Sumit Binani vs M/s. JSW Energy Limited & Anr.

[PER : BENCH]

The instant Application bearing IA (IBC) (Plan) 2/2025 has been filed on behalf of the Resolution Professional of the Corporate Debtor, M/s. KSK Mahanadi Power Company Limited (CD/KMPCL), under Section 30(6) and 31(1) of IBC^{11.Insolvency & Bankruptcy Code, 2016}, r/w regulation 39(4) of the applicable Regulations^{22.IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016}, seeking approval of the Resolution Plan^{33.Resolution Plan dated 29.11.2024 alongwith all its annexures, clarifications and addenda.}, submitted by the Successful Resolution Applicant (SRA) M/s. JSW Energy Limited (JEL) duly approved in the 56^th Committee of Creditors (COC) meeting physically and by e-voting with 100% voting share on 10.01.2025.

The Company Petition CP(IB) No. 492/7/HDB/2019 filed by M/s. Power Finance Corporation Ltd., the Financial Creditor (FC/PFC), was admitted by this Authority u/s 7 of IBC, vide Order dated 03.10.2019 ordering commencement of CIRP^{44.Corporate Insolvency Resolution Process} against M/s. KSK Mahanadi Power Company Limited, the CD, by appointing Mr.Mahender Kumr Khandelwal as the Interim Resolution Professional and subsequently replaced by Mr.Sumit Binani as Resolution Professional.

Public Announcement^{55.Annexure-A1 @ pg. 41 of the Application} of the commencement of CIRP was made in Form-A on 06.10.2019 in the newspapers^{66.Times of India, English Daily Newspaper in Hyderabad and Raipur editions.}, inviting claims from the creditors of the CD. In response, claims were received from the Financial Creditors.

After collating all the claims received and determining the financial position of the CD, initially, the IRP constituted the COC on 24.10.2019. Finally, after amending the list of creditors on various dates, the Applicant constituted the COC comprising of the following Financial Creditors:

The IRP invited Expression of Interest (EOI-1) from Prospective Resolution Applicants (PRAs), by issuing Form-G on 08.01.2020. The last date for submission of Expression of Interest was extended from time to time and finally it was fixed as 29.11.2021. In response, EOIs were received from the PRAs and the Applicant shared the RFRP^{77.Request for Resolution Plan} dated 12.12.2021 to the eligible PRAs by fixing the last date for submission of Resolution Plans as 08.07.2022 after extending the last date from time to time. Subsequently, a final list of PRAs was issued by the Applicant on 22.12.2021 and also shared the IM^{88.Information Memorandum} to the COC as well PRAs.

Pursuant to the meetings of the common lenders of KMPCL, being related entities, M/s.KSK Water Infrastructure Private Limited (KSK Water), Raigarh Champa Rail Infrastructure Private Limited (RCRIPL), Punjab National Bank (PNB), one of the Financial Creditors of KSK Water had filed an IA 32/2020 in CP(IB) 492/7/HDB/2019 and CP(IB) 813/7/HDB/2019 seeking consolidation of CIRPs of KMPCL and KSK Water, which was dismissed by this Authority vide order dated 12.02.2021. Aggrieved by the order dated 12.02.2021, PNB preferred an Appeal (AT) (CH) (Ins) No.46/2021 (Consolidation Appeal) before the Hon’ble NCLAT, Chennai and later on a substitution application was filed by Prudent ARC as PNB had assigned its loans to Prudent ARC, which was dismissed as withdrawn.

ASREC (India) Ltd. (ASREC) had filed an IA 403/2022 in IA 374/2022 and this Authority vide Order dated 07.06.2022 directed to stay on the CIRP of KMPCL, until further orders, pending outcome of the said Consolidation Appeal.

The Applicant had filed an IA 507/2024 in IA 403/2022 in IA 374/2022 before this Authority seeking for directions to proceed with the standalone resolution process of KMPCL. This Authority vide Order dated 05.04.2024 disposed of stating that the Applicant may proceed with the Resolution Plan process of KMPCL.

Pursuant to the Order dated 05.04.2024, the IRP invited Expression of Interest (EOI-2) from Prospective Resolution Applicants (PRAs), by issuing fresh Form-G^{99.Hari Bhoomi, Andhra Prabha and ET, Delhi, daily newspaper – Annexure 8 at pg. 51 of the application} on 11.04.2024. In response, EOIs were received from 25 PRAs and the final list of PRAs was published by the Applicant on 13.05.2024. The Applicant issued the provisional list of PRAs to the COC as well as to all the PRAs on 02.05.2024 and issued final list of PRAs to the COC on 13.05.2024¹⁰.

