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Judgment
This application is filed on 10.01.2023 under Section 30(6) of Insolvency & Bankruptcy Code, 2016 by Mr. Ravindra Kumar Goyal Resolution Professional (RP) of the corporate debtor-Yashasvi Yarns Limited for approval of the Resolution Plan submitted by Amit Jain & Gyanesh Kanodia.
The averments made by the applicant/ resolution professional in the present application and as argued by the learned counsel are summarized as under:-
The corporate debtor was admitted in Corporate Insolvency Resolution Process (CIRP) on 26.04.2022. Mr.Ravindra Kumar Goyal was appointed as Insolvency Resolution Professional (IRP). On 30.04.2022 the IRP made a public announcement of the CIRP of the corporate debtor thereby calling upon its creditors to submit their claim with requisite proof. The Committee of Creditors (CoC) was constituted with the following financial creditors having voting percentages based on their debt value as follows:-
| Sr. | Name of Creditor | Voting (%) |
| 1. | State Bank of India | 63.73% |
| 2. | Pegasus Assets Reconstruction Private Ltd | 19.94 % |
| 3. | Phoenix ARC Private Ltd | 7.88 % |
| 4. | Canara Bank | 8.45% |
| Total | 100% | |
The CoC resolved to appoint the IRP as the RP and the same was approved by this Adjudicating Authority.
The CoC instructed the RP to publish Form G calling upon the prospective resolution applicants to submit the EoI/Resolution Plans for the corporate debtor.
The RP published Form-G on 01.07.2022 in widely circulated English as well as local language newspapers. In response thereto, he received 6 resolution plans from the following:-
| Sr. | Prospective Resolution Applicants |
|---|---|
| 1. | Radhekrishna Corporation, Silvasa; |
| 2. | Laxmi Technical Textiles Private Limited, Mumbai; |
| 3. | Aalidhra Texpro Engineers Private Limited, Surat; |
| 4. | Consortium of Alliance Superfine Industries Limited, Mumbai along with- Udaaran Properties and Trading Private Limited, Obron Industrial Finance Limited, Suvino Exports Private Limited and Mr. Robin Agarwal; |
| 5. | Amit Jain & Gyanesh Kanodia (Suspended Management), Mumbai; |
| 6. | Siddhivinayak Filaments Private Limited, Mumbai; |
Meantime, CIRP period of 180 days were about to get over on 30.10.2021, the RP, with the approval from the CoC requested this Adjudicating Authority to extend CIRP period by 90 days and accordingly, CIRP period was extended by this Adjudicating Authority vide its order dated 21.11.2022.
The CoC discussed the proposal, which was received in the form of Resolution Plans, in various meetings of the CoC. In the 8th CoC meeting held on 18.11.2022, the resolution plans were discussed and put to vote. The resolution plan from Amit Jain & Gyanesh Kanodia was approved by the CoC with 100% votes.
The said resolution plan approved by the CoC is of the suspended management. Since the corporate debtor is MSME the provisions of section 29A do not apply to the resolution applicant in accordance with section 240A of the Code.
