State Bank of India vs M/s. Kotsons Private Limited

PER: BACHU VENKAT BALARAM DAS, MEMBER (JUDICIAL)

The present application has been filed by Mr. Alok Kaushik, Resolution Professional ("RP") of M/s. Kotsons Private Limited ("Corporate Debtor") under the provisions of Section 30(6) read with Section 31(1) of the Insolvency & Bankruptcy Code, 2016 ("the Code" or "IBC") read with Regulation 39(4) of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations") for approval of the Resolution Plan in respect of M/s. Kotsons Private Limited ("Corporate Debtor") submitted by Respondent/Successful Resolution Applicant ("SRA") namely M/s. Bee Pee Electricals.

The Corporate Debtor was incorporated on 22.04.1978, as a Company Limited by Shares (Non-govt. Company) having CIN: U31101DL1978PTC191934, under the Companies Act, 1956 with the Registrar of Companies, NCT of Delhi and Haryana. The Authorised Share Capital of the Corporate Debtor was 12,00,00,000/- and the Paid-up Share Capital of the Corporate Debtor was Rs. 6,96,72,110/- The Registered Office Address of the Corporate Debtor was at A-208, 2nd Floor, R. G. City Centre, Plot No. 4, D.D.A Community Centre, Motia Khan, Paharganj, New Delhi-110055. The Corporate Debtor was engaged in manufacturing, exporting and repairing and servicing power and distribution transformers.

In terms of Section 13 and Section 15 of the Code, the Applicant/RP has submitted that the public announcement was published in newspapers i.e., Financial Express (English Edition) and Jansatta (Hindi Edition) Delhi, West UP, UK and Rajasthan and Jaipur-Tonk Sabdesh (Hindi and Rajasthan Edition) on 14.06.2023 in Form-A to invite the stakeholders for submission of their claims. In terms of Regulations 6(2)(c) of the CIRP Regulations, 2016, the last date for submission of claim was specified as 27.06.2023.

In response to the public announcement (publication of Form-A) made, the Applicant constituted the Committee of Creditors ("CoC") under Section 21(1) of the Code read with Regulation 13 & 17 of CIRP Regulations. The 1st CoC Meeting was convened on 06.07.2023 wherein the IRP was confirmed as the Resolution Professional (RP) by 100% votes.

The 2nd CoC Meeting was convened on 01.08.2023 wherein the CoC approved the publication of Form-G, Evaluation Matrix, Eligibility Criteria, Request of RFRP and Performance Security for the Resolution Applicant. In terms of Section 29 of the Code and Regulation 36 of the CIRP Regulations, the Applicant prepared and issued Information Memorandum (IM). 3.2. The 3rd CoC Meeting was convened on 22.08.2023 wherein the Applicant informed the members of CoC that on the last date for submissions of EOI, 15 EOI was received from PRAs. 3.3. The 4th CoC Meeting was convened on 22.09.2023 wherein the RP apprised that as per Regulation 36A CIRP Regulations, the Applicant issued the Provisional List of PRAs to the Committee of Creditors and Prospective Resolution Applicant on 29.08.2023 and Applicant also issued the Information Memorandum, Request for Resolution Plan and Evaluation Matrix to the Prospective Resolution Applicants on 03.09.2023. 3.4. The 5th CoC Meeting was convened on 10.10.2023 wherein the RP informed the members of the CoC that a total of 6 Resolution Plans have been received from the Prospective Resolution Applicants in sealed envelopes till the last date of submission of Resolution Plans, i.e. 09.10.2023. The Applicant further apprised that as per Form-G published on 04.08.2023, the last date of receipt of the Resolution Plan was 03.10.2023. However, due to various requests received from PRAs, the last date was extended up to 09.10.2023 with the approval of CoC member in accordance with Section 30(1) read with Regulation 39(1) of the CIRP Regulations.

The 6th CoC Meeting was convened on 06.11.2023. The 7th CoC Meeting was convened on 24.11.2023 wherein the RP informed the members of the CoC that 5 PRA's have submitted their draft Resolution Plans. Further, the Applicant apprised the CoC members that the last date of the CIRP of the Corporate Debtor is 05.12.2023 and the Resolution Plans received by the Applicant in the CIRP of the Corporate Debtor are under active consideration of the members of the CoC. After due deliberation and discussions, the members of the CoC resolved to seek an extension for a period of 90 days from 06.12.2022 to 04.03.2024 and authorized the Applicant herein to file an appropriate application before this Adjudicating Authority.