¹⁰ Annexure A-10 at pg. 85 of the application.

The Applicant shared the RFRP^{1111.Request for Resolution Plan} dated 18.05.2024 to the eligible PRAs by fixing the last date for submission of Resolution Plans as 31.07.2024 alongwith the Information Memorandum (IM) and Evaluation Matrix, other relevant details of the CD and access to the Virtual Data Room (VDR).

Meanwhile, Uttar Pradesh Power Company Limited (UPPCL) had filed a Writ Petition W.P.No.25060 of 2024 before the Hon’ble High Court of Telangana seeking, inter alia, for a direction of consolidation of the CIRPs of KMPCL with KSK Water and RCRIPL (UPPCL Writ), which was disposed of directing UPPCL to approach this Authority and deferred the CIRP of KMPCL. As aggrieved by the order of Hon’ble High Court of Telangana dated 10.09.2024, the COC of KMPCL preferred an appeal before the Hon’ble Supreme Court of India, vide SLP(C ) No.23339/2024 (Civil Appeal No.11086 of 2024) wherein it was held that ‘the High Court of Telangana had no justification to direct the deferment of the CIRP of KMPCL’. Accordingly, UPPCL Writ Order cease to be operative on 14.10.2024.

UPPCL had filed an IA 1949/2024 before this Authority seeking consolidation of KMPCL, RCRIPL and KSK water, which was dismissed at admission stage by this Authority, vide Order dated 29.11.2024.

Pursuant to the RFRP^{1212.Annexure A-11 of the application} dated 18.05.2024, 10 PRAs submitted their Resolution Plans. These were opened in the 10^th COC Meeting held on 01.08.2024:

After availing the extensions and exclusions allowed periodically^{1313.Para 4.74 of the Application}, the last date for completing the CIRP was set at 16.02.2025.

The COC had filed an IA 1365/2024 seeking distribution of surplus/idle funds available with the CD to its Creditors in accordance with Section 53 of the Code, which was allowed by this Authority on 05.08.2024 permitting interim distribution of the surplus funds of the Corporate Debtor. Accordingly, the Applicant had distributed the same in five tranches, pursuant to which, the voting percentage of the secured financial creditors have been modified. The applicant also paid the employees and workmen dues in full. Thereafter, the applicant had filed an IA 2356/2024 for record of the updated list of creditors pursuant to the Interim Distribution of Funds.

Pursuant to the 2^nd COC Meeting held on 29.11.2019, the RP appointed M/s. RBSA Valuation Advisory LLP and M/s. GAA Advisory (Registered Valuers) to determine the Liquidation Value and Fair Value of the CD respectively.

Further, M/s. RBSA Valuation Advisory LLP was appointed as the Process Advisor for evaluating the Resolution Plans.

The RP conducted a total of 57 meetings of the COC during the CIRP.

The challenge process to maximize the value of assets and interest of the stakeholders (Challenge Process) was conducted by COC in their 55^th meeting held on 25.10.2024 and continued till 26.10.2024. Out of 10 PRAs, the following 6 PRAs participated in the Challenge Process, which went on for 11 (eleven) rounds. M/s.JSW Energy emerged as the highest bidder in the last round offering upfront cash recovery from the RA to financial creditors to the tune of Rs.15,985.08 crores.

Pursuant to the conduct of the Challenge Process, all PRAs except M/s.Coal India Limited submitted its revised plan.

In the 56^th COC Meeting held on 02.12.2024, the Applicant informed that there were no findings in respect of any PUFE transactions. The COC discussed upon the compliance, feasibility and viability of the final Resolution Plans as submitted by the 10 PRAs and put for e-voting. During the e-voting, the COC with 100% voting^{1414.Voting result dated 11.01.2025 as Annexure A-13 of the application} rights approved the Resolution Plan dated 29.11.2024^{1515.Resolution Plan dated 29.11.2024 alongwith all its annexures, clarifications and addenda as Annexure-} submitted by M/s.JSW Energy Limited. The voting share is detailed as follows:

The Applicant has further submitted that as the approved Resolution Plan meets all the requirements envisaged under IBC and Rules/Regulations made thereunder, on 13.01.2025, the RP issued ‘Letter of Intent’ (LoI)^{1616.LOI @ pg. 443 of the application} to M/s.JSW Energy Limited declaring them as Successful Resolution Applicant (SRA). They were requested to comply with the terms of the LOI and submit the Performance Security. In turn, on 15.01.2025, the Resolution Applicant unconditionally accepted the LOI and submitted Performance Bank Guarantee No.1731325BG0B00056, dated 14.01.2025 for Rs.250 crores^{1717.Performance Bank Guarantee as Annexure A-16 @ pgs. 445 to 452 of the application} (Rupees Two Hundred and Fifty Crores only), valid upto 17.01.2026 with further claim period upto 17.01.2027, with acceptance of LOI.

