their first meeting held on 07.11.2018 confirmed the appointment of Shri B. Parameshwara Udpa as the Resolution Professional.
Subsequently, the Tribunal, vide order dated 05th April 2019 extended CIRP of the Corporate Debtor by further 90 days beyond 180 days starting from 10th April 2019 to 09th July, 2019 upon an application filed by RP under Section 12(2) R/w Section 60(5) of the Code.
The RP, in pursuant to the provisions of Section 25(2)(h) of the Code, invited Expression of Interest (EOI) from potential Resolution Applicants for the purpose of submission of resolution plans for the Corporate Debtor. The advertisement for inviting EOI was published on 20.01.2019, calling upon the potential resolution applicants to submit EOIs, in accordance provisions of the Code on or before 23.03.2019. The Applicant has placed before the CoC, (SBI) the Resolution Plan submitted by M/s. Bhadrashree Steel and Power Ltd. and the CoC has informed the Applicant that the same has been forwarded with recommendation to their corporate office for placing before the competent authority and higher officials for finalization of the Resolution Plan.
In view of the same and the finalisation by the CoC (SBI), it was resolved by the CoC on 03.07.2019 that suitable measures be taken and necessary application be preferred to the Adjudicating Authority to exclude the time period of 12 days in procuring the copy of the Admission Order by the Applicant from the total 270 days provided for the completion of the CIRP. The Resolution Applicant M/s. Bhadrashree Steel and Power Ltd., has submitted Resolution Plan, dated 22.03.2019 for Rs.12.00 Crores. After much negotiations, the Resolution Applicant revised plan on 08.07.2019 for Rs.14.30 Crores in addition to the CIRP cost to the extent of 25,00,000/-. The said Resolution Plan, along with Resolution Professional report, the queries raised with Resolution Applicant, reply received from the Resolution Applicant and Audited Balance Sheet as on 31.03.2018 of BS&PL. Directors details and clarity about payment of CIRP cost, list of group of companies and surplus available in support of the sources of funds and the capability of Resolution Applicant, were placed before the CoC along with a certificate as required under Regulation 39(2) of I&B BoI (IRPCP) 2016. Also the Affidavit under taking submitted by Sri Mukesh Goel Director of M/s. Bhadrashree Steel and Power Ltd.
It is stated that the average liquidation value is Rs.18.81 Crores. SBI, the sole members of the COC, in the meeting held on 20.07.2019, informed that earlier the mortgaged properties were brought for auction 9 times under provisions SARFASI Act 2002 and the last of such auctions was conducted 25.07.2018 with Reserve Price of Rs.16.49 Crores. All such auctions had failed for want of bidders. Hence it was resolved to accept the present Resolution Plan.
Details of claims received, admitted, rejected and amount provided under the plan:
| Sl No | Claimant | Amt. Claimed | Admitted Amount | No. of claims rejected | Amount of claims rejected | Amount provided under the plan |
|---|---|---|---|---|---|---|
| 1 | State Bank of India | 6857 | 6857 | NA | NA | 1430 |
| (Secured Financial Creditors) | ||||||
| 2 | Un-secured Operational Creditors (Nos. 4) | 488 | 187 | 1 | 301 (279+22) (Full 279 partial 22) | Nil |
| Total | 7345 | 7044 | 1 | 301 | 1430 |
The resolution Plan was placed before the Committee of Creditors (10th COC) in its meeting held on 20.07.2019 and thus it was resolved that the Resolution Plan is feasible and viable and was approved with 100% voting rights. Therefore,, after much deliberations, taking into account the combined position of the 10th meeting of CoC resolved on 20.07.2019 to approve the Resolution Plan dated 08.07.2019 and further resolved and directed the Resolution Professional to place the before the Adjudicating Authority.
Heard Ms. Varsha Hittinhalli, learned Counsel for the Applicant/Resolution Professional along with Shri B. Parameshwara Udpa, learned Resolution Professional. We have carefully perused the pleadings of party and extant provisions of the Code.
Ms. Varsha Hittinhalli, learned Counsel for the Applicant/Resolution Professional, while reiterating various averments made in the Application, has further submitted that the Resolution Plan, as approved by the CoC satisfy all requisite conditions as per the provisions of the Code and rules made thereunder and the same is approved with requisite majority and also filed Compliance Certificate in Form-H, Under Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016, and thus urged the Tribunal to approve the Resolution Plan.
In order to approve a Resolution Plan U/s. 31(1) of the Code, Resolution Professional should examine each Resolution Plan should confirm the following conditions as per Section 30(2) of the Code:
provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor;
provides for the payment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under Section 53;
provides for all management of the affairs of the corporate debtor after approval of the resolution plan;
the implementation and supervision of the resolution plan;
does not contravene any of the provisions of the law for the time being in force;
conforms to such other requirements as may be specified by the Board.
