Suzuki Textiles Limited Through Mr. Prashant Agrawal, Resolution Professional vs Sangam (India) Limited

Per: Shri Prasanta Kumar Mohanty, Hon’ble Technical Member

This Application has been filed on behalf of the Resolution Professional under Section 30(6) read with Section 31 and 60(5) of the Insolvency and Bankruptcy Code, 2016 for the approval of the Resolution Plan submitted by Successful Resolution Applicant- M/s Sai Leela Synthetics Private Limited which has been approved by the Committee Of Creditors with 99.99% voting shares in the second phase of their eighth meeting of CoC dated 19.10.2022, for which the voting window was kept open till 09.11.2022., seeking the following reliefs:

Allow the present Application and pass necessary order(s)/direction(s):

True Copy of the Resolution Plan submitted by M/s Sai Leela Synthetics Private Limited. has been annexed.

The Applicant submits that:

Vide admission order dated 31.01.2022, this Hon'ble Tribunal had admitted Suzuki Textiles Limited (Corporate Debtor) into Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC), and vide the said admission order, the Applicant herein, Mr. Prashant Agrawal was appointed as the Interim Resolution Professional.

In compliance with Section 13 and Section 15 read with Regulation 6 of the CIRP Regulations, a public announcement under Form- A was made in following newspaper for disseminating and inviting claim at a wider scope:

a. Jaipur edition of the Economic Times, a leading English newspaper, in English language on 03.02.2022. (Jaipur edition covers Bhilwara region)

b. Udaipur edition of Dainik Bhaskar, a leading Hindi newspaper, in English language on 03.02.2022. (Udaipur edition covers Bhilwara region)

c. Udaipur edition of Dainik Bhaskar, a leading Hindi newspaper, in Hindi language on 04.02.2022. (Udaipur edition covers Bhilwara region)

d. Surat edition of Jandesh, a leading Gujarati newspaper, in Gujarati language on 11.02.2022.

e. Surat edition of Silvasa Mirror, an English newspaper, in English language on 11.02.2022. The Corporate Debtor has place of business in Surat was received post hoc, therefore, the public announcement was made in Surat at a later stage.

On receipt of claims, the IRP verified and collated the claims received by him and prepared the list of creditors and constituted Committee of Creditors (COC) on 19.02.2022 and filed the report under Regulation 17(1) of the CIRP Regulation qua constitution of COC before this Horrible Tribunal vide IA No. 98/JPR/2022 and the same was taken on record by this Hon'ble Tribunal on 29.03.2022.

In the first meeting of the Committee of Creditors held on 01.03.2022, the Interim Resolution Professional was confirmed and appointed as the Resolution Professional by the Committee of Creditors. Further, the Hon'ble Tribunal vide its order dated 11.05.2022 and 24.05.2022 in I.A. No 154/JPR/2022 confirmed the appointment of the Applicant as the Resolution Professional of the Corporate Debtor.

Pursuant to Regulation 27(1) of the CIRP Regulations, the Resolution Professional appointed registered valuers for all the class of assets within prescribed time limit.

In pursuance to Section 29 of the Insolvency and Bankruptcy Code, 2016 read with Regulation 36(1) of the CIRP Regulations. The resolution professional, issued Information Memorandum to the committee of creditors after receipt of confidential undertaking. The issuance of Information memorandum was made within prescribed time limit of 54 days.

The Resolution Professional, presented Eligibility Criteria for Prospective Resolution Applicant, Evaluation Matrix and Request for Resolution Plan (RFRP) for approval of Committee of creditors in their second meeting dated 21.04.2022, which were approved by the committee with 84.02% voting.

The Applicant pursuant to Section 25(2)(h) of the Code read with Regulation 36A of the CIRP Regulations, published the Form-G for invitation of expression of interest ("MID) for submission of resolution plan on 16.04.2022 in following newspapers

a. Jaipur edition of the Economic Times (The edition covers Bhilwara region)

b. Udaipur edition of Dainik Bhaskar (The edition covers Bhilwara region)

c. Surat edition of Jandesh in Gujarati language

d. Surat edition of Silvasa Mirror in English language.