The resolution applicant- Amit Jain & Gyanesh Kanodia has proposed to infuse a sum of Rs.2844 lacs. The details of the proposed payment to the stakeholders are as follows:
| (Rs. in lakhs) | ||||||
| Sr. | Category of Stakeholder | Sub-Category of Stakeholder | Amount claimed | Amount Admitted | Amount Provided under the Plan | Amount Provided to the Amount Claimed % |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
| 1. | CIRP Cost | 60 | ||||
| 2. | Secured Financial Creditors | (a) Creditors not having a right to vote under sub-section (2) of section 21 | Nil | NA | NA | NA |
(b) Other than (a) above: (i) who did not vote in favour of the resolution plan (ii) who voted in favour of the resolution plan | Nil 24677.71 | NA 24677.72 | NA 2779.20 | NA 11.26% | ||
| Total [(a)+(b)] | 24677.71 | 24677.72 | 2779.20 | 11.26% | ||
| 3. | Unsecured Financial Creditors | (a) Creditors not having a right to vote under sub-section (2) of section 21 | Nil | Nil | Nil | Nil |
(b) Other than (a) above: (i) who did not | ||||||
vote in favour of the resolution plan (ii) who voted in favour of the resolution plan | Nil Nil | Nil NA | Nil NA | Nil NA | ||
| Total [(a)+(b)] | Nil | Nil | Nil | Nil | ||
| 4. | Operational Creditors | (a) Related Party of Corporate Debtor | Nil | NA | NA | NA |
| (b) Other than (a) above: (i) Government (ii) Workmen (iii) Employees (iv) Other debts and dues | Nil Nil Nil 4.80 | Nil Nil Nil 4.80 | Nil Nil Nil 4.80 | Nil Nil Nil 100% | ||
| Total [(a)+(b)] | 4.80 | 4.80 | 4.80 | 100% | ||
| Grand Total | 24682.51 | 24682.51 | 2844.00 | 11.28% | ||
The RP has examined the resolution plan and the compliances required. For ready reference, the compliances examined by the RP are reproduced hereunder:-
| 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 operations of business of the CD? | Clause 1; Section 240 A of IBC; MSME Registration Available | 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? | Resolution Applicants are not ineligible under provisions of Section 29 A of IBC; Verification conducted and Affidavit dated 29.08.2022 also on record | Yes |
| Section 30 (1) | Whether the Resolution Applicant has submitted an affidavit stating that it is eligible? | Affidavit dated 17.07.2022 | Yes |
| Section 30 (2) | Whether the Resolution Plan- a) provides for the payment of insolvency resolution process costs? b) provides for the payment to the operational creditors? | Clause 5.3, Pg.22 Clause 5.6, Pg. 27 | Yes Yes |
c) provides for the payment to the financial creditors who did not vote in favour of the resolution plan? d) provides for the management of the affairs of the corporate debtor? e) provides for the implementation and supervision of the resolution plan? f) contravenes any of the provisions of the law for the time being in force? | Clause 5.5.6, Page 26 Clause 7, Pg.33 Clause 8 Pg. 36 Clause 10.2, Pg. 37-38 | Yes Yes Yes Yes | |
| 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? | Clause-4, Clause-5 and Clause-8 Minutes of 8th CoC Meeting | Yes Yes |
| Section 31(1) | Whether the Resolution Plan has provisions for its effective implementation plan, according to the CoC? | Minutes of 8th COC Meeting | Yes |
| Regulation 38(1) | Whether the amount due to the operational creditors under the resolution plan has been given priority in payment over financial creditors? | Clause 5.6, Pg.27 | Yes |
| Regulation 38(1A) | Whether the resolution plan includes a statement as to how it has dealt with the interests of all stakeholders? | Clause 9, Pg.36 | Yes |
| Regulation 38(1B) | (i)Whether the Resolution Applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any resolution plan approved under the Code. (ii)If so, whether the Resolution Applicant has submitted the statement giving details of such non-implementation | Clause 10.1 Pg.37 NA | Yes NA |
| Regulation 38(2) | Whether the Resolution Plan provides: (a)the term 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? | Clause 5, Pg 22 Clause7 Pg 33 Clause 8 Pg 36 | Yes Yes Yes |
| 38(3) | Whether the resolution plan demonstrates 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 for approvals required and the timeline for the same? (e) the resolution applicant has the capability to implement the resolution plan? | Clause 4 Pg 16 Clause 4 Pg 16, Clause 5,Pg 22 and Clause 8, Pg 36 Clause7 Pg 33 and Clause 8 Pg 36 Clause 13, Pg 43 Clause 1 Pg 11 and Clause6.4 Pg 32 | Yes Yes Yes Yes Yes |
| 39(2) | Whether the RP has filed applications in respect of transactions observed, found or determined by him? | No such transactions determined | NA |
| Regulation39(4) | Provide details of performance security received, as referred to in sub-regulation (4A) of regulation 36B.] | Performance Security of Rs 5.00 Crore Provided | Yes |
We heard the learned counsel for the RP and on perusal of records it is noted that the CoC approved the resolution plan of Amit Jain & Gyanesh Kanodia by 100% voting and it is not necessary for us to go into details of the commercial aspect of the plan. We proceed to examine the plan in view of sections 30(2) and 31 of the IBC r.w. Regulation 38 of the IBBI (CIRP of the Corporate Debtor Regulation, 2016). The RP has produced on record the compliance certificate in Form-H. It shows that the fair value of the assets of the corporate debtor is Rs.25,25,34,609/- whereas, the liquidation value is Rs.16,79,74,425/-. The successful resolution applicant has proposed a payment of Rs.2844 lacs in the resolution plan.