In compliance with the above requirements, the Applicant/ Resolution Professional has filed Compliance Certificate in Form-H, Under Regulation 39(4) of the IBBI (Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016:
The details of the CIRP are as under:
| Sl. No. | Particulars | Description |
|---|---|---|
| 1 | Name of the CD | M/s. Shantha Projects Limited |
| 2 | Date of Initiation of CIRP | 10.10.2018/22.10.2018 |
| 3 | Date of appointment of IRP | 10.10.2018/22.10.2018 |
| 4 | Date of Publication of Public Announcement | 24.10.2018 |
| 5 | Date of Constitution of CoC | 07.11.2018 |
| 6 | Date of First Meeting of CoC | 07.11.2018 |
| 7 | Date of Appointment of RP | 03.12.2018 |
| 8 | Date of Appointment of Registered Valuers | 05.12.2018 |
| 9 | Date of Issue of Invitation for EoI | 20.01.2019 |
| 10 | Date of Final List of Eligible Prospective Resolution Applicants | 28.02.2019 |
| 11 | Date of Invitation of Resolution Plan | 20.02.2019 |
| 12 | Last Date of Submission of Resolution Plan | 23.03.2019 |
| 13 | Date of Approval of Resolution Plan by CoC | 20.07.2019 and also the letter dated 23.09.2019 for amendments of payments to be made under the Resolution Plan dated 08.07.2019 which was approved by the CoC on 23.09.2019. |
| 14 | Date of Filing of Resolution Plan with Adjudicating Authority | 22.07.2019 |
| 15 | Date of Expiry of 180 days of CIRP | 09.04.2019 |
| 16 | Date of Order extending the period of CIRP | 05.04.2019 |
| 17 | Date of Expiry of Extended Period of CIRP | 09.07.2019/23.07.2019 |
| 18 | Fair Value | Rs.32.59 Crores |
| 19 | Liquidation value | Rs.18.81 Crores |
| 20 | Number of Meetings of CoC held | 10 |
The Resolution Plan dated 08.07.2019 received from Resolution Applicant M/s. Bhadrashree Steel and Power Ltd. (BSPL) and approved by Committee of Creditors (CoC) of State Bank of India on 20.07.2019 and also the letter dated 23.09.2019 for amendments of payments to be made under the Resolution Plan dated 08.07.2019 which was approved by the CoC on 23.09.2019.
The Resolution Professional in his Compliance Certificate (Form H) has declared/certified as under :
The said Resolution Plan complies with all the provisions of the IBC, 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. ii. The Resolution Applicant M/s. Bhadrashree Steel and Power Ltd. (BSPL) has submitted an affidavit pursuant to 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. iii. The said 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. iv. The voting was held in the meeting of the CoC on 20.07.2019 and 23.09.2019 where all the members of the CoC were present.
The list of financial creditors of the Corporate Debtor being members of the CoC and distributed of voting share among them is as under:
| Sl. No. | Name of Creditor | Voting Share (%) | Voting for Resolution Plan (Voted for/ Dissented/Abstained |
|---|---|---|---|
| 1 | State Bank of India | 100% | 100% |
The Resolution Plan includes a statement under Regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interest of all stakeholders in compliance with the Code and Regulations made there under.
The amount provided for the stakeholders under the Resolution Plan is an under:
| Sl No. | Category of Stakeholder* | Amount Claimed | Amount Admitted | Amount Provided under the Plan# | Amount provided to the Amount Claimed (%) |
|---|---|---|---|---|---|
| 1 | Dissenting Secured Financial Creditors | N/A | N/A | N/A | N/A |
| 2 | Other Secured Financial Creditors | 6857 | 6857 | 1420 | 21% |
| 3 | Dissenting Unsecured Financial Creditors | N/A | N/A | N/A | N/A |
| 4 | Other Unsecured Financial Creditors | N/A | N/A | N/A | N/A |
| 4 | Operational Creditors | 488 | 187 | 25 | 14% |
| Government | NIL | NIL | NIL | NIL | |
| Workmen | NIL | NIL | NIL | NIL | |
| Employees | NIL | NIL | NIL | NIL | |
| --- | |||||
| 6 | Other Debts and Dues | NIL | NIL | NIL | NIL |
| Total | 7345 | 7044 | 1445 | ||
*if there are sub-categories in a category, please add rows for each sub-category. #Amount provided over time under the Resolution Plan and includes estimated value of non-cash components. It is not NPV.