Various expression of interests was received in pursuance to the publication of Form-G, which were eligible as per section 25(2)(h) and were made a part of provisional and final list of Prospective Resolution Applicants, however no resolution plan was received till the last date of submission of Resolution Plan, i.e., 15.06.2022, but just one resolution plan was received but after the last date of submission.

The Resolution Professional in the third meeting of CoC dated 23.06.2022, apprised the Committee of Creditors about the progress in the CIRP and that no resolution plan has been received until the last date and that one plan was received thereafter. The committee of creditors decided to extend the CIRP timeline with 79.69% voting shares and directed the RP to republish the Form-G. The republication of Form-G was made on 01.07.2022 in the following newspapers:

a. Jaipur Edition of the Economic Times (The edition covers Bhilwara region)

b. Udaipur Edition of Dainik Bhaskar (The edition covers Bhilwara region)

c. English Edition of Financial Express in its Surat edition

d. Gujarati Edition of Financial Express in its Surat edition

Meanwhile, the Resolution Professional, on the direction of the Committee of Creditors, filed an application before this Hon'ble Tribunal bearing IA No. 326/JPR/2022 for seeking exclusion of time period for the period 31.01.2022 to 28.02.2022 and extension of time period of 90 days under section 12(2) of Insolvency & Bankruptcy Code, 2016. The Hon'ble Tribunal in its order dated 27.07.2022 graciously allowed the exclusion of 29 days and extension of time period of 90 days and declared the CIRP ending date to be 20.11.2022. The order mentions the approval of exclusion and extension of the sought time period, however, the order inadvertently recorded the CIRP end date to be 20.11.2022, instead of 26.11.2022.

Pursuant to the publication of Form-G published on 01.07.2022, the Resolution Professional received 24 Expression of Interest (EOI), however, after verification, only 23 EOI’s were found to be eligible and were made part of provisional and final list of PRAs. The provisional list of eligible Prospective Resolution Applicants (PRAs) was issued on 23.07.2022, and no objection was received by the RP in response to the list issued. Thereafter, the Resolution Professional issued Information Memorandum and Request for Resolution Plan (RFRP), along with Evaluation Matrix to the PRAs vide email dated 28.07.2022, and through email dated 04.08.2022, the RP issued the final list of PRAs with 23 entries. It was proactively informed to all the PRAs the last date of submission of Resolution Plan, i.e., 27.08.2022.

In the Fifth (5th) COC meeting held on 29.08.2022, the applicant informed the CoC that he has received 7 resolution plans till the last date of submission of Resolution Plan, out of which 6 have been received as per the prescribed format as mentioned in the RFRP, however, one of the resolution plans has been received over email in an encrypted mode and the same was not considered by the COC as it was not submitted in the manner prescribed by the RFRP. The list of Resolution Applicants, who submitted Resolution Plan within prescribed time period in prescribed format as per RFRP are as follows:

The Applicant appointed M/s Signal X to ascertain the eligibility of the Resolution Applicant(s) under the Section 29A of the Code. During the scrutiny of Resolution Plans submitted by the Resolution Applicants and on the basis of information shared by the Signal X, the Resolution Professional sought various information, documents and undertaking in regards to litigations, relationship etc. for ascertaining whether resolution applicant is eligible as per provisions of IBC, 2016 and RFRP.