In order to obtain the approval of the Adjudicating Authority the resolution plan should adhere to the following requirements as per Section 30(2) of the Code r.w. CIRP Regulation 38:
It should provide for the payment of insolvency resolution process costs in priority to the repayment of other debts of the corporate debtor.
[Section 30(2)(a)]
The repayment of the debts of operational creditors should not be less than the amount to be paid to such creditors in the event of liquidation of the corporate debtor under section 53 of the Code, or the amount that would have been paid to the said creditors if the amount to be distributed under the resolution plan had been distributed in accordance of section 53(1) of the Code. Moreover, the payment to the operational creditor is to be made in priority over the financial creditor; Further the repayment of the debts of dissenting financial creditors should not be less than the amount that would have been paid to such creditors in the event of liquidation of the corporate debtor under section 53 of the Code and the payment to the said dissenting financial creditor is to be made in priority to the consenting financial creditors. [Section 30(2)(b) read with CIRP Regulation 38(1)(a) & 38(1)(b)];
Provides for the management of the affairs of the corporate debtor after approval of the resolution plan. [Section 30(2)(c) read with CIRP Regulation 38(2)(b)];
The implementation and supervision of the resolution plan. [Section 30(2)(d) read with CIRP Regulation 38(2)(c)];
It does not contravene any of the provisions of the law for the time being in force. [Section 30(2)(e)];
It conforms to such other requirements as may be specified by the Board. [Section 30(2)(f)]
Such other requirements of the resolution plan as detailed in IBBI (Resolution Process for Corporate Persons) Regulations, 2016 which are not covered above, are as under:
The resolution plan should include statement as to how it has dealt with the interests of all stakeholders including financial creditors and operational creditors of the corporate debtor. [CIRP Regulation 38 (1A)]
The resolution plan should include a statement giving details as to whether the resolution applicant or any of its related parties has at any time failed to implement or caused to the failure of implementation of any other resolution plan which was approved by the Adjudicating Authority. [CIRP Regulation 38 (1B)]
The resolution plan should contain the term of the plan and its implementation schedule. [CIRP Regulation 38(2)(a)]
The resolution plan should also demonstrate that it addresses the cause of default; is feasible and viable; has provisions for its effective implementation; has provisions for approvals required and timeline for the same. Further that the resolution applicant has the capability to implement the resolution plan. [CIRP Regulation 38(3)]
In view of the above provisions of the Code, the resolution plan submitted before us has been examined as follows:
In the plan, the provision towards CIRP costs is made for Rs.60 lacs to be paid within 45 days from the effective date in priority to the repayment of other debts of the corporate debtor. Thereby, section 30(2)(a) has been complied with. Further, the plan contains a provision that in case the CIRP cost is less than Rs.60 lacs then the difference amount would be paid to the secured creditors in addition to the amount proposed to them.
There are no dissenting financial creditors. Further, the plan provides payment to the operational creditors amounting to Rs.4.80 lacs which is 100% of their admitted claim. As such the provisions of section 30(2)(b) read with CIRP Regulation 38(1)(a) & 38(1)(b) are complied with.
The mechanism for management and control of the affairs of the corporate debtor after approval of the resolution plan has been provided in the resolution plan itself whereby the Monitoring Committee consisting of one person nominated by the resolution applicant; one person nominated by the secured creditor; one independent professional not related to the corporate debtor, resolution applicant and secured creditors, will look after the business of the corporate debtor after approval of the resolution plan and pending its implementation. We hold that thereby provisions of Section 30(2)(c) read with CIRP Regulation 38(2)(b) are complied with.
The resolution plan contains a provision wherein, the implementation of the said plan will be supervised by the Monitoring Committee. Thereby, Section 30(2)(d) read with CIRP Regulation 38(2)(c) has been complied with.
The RP has submitted that the plan does not contravene any provisions of law. We also noted that the plan does not contravene any provisions of the law for the time being in force. Thereby, Section 30(2)(e) has been complied with.
The resolution plan also conforms to other IBBI Regulations as given hereunder:
The resolution plan adequately deals with the interests of all stakeholders, including financial creditors and operational creditors of the corporate debtor. Thereby, the plan is in compliance with CIRP Regulation 38 (1A).