The interest of existing shareholders have been altered by the Resolution Plan as under:
| Sl No. | Category of Shareholder | 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 | 19,50,000/- | 20,00,000/- | 100% | 100% |
| 2 | Preference | NIL | NIL | NA | NA |
The compliance of the Resolution Plan is as under:
| Section of the Code Regulation No. | Requirement with respect to Resolution Plan | Clause of Resolution Plan | Compliance (Yes/No) |
|---|---|---|---|
| 25(2)(h) | Whether the Resolution Applicant meets the criteria approved by the CoC having regard to the complexity and scale of operation of business of the CD? | 5.1 | Yes |
| Section 29A | Whether the Resolution Applicant is eligible to submit resolution plan as per final list of Resolution Professional or Order, if any, of the Adjudicating Authority? | 4.3 | Yes |
| Section 30(1) | Whether the Resolution Applicant has submitted an affidavit stating that it is eligible? | 4.3 | Yes |
| Section 30(2) | Whether the Resolution Plan: (a) provides for the payment of insolvency resolution process costs? (b) provides for the payment of the debts of operational creditors? (c) provides for the management of the affairs of the Corporate Debtor? (d) provides for the implementation and supervision of the resolution plan? (e) contravenes any of the provisions of the law for the time being in force? | 12.6 12.6(3) 19.4 23&24 | Yes/Partially To the extent of Rs.25,00,000/- No. Yes No |
| Section 30 (4) | Whether the Resolution Plan (a) is feasible and viable, according to the CoC? (b) has been approved by the CoC with 66% voting share? | 5 100% (20.07.2019) | YES YES |
| Section 31(1) | Whether the Resolution Plan has provisions for its effective implementation plan, according to the CoC? | 23&24 | Yes |
| Regulation 35A | Where the resolution professional made a determination if the Corporate Debtor has been subjected to any transaction of the nature | No (such transaction found) |
| covered under Sections 43, 45, 50 or 66, before the one hundred and fifteenth day of the insolvency commencement date, under intimation to the Board? | |||
| Regulation 38(1) | Whether the Resolution Plan identifies specific sources of funds that will be used to pay the – (a) insolvency resolution process costs? (b) liquidation value due to operational creditors? (c) liquidation value due to dissenting financial creditors? | YES No No | |
| Regulation 38(1A) | Whether the resolution plan includes a statement as to how it has dealt with the interest of all stakeholders? | YES | |
| Regulations 38(2) | Whether the Resolution Plan provides: (a) the terms of the plan and its implementation schedule? (b) for the management and control of the business of the Corporate Debtor during its term? (c) adequate means for supervising its implementation? | 24 18.1 | YES YES YES |
| 38 (3) | Whether the resolution plan demonstrate that – (a) it addresses the cause of default? (b) it is feasible and viable? (c) it has provisions for its effective implementation? (d) it has provisions of approvals required and the timelines for the same? (e) the resolution applicant has the capability to implement the resolution plan? | 4 4 23 15.3 22 | YES YES YES YES YES |
| 39 (2) | Whether the RP has filed application in respect of transactions observed, found or determined by him? | No such transactions found & informed to CoC |
The above facts and circumstances established that the Resolution Plan dated 23rd September 2019 for M/s. Shantha Projects Limited, submitted M/s. Bhadrashree Steel and Power Limited, Resolution Applicant confirm all the requisite conditions so as to approve it under Section 31(1) of Code. The Resolution Plan is approved by the CoC with 100% in accordance with law. Therefore, we are of the considered opinion that the said Resolution Plan is a fit to be approved under Section 31(1) of the IBC, 2016. The extended period of time for CIRP, all together expires on 09.07.2019, and the instant Application for approval of Resolution Plan was filed on 22nd July, 2019, and thus there is small time gap of time. Therefore, the Resolution Professional has filed 324 of 2019 by seeking exclusion of 12 days in getting the copy of order of admission. The RP is justified seeking exclusion of 12 days' time and this CIRP in any case is not exceeding final time as stipulated by statute. Therefore, we are inclined to condone the delay in the interest of justice.
In the result, by exercising the powers conferred on this Adjudicating Authority, U/s.31(1) IBC, 2016, C.P. (IB)No.69/BB/2018 & I.A.No.349/2019 are disposed of with the following directions:
(1) The Resolution Plan dated 23rd September, 2019 submitted by M/s. Bhadrashree Steel and Power Limited (Resolution Applicant) as approved by the Committee of Creditor at 10th meeting held on 20th July, 2019, which was finally approved by COC in its meeting held on 23.09.2019, with 100% is hereby approved by declaring that the Resolution Plan will be binding on the Corporate Applicant and its employees, members, creditors, guarantors, and other stakeholders involved in the resolution plan.
(2) The moratorium imposed vide order dated 10.10.2018 passed in the CP shall cease to have affect from the date of communication of the order.
The Resolution Professional is directed to handover the management control all the assets, documents/records in physical and/or digital form on an as is where is basis to the Resolution Applicant immediately, and the Resolution Professional will ceased to be resolution professional.
The Resolution Professional shall forward all records relating to the conduct of the CIRP and the resolution plan to the Board to be recorded on its database.
The Resolution Applicant shall pursuant to the Resolution Plan approved under sub-section (1) obtain the necessary approval required under any law for the time being in force within a period of the one year from the date of approval of the Resolution Plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later;
The Resolution Applicant is at liberty to file any Miscellaneous Application seeking for clarification, if any, in the implementation of the terms and conditions to the Resolution Plan.
I.A.No.324/2019 in C.P.(IB)No.69/BB/2018 is allowed by excluding 12 days from statutory period of CIRP, as prayed for.