The salient details of the Resolution Plan, submitted by JSW and as approved by the CoC, are as follows:

The amounts provided for the stakeholders under the Resolution Plan^{1818.Form-H @ Page 459-470 of the Application} are as under:

(Rs. in lakhs)

*Rs.99 crores payable to Operational Creditors includes Other Creditors. The (%) in column (7) will increase pursuant to the distribution of additional amounts to operational creditors, on a pro-rata basis in terms of the Distribution Framework approved by COC in 56 meeting of COC held on 02.12.2024 vide voting result declared on 11.01.2025 (“Distribution Framework”).

*Although an amount of Rs.13,538.97 lakhs has been admitted against related party unsecured financial claim (“Creditors not having a right to vote under sub-section (2) of section 21”), but subsequently an amount of Rs.16,480.83 lakhs is receivable from them which is higher than the claim admitted amount and so, after mutual set-off, the net payable is Nil.

** The amount proposed by JSW Energy Limited in their Resolution Plan is to be payable to Financial Creditors. However, the Resolution Plan does not provide for bifurcation between secured and unsecured financial creditors. Further, the Resolution Plan does not provide a bifurcation of payments made to various stakeholders under operational creditors. Total Resolution Amount shall be distributed to the Creditors in such a manner that the final distribution of the Total Resolution Amount is as per the proportion determined by the COC as per Clause 3.3.6 of the Resolution Plan and as per Distribution Framework.

*** As per the order given by the Hon’ble NCLT dated 05.08.2024, a portion of the admitted claim of the secured financial creditors has been proportionately paid out from the surplus/idle fund distributed in waterfall mechanism during the CIRP. Thus, their current admitted amount has been calculated by deducting the payout during CIRP from the initial gross admitted amount.

**** As per the order given by the Hon’ble NCLT dated 05.08.2024, the admitted claim of the employees has been entirely paid out from the surplus/idle fund distributed in waterfall mechanism during the CIRP. Thus, their current admitted claim amount is Nil after deducting the payout during CIRP from the initial gross admitted amount.

Summary of Proposal:

the Financial Creditors – who shall be entitled to redistribute the said amounts in accordance with this Resolution Plan.

Implementation structure^{2020.Clause 3.5 of the Resolution Plan}:

Upon making the above payments, the debts of the CD shall stand discharged and extinguished and necessary actions will be taken for release of encumbrances etc.

The Resolution Plan provides for the merger of BidCo with the Corporate Debtor, which shall take effect within the Closing Date, i.e. 90 days from the date of approval. However, such effect shall be contingent upon the approval of the Competition Commission of India (CCI). On the Closing Date, the Corporate Debtor shall be acquired by BidCo, and 100% of its Share Capital shall be beneficially owned by BidCo, free from any Encumbrances, with the shareholding structure reflecting BidCo’s ownership (alongwith nominee shareholders) prior to the Merger.

Manner of Distribution^{2424.Clause 3.3.6 of the Resolution Plan}: COC may, in its discretion, adopt the manner and timing of the distribution of the total resolution amount proposed under the Resolution Plan. It is also provided that in the event there are any inter-creditor disputes (including but not limited to disputes relating to cash entitlement under the Plan, manner or priority of distribution of the total resolution amount), the portion of amount pertaining to the dispute shall be set aside and kept in a designated escrow account and the said dispute shall not affect the implementation of the COC Approved Resolution Plan or lead to an increase in the upfront cash recovery payable by the Resolution Applicant. (Clause 3.3.6). The distribution framework approved by the COC in its 56^th meeting is filed as Annexure-20 @ pg. 480 (V-III).

Amounts remaining after distribution shall be distributed to the following three classes of creditors:

Management of the Corporate Debtor^{2525.Clause 3.5.4 of the Resolution Plan}: With effect from the date of approval of the COC Approved Resolution Plan by this Authority and during the standstill period, the control and management of the CD will vest with the Monitoring Committee (MC) comprising of (i) 2 representatives of the Resolution Applicant; (ii) the Monitoring Agent (who shall be RP or such other person jointly appointed by the Resolution Applicant and COC); and (iii) 2 representatives of the Assenting Financial Creditors. During the Standstill Period, the Monitoring Agent shall oversee the operations and management of the CD.