The Resolution Professional came to know that the directors of one of the Resolution Applicants, M/s Mukesh Suitings Private Limited are relatives of the suspended directors of the corporate debtor. The Resolution Professional sought explanation from the Resolution Applicant in this regard by sending various emails, but neither confirmation, nor any denial to the fact was received from the Resolution Applicant

In the 7th meeting of CoC held on 29.09.2022, all Resolution Applicants were invited to present, discuss and negotiate their Resolution Plans before the COC, and after presentation by all the RAs, it was decided by the committee to issue a checklist to the RAs where they were asked to give specific responses to the parameters/elements of the checklist, backed by supporting documents. It was decided by the Committee of Creditors that the response of above-mentioned parameters/elements shall be submitted by the respective RAs in a sealed envelope to the Resolution Professional and that the same would be opened by the Resolution Professional in the second phase of the seventh meeting of COC on 06.10.2022.

The Resolution Applicant, Mukesh Suitings Private Limited was also invited in order to seek clarification where the relationship between the directors of RA with those of the corporate debtors was a correct fact or not. During the presentation, Mr. Gulab Chand Soni (director) of Mukesh Suitings Private Limited affirmed the truthfulness of the fact that his wife is the sibling/sister of the suspended directors of the corporate debtor. In light of the mentioned confirmation, the COC suggested the Resolution. Professional to take a legal opinion whether the confirmation makes the RA ineligible under section 29A of the Code, 2016, which the Resolution Professional complied with and took legal opinion for the same, by which, it was established that relationship of RA with the Corporate Debtor does make the RA ineligible under section 29A of the Code, 2016 and thereafter, during the second phase of the seventh meeting of COC, it was decided by the Committee of creditors to not consider the Resolution Plan submitted by Mukesh Suitings Private Limited.

In the second phase of the 7th meeting of the CoC held on 06-10-2022, the sealed envelopes received from all the resolution applicants were opened before the Committee of Creditors.

The CoC decided not to consider resolution plan submitted by Shivam Sulz Private Limited, and the reasons assigned and recorded for the same in the proceedings of seventh meeting of COC. The true copy of minutes of seventh meeting of COC dated 29.09.2022 and 06.10.2022 have been annexed.

The resolution plans, along with addendum submitted by the RA were considered by the committee of creditors. The same were discussed among the members of committee. It was discussed in the meeting for setting up a score pattern of qualitative scores of evaluation matrix for all Resolution Applicants to have a uniform standard of scoring. The Resolution Applicants were given scores as per evaluation matrix, which are as follows:

Table A: Statement of Comparative Evaluation Matrix for Quantitative Parameters

Table B: Statement of Comparative Evaluation Matrix for Qualitative Parameters

Statement of conclusive score based on Table A and Table B

On the basis of above-mentioned scoring, M/s Sai Leela Synthetics Private Limited was declared as the highest bidder (H1) by the Committee of Creditors and it was further decided to call the H1 Bidder to submit the final resolution plan and to not consider other RAs and their plan for the purpose of approval of Resolution Plan.

The Resolution Professional received the final resolution plan from the RA vide email dated 13.10.2022 and hardcopy of the plan on 14.10.2022. The same had been shared with the committee of creditors vide email dated 14.10.2022. The Resolution Professional vide his email dated 17.10.2022 apprised the committee of creditors about the final resolution plan being compliant of the provisions of the Insolvency & Bankruptcy Code, 2016 and all the relevant rules and regulations, for which the RP issued the compliance status report. The copy of compliance status report has been annexed.

In the first phase of 8th meeting of committee of creditors held on 18.10.2022, it was decided by the CoC to seek further explanations from the H-1 Resolution Applicant in the matter of treatment of assenting and dissenting financial creditor in respect of sharing of proceeds of pending insurance claim and realization of trade receivables, and monitoring process proposed by him for the realization made from pending insurance claim and trade receivables. The committee decided to defer the meeting for the next day in order to give an opportunity to the Resolution Applicant to clarify his stand on the mentioned elements.