It is submitted that neither the resolution applicant nor any of its related parties have at any time failed to implement or contributed to the failure of implementation of any other resolution plan which was approved by the Adjudicating Authority. Thereby, the plan is in compliance with CIRP Regulation 38 (1B).
The term of the Plan is 45 days and its implementation schedule is as under:-
| Sr | Description Event | Amount (in Rs) | Proposed timeline |
|---|---|---|---|
| 1 | Payment to the secured financial creditors | 2779.20 lacs | Within 45 days from the effective date |
| 2. | CIRP Cost | Rs. 60 lakh | Within 45 days of the Effective Date |
| 3. | Constitution of new Board of Directors | Within 30 days of the Effective Date |
Thereby CIRP Regulation 38(2)(a) has been complied with.
The resolution plan addresses the cause of default; is feasible and viable; has provisions for its effective implementation; contains provisions for approvals required and the timeline for the same. Further that the resolution applicant has the capability to implement the resolution plan. Thus CIRP Regulation 38(3) has been complied with.
The resolution applicant Amit Jain & Gyanesh Kanodia are the founding members of the corporate debtor, which is a registered MSME. Sources of funds is Rs.2844 lakhs by infusion of their own funds in the form of debt and equity by the resolution applicant.
It is also noted that the resolution applicant has sought certain reliefs & concessions such as waiver of:-
the guarantee given by the corporate debtor against the lenders who have submitted their claim;
ii) any debt prior to the approval of the plan which are unknown & unlisted in the Information Memorandum;
iii) any unknown dues towards any tax, subsidy, interest & penalty from any statutory authorities for the period prior to the initiation of CIRP;
iv) waiver under Income Tax Act, 1961 & GST Act, 2017;
penalties pertaining to regulatory non-compliances; etc. Further, the approval of the resolution plan is not conditional to the grant of reliefs & concessions sought by the resolution applicant.
As far as reliefs and concessions claimed by the resolution applicant with respect to the unpaid liabilities after approval of the plan and the claims not filed at all with the RP during the CIRP, the law has been well settled by the Hon'ble Supreme Court in the case of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited and Ors. reported in MANU/SC/0273/2021 in the following words:
“……..The legislative intent behind this is, to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans, would go haywire and the plan would be unworkable.
87.We have no hesitation to say, that the word "other stakeholders" would squarely cover the Central Government, any State Government or any local authorities. The legislature, noticing that on account of obvious omission, certain tax authorities were not abiding by the mandate of I&B Code and continuing with the proceedings, has brought out the 2019 amendment so as to cure the said mischief…..”
In view of the above, all unpaid liabilities and claims that are not filed with the RP before the approval of the resolution plan and those which are not included in the said resolution plan would stand extinguished. However, as far as other reliefs and concessions as sought by the resolution applicant, we direct the said successful resolution applicant to approach the concerned statutory authority for those concessions and those authorities will consider the same as per their established procedure.
The proviso to section 31 of the Code, 2016, states that before passing any order for approval of the resolution plan, the Adjudicating Authority should also satisfy that the resolution plan has provisions for its effective implementation. We being satisfied, approve the resolution plan submitted by Amit Jain & Gyanesh Kanodia for Corporate Debtor i.e., Yashasvi Yarns Limited and in addition to the above directions, proceed to pass the following order:-
Application is allowed.
The resolution plan of Amit Jain & Gyanesh Kanodia for Corporate Debtor i.e., Yashasvi Yarns Limited allowed as per Section 30(6) of the IBC, 2016.
The approved ‘Resolution Plan’ shall become effective from the date of passing of this order.
The order of moratorium dated 26.04.2022 passed by this Adjudicating Authority under Section 14 of I&B Code, 2016 shall cease to have effect from the date of passing of this order.
The Resolution Professional shall forthwith send a copy of this Order to the participants and the Resolution Applicant(s).
The Resolution Professional shall forward all records relating to the conduct of the corporate insolvency resolution process and Resolution Plan to the Insolvency and Bankruptcy Board of India to be recorded in its database.
Accordingly, IA 118 of 2023 in CP(IB) 209 of 2021 is allowed and stands disposed of in terms of the above directions.
Urgent certified copy of this order, if applied for, to be issued to all concerned parties upon compliance with all requisite formalities.