The 8th CoC Meeting was convened on 11.12.2023 wherein the RP informed the members of the CoC that all the Resolution Plans submitted by the Resolution Applicants as per Section 30(1) of the Code were examined and were in compliance with Section 30(2) of Code read with Regulation 37, 38 and 39 of CIRP Regulations and RFRP. Accordingly, this Adjudicating Authority vide Order dated 14.12.2023 was pleased to grant extension and hence CIRP of the Corporate Debtor was extended by 90 (Ninety) days beyond 05.12.2023 i.e., 180 days.

The 9th CoC Meeting was convened on 04.01.2024. The 10th CoC Meeting was convened on 20.01.2024. The 11th CoC Meeting was convened on 08.02.2024 wherein the Applicant informed the members of the CoC that the Appeal filed by the Suspended Board of Directors of the Corporate Debtor before the Hon'ble Appellate Tribunal bearing Company Appeal (AT) (Insolvency) 869 of 2023 against the Admission Order dated 09.06.2023 passed by this Adjudicating Authority was dismissed as withdrawn vide Order dated 22.01.2024 and as a result, the interim Order for stay on the final decision on resolution plan is now vacated.

The 12th CoC Meeting was convened on 26.02.2024 wherein the Applicant informed the members of the CoC that the previous extension of the CIRP granted by this Adjudicating Authority is coming to an end on 04.03.2024. After due deliberations and discussions, the members of the CoC resolved to seek an extension for 60 days from 05.03.2024 to 03.05.2024 and authorized the Applicant herein to file an appropriate application before this Adjudicating Authority. Accordingly, this Adjudicating Authority vide Order dated 07.03.2024 was pleased to grant an extension and hence CIRP of the Corporate Debtor was extended by 60 (Sixty) days.

The 13th CoC Meeting was convened on 22.03.2024 wherein the Applicant informed the members of the CoC that the Resolution Applicant shall pursue the Preferential, Undervalued, Fraudulent and Extortionate Applications once the Resolution Plan is implemented. It was further decided that recoveries and expenses would be divided in an 80:20 ratios between the CoC and the Successful Resolution Applicant respectively.

The 14th CoC Meeting was convened on 15.04.2024 wherein the Applicant presented the final resolution plans before the CoC, after discussion and deliberation, it was decided to put all Resolution Plans being 5 in number for e-voting. It is further submitted that the voting window was opened on 18.04.2024 wherein, the last date for voting was on 23.04.2024 till 05:00 PM as decided by the members of CoC. The e-voting on the Resolution Plan was conducted from 18.04.2024 at 11:00 A.M. to 10.05.2024 at 05:00 PM wherein the members of CoC were pleased to approve the Resolution Plan submitted by Bee Pee Electricals with 100% votes in favour which is more than requisite threshold of 66%.

The 15^th CoC Meeting was convened on 23.04.2024 wherein the members of the CoC resolved to extend the CIRP period by 30 days beyond the period of 330 days as per provisions of the Code. Accordingly, this Adjudicating Authority vide Order dated 08.05.2024 was pleased to grant extension and hence CIRP of the Corporate Debtor was extended by 30 (Thirty) days.

The RP has submitted that a total of 15 (Fifteen) CoC meetings have been held during the CIRP period which are as follows:

The List of the Financial Creditors of the Corporate Debtor being members of the CoC and distribution of voting share is as under:

In terms of Regulation 27 of CIRP Regulations, the Applicant appointed registered valuers who were entitled to determine the fair and liquidation value of the Corporate Debtor.

As per the Form-H, the fair value and liquidation value of the assets of the Corporate Debtor are as follows:

The Fair Value of the Corporate Debtor is Rs. 60,60,94,335/- and the Liquidation Value of the Corporate Debtor is Rs. 44,64,60,736/-.

The Resolution Applicant has to the extent possible, taken into account the interests of all stakeholders of the Corporate Debtor in the following manner:

RA clarified that he has diversified business forum handled by his family members . All the business are profitable concern . Sufficient funds are available from these business forums if required for supporting the implementation of Resolution Plan.

Based on the information provided by the Resolution Professional, the estimated CIRP Cost amounts to Rs. 0.90 Crs. In compliance to the provisions of Section 30(2)(a) of the IBC, 2016 read with Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Insolvency Resolution Process Cost will be paid in priority to any other class of creditors. The Resolution Applicant proposes the payment of the unpaid CIRP cost amounting to Rs.0.90 Crs in priority to all other debts of the Corporate debtor proposed under this Resolution Plan.

Based on the information made available to the Resolution Applicant, the Corporate Debtor has three Secured Financial Creditor, i.e. State Bank of India, Punjab National Bank & SIDBI. All financial creditors are member of the Committee of Creditors and are unrelated parties.