In the second phase of the Eighth meeting of Committee of creditors dated 19.10.2022, the RP apprised the committee that he has received clarification from the RA and the same was presented before the committee. Further, during the discussion in the meeting of COC, following discussion were made in respect of assessment of compromise or arrangement as per regulation 39BA of the CIRP Regulations, 2016:

Further, in compliance with the regulation 39B of the CIRP Regulations, 2016, the Resolution Professional had presented the agenda before COC in the second phase of the seventh meeting dated 06.10.2022 and the second phase of the eighth meeting dated 19.10.2022 for their discussion and voting in respect of the best estimate of the amount required to meet the liquidation cost in the event this Hon'ble Tribunal does not approve the Resolution Plan as approved by the COC, however the committee decided to defer the agenda and to discuss and decide over it only in the event where the need for the same arises.

Furthermore, in compliance with the regulation 39C of the CIRP Regulations, 2016, the Resolution Professional had presented the agenda before COC in the second phase of the seventh meeting dated 06.10.2022 and the second phase of the eighth meeting dated 19.10.2022 for assessing for sale as a going concern in the event this Hon'ble Tribunal does not approve the Resolution Plan as approved by the COC, however the committee decided to defer the agenda and to discuss and decide over it only in the event where the need for the same arises.

Similarly, in the seventh and eighth meeting of COC, where the Resolution Professional presented the agenda, in compliance with the regulation 39D of the CIRP Regulations, 2016, to decide over the fee of the liquidator in the event this Hon'ble Tribunal does not approve the Resolution Plan as approved by the COC, however the committee decided to defer the agenda and to discuss and decide over it only in the event where the need for the same arises.

The Committee of Creditors, in the second phase of the Eighth meeting of dated 19.10.2022, discussed the final resolution plan submitted by M/s Sai Leela Synthetics Private Limited in its entirety and found that the resolution plan fulfils the mandatory contents of the Resolution Plan as provided for in regulation 38 of the CIRP Regulations, 2016 and in accordance to sub-regulation (4), the plan is demonstrating 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.

The Registered Valuers appointed by the Applicant submitted their respective valuation reports for all the classes of assets of the Corporate Debtor. The Average of the fair and liquidation value of the Corporate Debtor calculated on the basis of said valuation report(s) are provided herein below:

Accordingly, COC in the second phase of the eighth meeting dated 19.10.2022 decided to put the resolution for approval of the Final Resolution plan, along with its addendum (Final Plan) submitted by M/s Sai Leela Synthetics Private Limited for e-voting and the voting window was kept open till 09.11.2022. The voting Result revealed that the following relevant resolutions were approved by the committee of creditors with 99.99% voting shares

The Applicant further submits:

The brief contour of the approved resolution plan of M/s Sai Leela Synthetics Private Limited for convenience:

The true Copy of the approved resolution plan of M/s Sai Leela Synthetics Private Limited has been annexed.

The Resolution Applicant has submitted its affidavits as required under Regulation 39(1) of the CIRP Regulations confirming its eligibility in terms of Section 29A of the Code. The affidavit provided by the RA has been annexed.

Pursuant to the approval of the Resolution Plan by the COC, the RP issued a Letter of Intent dated 11.11.2022 to the Resolution Applicant. The Resolution Applicant accepted the letter of Intent unconditionally on 12.11.2022. The Resolution Applicant was given time to file the performance guarantee till 17.11.2022 as part of the Letter of Intent, which has been unconditionally accepted by the RA.

As required under Regulation 39 (4) of the CIRP Regulations, the RP has filed the Compliance Certificate in 'Form H' of the schedule of CIRP Regulation with the present Application. Compliance Certificate in Form H has been annexed.

Section 30(6) of the Code mandates that the Resolution Professional to submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority for approval under Section 31(1) of the Code. Accordingly, as the resolution plan submitted by the Successful Resolution Applicant has been duly approved by the COC with 99.99% vote casted in favor, therefore, present Application is being filed by the Applicant seeking approval of this Hon'ble Tribunal which is the Adjudicating Authority under the Code.