Source of Funds: The Resolution Applicant proposes the aggregate Upfront Cash Recovery Amount of Rs.16,084.08 crores, from the following sources:

Term of the Resolution Plan, Implementation Schedule, effective implementation and supervision for its implementation^{2626.Clause 4.1, Clause 3.5.1, Clause 3.5.2 (a)(iv) and Clause 3.5.5 of the Resolution Plan} The Plan provides that the Term of the Resolution Plan shall commence on the date of approval of the Plan by this Authority and shall conclude on the Closing Date (as defined in Clause 1.1.17 of the Resolution Plan).

The Plan also provides for an Implementation Plan at Clause 3.5.1.

Compliance of mandatory contents of Resolution Plan under IBC and CIRP Regulations: The Applicant is stated to have conducted a thorough compliance check of the Resolution Plan in terms of Section 30(2)(a), (b) & (c) of IBC as well as Regulations 38 & 39 of the CIRP Regulations and has submitted Form-H under Regulation 39(4). A copy of the Form-H has also been filed.^{2727.Page nos. 459 - 466 of the Application} It is submitted that the Resolution Applicant has filed an Affidavit pursuant to Section 30(1) of IBC confirming that they are eligible to submit the Plan under Section 29A of IBC and that the contents of the said Certificate are in order. The Fair Value and Liquidation Value as submitted in Form-H are stated to be Rs.9,947.74 crores and Rs.6,848.80 crores respectively.

Reliefs & Concessions: Besides seeking approval of the Resolution Plan submitted by JSW, the Applicant has also prayed for grant of reliefs, waivers and concessions^{2828.Annexure A-19 @ pg. nos. 471 to 479 of the application} to the Resolution Applicant, as set out @ pg. 88 to 95 of the Resolution Plan.

In the above backdrop, we have heard the Learned Counsel for the Applicant and perused the records.

The Resolution Plan meets the requirement of Section 30(2) of IBC and Regulation 38 of CIRP Regulations, as under:

Any costs arising during CIRP that pertain to the matters mentioned in Schedule 3 (costs) of the COC approved plan which is currently under dispute and attains finality post the Cut-Off date shall be dealt with by the Resolution Applicant without any reduction to the Total Resolution Amount.

We have carefully considered the present application seeking approval of the Resolution Plan dated 29.11.2024 (alongwith all its annexures, clarifications and addenda) submitted by the Resolution Applicant M/s. JSW Energy Limited.

While reviewing the resolution plan as aforesaid, we have taken into account the judgment in the case of K. Sashidhar v. Indian Overseas Bank^{3535.In K. Sashidhar v. Indian Overseas Bank & Others (in Civil Appeal No. 10673/2018) decided on 05.02.2019: (2019) 12 SCC 150} where the Hon’ble Supreme Court has held that:

The Hon’ble Supreme Court reiterated this view in the case of Essar Steel^{3636.Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. in Civil Appeal No.8766-67/2019, decided on 15.11.2019: (2020) 8 SCC 531} by holding that:

Reinforcing the above, the Hon’ble Supreme Court more recently has held in Vallal RCK vs M/s Siva Industries^{3737.Vallal RCK vs M/s Siva Industries and Holdings Limited & Ors. in Civil Appeal No.1811-} that:

1812/2022, decided on 03.06.2022: (2022) 9 SCC 803

bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC…..”

Therefore, when tested on the touch stone of the rulings, and considering the facts of the case, we are of the view that the Resolution Plan satisfies the requirements of Section 30 (2) of IBC and Regulations 37, 38 & 39 of CIRP Regulations. We also find that the Resolution Applicant is eligible to submit the Resolution Plan under Section 29A of IBC. A copy of the Affidavit filed by the Resolution Applicant and Section 29A Diligence Review Report on Resolution Applicants are filed as Annexure A-17 @ pg. nos. 453 – 458 of the application respectively.

It is also to be clarified that approval of the resolution plan shall not be construed as waiver of any statutory obligations/ liabilities of the Corporate Debtor and shall be dealt with by the appropriate Authorities in accordance with law. Any waiver sought in the resolution plan, shall be subject to approval by the Authorities concerned. As regards to the reliefs sought, the Corporate Debtor has to approach the authorities concerned for such reliefs and we trust the authorities concerned will do the needful.

With the above remarks, we hereby approve the Resolution Plan dated 29.11.2024 (alongwith all its annexures, clarifications and addenda) submitted by the Resolution Applicant M/s JSW Energy Limited, and order as under:

1553/2021, decided on 13.04.2021.: (2021) 9 SCC 657

Accordingly, IA 2/2025 in CP(IB) No.492/7/HDB/2019 is allowed and disposed of.