In compliance to Regulation 38(1)(b) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, if the Financial Creditors representing a minority stake do not consent to the repayments as proposed above, then such dissenting creditors would be eligible for payment in priority to any other payment being made to consenting Creditors. The amount for dissenting creditors shall be paid out of amount proposed for the Financial Creditors under the Resolution Plan which shall not be less than liquidation value available to said dissenting creditor.

Based on the information made available to the Resolution Applicant, the Corporate Debtor has received only 4 claims from statutory authorities.

Since the liquidation value of Corporate Debtor as assessed by Resolution Applicant is not sufficient to settle the dues of Secured Financial Creditors, hence RA is not proposing any amount against the admitted claims of statutory authorities (except EPFO). The EPFO claim as admitted by RP, has been proposed for 100% payment of claim admitted amount under the plan.

The claims received from workmen/employees are from left/existing staff of Corporate Debtor. However, the present staff has been terminated during CIRP as informed by RP. Hence at present there are no workmen/employees on the rolls of Corporate Debtor. Further all the retirement benefits & dues of workmen/employees has been dealt with in this plan.

Resolution Applicant hereby proposes to implement the plan in 15 months times from effective date (Date of approval of resolution plan by Adjudicating Authority).

The amounts provided for the stakeholders under the Resolution Plan are as under:

(Amount in Rs. Cr)

* The amount of Rs. 40,07,415/- allocated towards the employee and workmen dues is inclusive of the amount allocated towards the gratuity dues (over and above the gratuity fund already available). The remaining admitted amount of gratuity shall be paid out of Gratuity fund available with the CD.

The total amount proposed under Resolution Plan is Rs. 52,86,39,545/-. The amount of Rs. 51,83,40,322/- is exclusive of regulatory fee payable to IBBI in compliance with Regulation 31(A)(1) of CIRP Regulations (0.25% of the realizable value to creditors, i.e., Rs. 12,99,223/-) and amount allocated towards the payment of CIRP cost which is Rs. 90,00,000/-.

The Resolution Applicant has prayed for the reliefs as enumerated under the Resolution Plan approved by the CoC. From the Resolution Plan approval date, all inquiries, investigations and proceedings, whether civil or criminal, suits, claims, disputes, interests and damages in connection with the Corporate Debtor or the affairs of the Corporate Debtor, pending or threatened, present or future in relation to any period prior to the plan approval date, or arising on account of implementation of this resolution plan are requested to be stand withdrawn, satisfied and discharged. From the date of approval of the Resolution Plan, the Resolution Applicant has requested to be legally authorised to seek appropriate orders from respective authorities/ courts/tribunals for renewal of licences/withdrawal/dismissal or abatement of the proceeding as the case may be.

The Resolution Plan also provides details of Reliefs and Concessions as already set out in Chapter 4 (14. RELIEFS AND WAIVERS SOUGHT, Page No. 60-67 of the Resolution Plan).

The Resolution Plan also provides details of the Implementation Schedule under Regulation 38(2)(a) of CIRP Regulations, management and control under Regulation 38(2)(b) of CIRP Regulations and under Section 30(2)(c) of IBC, and supervision under Regulation 38(2)(c) of CIRP Regulations and under Section 30(2)(d) of IBC under the Resolution Plan. The same has already been set out in Chapter 4 (10. MANDATORY CONTENTS OF RESOLUTION PLAN) on Page No. 47-53 of the Resolution Plan.

This Adjudicating Authority notes that the Resolution Plan was submitted by the Successful Resolution Applicant namely M/s. Bee Pee Electricals which was approved by the CoC in its 14^th meeting dated 15.04.2024 (e-voting concluded on 10.05.2024) by 100% voting share in respect of the CIRP of the Corporate Debtor under Section 30(4) of the IBC and no provision of the IBC has been contravened.

We find that the Resolution Plan meets the requirement of being viable and feasible and for the revival of the Corporate Debtor. By and large, there are provisions for making the Plan effective after approval by this Bench.

This Adjudicating Authority has relied on the Hon'ble Supreme Court's decision in the matter of "Vallal RCK vs. M/s. Siva Industries and Holdings Limited and Others, Civil Appeal Nos. 1811-1812 of 2022' whereby the Hon'ble Apex Court has answered the question as to whether 'the adjudicating authority (NCLT) or the appellate authority (NCLAT) can sit in an appeal over the commercial wisdom of the Committee of Creditors ("CoC") or not'. We have relied upon the following paragraphs:

In light of the above-quoted judgements, it is clear that the “Commercial wisdom of CoC” is given paramount status. This Adjudicating Authority is not endowed with the powers of jurisdiction or authority to analyse or evaluate the commercial decision of the CoC. The Resolution Plan has been submitted by the Successful Resolution Applicant namely M/s. Bee Pee Electricals which was approved by the CoC in its 14th meeting dated 15.04.2024 (e-voting concluded on 10.05.2024) by 100% voting share in respect of the CIRP of the Corporate Debtor under Section 30(4) of the IBC, this Adjudicating Authority cannot interfere in the same.