The Resolution Plan has been approved taking into consideration of all the stakeholders as well as creditors of Corporate Debtor equated with the revival of the Corporate Debtor. It is submitted that it shall be in the best interest of all the stakeholders including creditors as well as Corporate Debtor if the said resolution plan is approved by this Hon'ble Tribunal without any modification. Further, it is submitted that the Resolution Plan contains necessary provisions for its effective implementation.

The Applicant/RP has under Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, submitted the Compliance Certificate Form H as stated below:

Section 30 (1) and (2) of the Code:

been distributed in accordance with the

Requirements of Regulations 38 (1), (2), (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is as under:

Requirement of Regulations 39(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is as under:

Therefore, the Resolution plan is complete as per the provisions of the Insolvency and Bankruptcy Code, 2016, read with relevant rules and regulations.

In accordance to the Bench’s order dated 29.11.2022, the Resolution Professional submits that:

In accordance with order dated 29.11.2022, the RP called ninth meeting of Committee of creditors on 05.12.2022 where the Successful Resolution Applicant was also invited and the observation recorded in the order dated 29-11-2022 were placed before the committee of creditors. In the ninth meeting of committee of creditors dated 05.12-2022, the committee of creditors considered the points recorded in the Hon’ble Bench’s order dated 29-11- 2022 and based upon the discussion, following conclusions were made:

a. The committee of creditors submitted that during the CIRP, the Resolution Professional, published Form-G for inviting expression of interests from Prospective Resolution Applicants on 16.04.2022, however, no resolution plan was received till the last date of submission of the plan. Thereafter, the COC in their third meeting dated 23.06.2022 decided to extend the CIRP time period and re-publish Form - G for exploring one more time expressions of interests from PRAs.

b. During the second round of Invitation to PRAS, 24 EOIs were received, out of which only 6 resolution applicants submitted their resolution plan till the last date of submission of plan. The same were presented before the committee of creditors and all the resolution plans were discussed and negotiated with the respective Resolution Applicants.

c. In the seventh meeting of COC dated 29.09.2022, the Resolution Professional invited all the resolution applicants to present their plans and negotiate the terms before the committee of creditors for consideration of Resolution Plans in term of section 30(5) of the Code, 2016.

d. Upon considering all the plans and their feasibility and viability, the M/s Sal Leela Synthetics Private Limited as the H1 bidder in the second phase of the seventh meeting of COC dated 06.10.2022, where the committee considered various factors including of the value of the plan of H1 Bidder being more than the fair value of the corporate debtor.

e. Thereafter, the committee of creditors further clarified that they had internally analysed the value of resolution plan against the debt owed by the corporate debtor to them. It was explained by the lead banker that the claimed and admitted amount is inclusive of interest, penal Interest and penalties and legal charges, etc., which shows a haircut of 84.50% against their admitted claim of Rs. 193.57 Crores, however, the total aggregate outstanding debt against the corporate debtor is Rs. 101.73 Crores as on the date of declaration of Corporate Debtor as NPA in their books. Therefore, the effective hair cut undertaken by the secured financial creditors is 70.50%, instead of 84.50%

f. Further, the Supreme Court in its judgement dated 03-06-2022 in the matter of Vallal RCK v. Siva Industries and Holdings Limited sought to hold, once again, that the commercial wisdom of the Committee of Creditors CoC is supreme. Apart from the paramountcy of the commercial wisdom of the CoC, the Court also noted the tremendous importance of safeguarding a corporate debtor from being liquidated and providing it a chance of revival.

g. Similarly, the Supreme Court in its judgment dated 22-06-2020 in the matter of Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh held that where once a resolution plan has been approved by committee of creditors statutory mandate on Adjudicating Authority under section 31(1) is to ascertain that a resolution plan meets requirement of sub-sections (2) and (4) of section 30 thereof and there is no provision in Code or Regulations that bid of any resolution applicant has to match liquidation value.

h. The committee of creditors relied its decision of approval of resolution plan on all the factors that were needed to be taken into account for determining whether or not corporate debtor could be kept running as a going concern and stated that as established by the judgment of the Apex Court In the case of Karad Urban Co-operative Bank Ltd. versus, Swapnil Bhingardevay, that where the COC has taken such factors into consideration that would keep the corporate debtor as going concern, and accordingly decided to approve the resolution plan, the Adjudicating Authority could not have interfered with decision of CoC.