On perusal of the documents on record, we are satisfied that the Resolution Plan is in accordance with Sections 25(2)(h), 29A, 30(2), 30(4) and 31(1) of the IBC and also complies with Regulations 35A, 36B(4A), 37, 38(1), 38(1A), 38(1B), 38(2), 38(3), 39(1), 39(2) and 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Applicant/RP has filed a Compliance Certificate in the prescribed Form, i.e., Form-H as per the amended Resolution Plan in compliance with Regulation 39(4) of the CIRP Regulations. The Applicant/RP submits that the Successful Resolution Applicant is not disqualified under Section 29A of the Code to submit the Resolution Plan, as required by Regulation 39(1)(a) of the CIRP Regulations. A separate undertaking has also been submitted along with the EoI by the Successful Resolution Applicant, as mandated in terms of Regulation 39(1)(c) of the CIRP Regulations.

The reliefs, concessions and waivers sought by the Successful Resolution Applicant will be dealt with strictly as per law.

As far as the question of granting time to comply with the statutory obligations/seeking sanctions from governmental authorities is concerned, the Resolution Applicant is directed to do the same within one year as prescribed under section 31(4) of the Code.

In case of non-compliance of this order or withdrawal of the Resolution Plan within the stipulated time, in addition to other consequences which follow under law, the CoC shall forfeit the EMD already paid by the SRA as well as the PBG.

The present application has been filed with bonafide means, in the interest of justice and to advance the objectives of the Code.

The Resolution Plan IA-25/2024 which is for approval of the Resolution Plan is allowed and the Resolution Plan of Rs. 52,86,39,545/- is approved [The total amount proposed under Resolution Plan is Rs. 52,86,39,545/-. The amount of Rs. 51,83,40,322/- is exclusive of regulatory fee payable to IBBI in compliance with Regulation 31(A)(1) of CIRP Regulations (0.25% of the realizable value to creditors, i.e., Rs. 12,99,223/-) and amount allocated towards the payment of CIRP cost which is Rs. 90,00,000/-]. The Resolution Plan shall form part of this Order. “Effective Date” means the date on which this Resolution Plan is approved by this Adjudicating Authority under Section 31 of the Code.

The Resolution Plan is binding on the 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 is due, guarantors and other stakeholders involved in the Resolution Plan, so that the revival of the Corporate Debtor Company shall come into force with immediate effect.

The Moratorium imposed under section 14 of the Code shall cease to have effect from the date of this order.

Further from the effective date and until the transfer date, a 3-member Monitoring Committee or Managing Committee is to be constituted. The Committee shall consist of one representative of the Resolution Applicant, one representative of the CoC and the Resolution Professional.

The RP shall submit the records collected during the commencement of the proceedings to the Insolvency and Bankruptcy Board of India (“IBBI”) for their record.

Liberty is hereby granted for moving appropriate application(s), if required in connection with the implementation of this Resolution Plan.

A copy of this Order shall be filed by the Resolution Professional with the Registrar of Companies, (RoC), NCT of Delhi & Haryana. The Memorandum of Association (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the RoC, for information and record.

The Resolution Applicant, for effective implementation of the Plan, shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed.

The Resolution Professional shall stand discharged from his duties with effect from the date of this Order, save and except those duties that are enjoined upon him for implementation of the approved Resolution Plan. Further, the Resolution Professional shall supervise the implementation of the Resolution Plan and file the status of its implementation before this Adjudicating Authority from time to time, preferably every quarter.

Further, in terms of the Judgment of 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, wherein the Hon’ble Supreme Court held that on the date of the approval of the Resolution Plan by the Adjudicating Authority, 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 to a claims which are not a part of the Resolution Plan.

The Resolution Professional is further directed to hand over all records, premises/factories/documents available with it to the Successful Resolution Applicant to finalise the further line of action required for starting the operation. The Successful Resolution Applicant shall have access to all the records and premises through the Resolution Professional to finalise the further course of action required for starting operations of the Corporate Debtor.

The Registry is hereby directed to send copies of the order forthwith to the IBBI, all the parties and their Ld. Counsel for information and for taking necessary steps.

A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities. File be consigned to the record. No order as to costs.