Response:

a. The CIRP incurred till the date of the present affidavit is as follows:

b. Further, the CIRP cost of Rs. 1,45,00,000.00 shown in the Resolution Plan is based on the estimation. The Resolution Applicant has further in his resolution plan in clause 6.1. (Financial Outlay Under Resolution Plan) provided that in a case where the estimated CIRP cost is more than the actual CIRP cost, the difference amount will be additionally distributed to the Secured Financial Creditors over and above the amount provided by the RA to them.

Response:

a. The Resolution Applicant has proposed to increase the amount for the class of employees and workmen. The summary of the details are as follows:

b. The above- mentioned increase of amount distributable as proposed in the resolution plan to the class of employees and workmen is over and above the Resolution Plan value of Rs. 31.70 Crores. The undertaking/affidavit to this effect has been provided by the Successful Resolution Applicant and the same has been annexed.

c. The enhancement in the resolution plan was acknowledged by the Resolution Professional and the committee of creditors further considered the observation of the Hon'ble Apex Court in the matter of Committee of creditors of Essar Steel India Limited versus. Satish Kumar Gupta that there is no residual equity jurisdiction in Adjudicating Authority or Appellate Tribunal to Interfere in merits of a business decision taken by requisite majority of Committee of Creditors; though a certain minimum figure may be paid to different classes of operational and financial creditors it will still be commercial wisdom of Committee of Creditors to determine what amounts are to be paid to different classes.

Response:

a. The Resolution Applicant submitted vide its affidavit/undertaking that the claims of Employee Provident Fund Organization were inadvertently mentioned as Rs. 11,15,285.00 as admitted claim, instead of Rs. 5,20,484.00. The revised summary of the EPFO's claim are as follows:

b. Irrespective of admission of EPFO claim or not, the Resolution Applicant proposes to pay the claimed amount of EPFO in its entirety. The consequence of the change would be enhancement of value of resolution plan by Rs. 2,79,727.00/- and the same is made as a part of undertaking/affidavit.

Response:

a. The Resolution Applicant in the clause 10.4.9. of its resolution plan has proposed that in respect of avoidance transaction, if any, under chapter III or fraudulent or wrongful trading under Chapter VI of Part II of the Code, will be pursued after the approval of the resolution plan by the Resolution Applicant and the proceeds, if any, from such proceedings shall be distributed to the Secured Financial Creditors.

b. Further, the same has been made part of financial outlay of the resolution plan, which can be seen in clause (xvii) of notes to clause 6.1., which states,

c. Furthermore, the Resolution Applicant in the addendum to the Resolution Plan has provided about the monitoring mechanism in this aspect, which Includes furnishing quarterly update and six-monthly CA certification to the secured financial creditors.

Response:

The Resolution Professional affirms that the resolution plan submitted by M/s Sai Leela Synthetics Private Limited is in compliance of the judgement of the Hon'ble Supreme Court passed in the matter of State Tax Officer vs. Rainbow Papers Limited in civil Appeal No. 1661 & 2568/2020. The basis of the affirmation is as follow:

a. In the order of Hon'ble Supreme Court dated 6th September, 2022 in the matter of Sales Tax Officer Vs. Rainbow Papers Limited, wherein in para 52 of the order, the Hon'ble Apex court has observed as under:

The basic premise of the extract of the order had been the ignorance of statutory dues in the resolution plan in its entirety. Whereas in the present case, the Resolution Plan has not ignored the statutory demand altogether, which can be also be seen that the Resolution Applicant has made provision of 100% payment to the EPFO Irrespective of admission of their claim or not. It has made a provision for payment of statutory demands be it CGST or EPFO claim as per priority determined in the provisions of section 53 of Insolvency & Bankruptcy Code, 2016.

b. Further, the Insolvency & Bankruptcy Code, 2016 has overriding effect under its section 238, which has also been acknowledged, accepted, contemplated and considered under section 82 of the Central Goods and Services Tax Act, 2017, while there were no such provisions of non-obstante cause under the provisions of Section 48 of the GVAT Act. The fact that the provision of Insolvency & Bankruptcy Code overrides the provisions of CGST Act is acknowledged both in IBC, 2016 and the CGST Act, 2017. The extract of section 48 of the GVAT Act and section 82 of the CGST Act is produced here for the reference:

c. Furthermore, the reason that the provision of GVAT Act does not apply in the present case can be understood by bare reading of para 56 and 57 of the judgment, which states:

The provision would apply where the security interest has been created by the State or any of its machinery by the operation of law (attachment) as per para 5 of the judgement, which is not the case in the present matter. The extract of the order in respect of para 5 is reproduced here for your kind indulgence:

d. The outcome of the judgment in the matter of Sales Tax Officer Vs. Rainbow Papers Limited has not effected any amendment in the provisions in the substantive law, including of alteration in the priority of Government dues as prescribed under section 53 of the Code, 2016. The changes have not been effected in section 5(21) of the Code, 2016, which has specifically included dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority as operational debt. The definition is reproduced herewith for the reference:

The intent of the Code, 2016 is still unaltered even after the judgment in the matter of Sales Tax Officer Vs. Rainbow Papers Limited, which is evident from the fact that no amendment has been introduced in this effect.

e. A due light needs to be thrown on the preamble of the Insolvency & Bankruptcy Code, 2016, which has explicitly provided for alteration to the order of priority to the payment of Government dues. The preamble of the Code provides:

f. Lastly, the section 30(2)(b) of the Code, 2016, provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than-

In the present case, the liquidation value of the Corporate Debtor is not even sufficient to cover the entire dues of the secured financial creditors, and workmen's dues for the period of twenty-four months. Therefore, the compliance of section 30(2)(b) read with section 53 of the code is complied in the present case.

The consequence of enhancement of proposed amount to the above-mentioned class of creditors is increase in the value of the final resolution plan by Rs. 15,79,727.00. Accordingly, the value of the Resolution plan is now Rs. 31,85,79,727.00 exclusive of funds to the extent of Rs. 10.00 Crores estimated to be allocated for working capital in running the units of the corporate debtor.

The following IAs are pending before this bench for adjudication in this matter:

IA No. 90/JPR/2022 has been filed by the RP under Section 19 r/w 60(5)(c) r/w Rule 11 of the NCLT Rules 2016 seeking following necessary directions against the respondents:

IA No. 220/JPR/2022 has been filed by the Suspended Director of CD, Mr. Rajendra Prasad Maheswari with the following prayer:

a. the present application may kindly be allowed and the registration of sale certificate by Respondent No. 4 in favour of Respondent No. 3 (Shorya Business (India) Ltd.) be declared null & void ab-initio and contrary to the provisions of section 14 of IBC.

b. Any other order or directions which this Hon’ble Tribunal may deem fit in the facts and circumstances of the case may also be passed in favour of the Applicant.

IA No. 323/JPR/2022 has been filed by the RP under section 25 of the Insolvency and Bankruptcy Code, 2016 for taking control and possession of the assets of the corporate debtor, seeking the following reliefs:

a. Direct the Respondent No. 1 to 3 to provide the Applicant-Resolution Professional with the current whereabouts of all the vehicles registered in the name of the Corporate Debtor along with all relevant details.

b. Direct the Respondent No. 1 to 3 to handover the control and possession of the vehicles over to the Applicant-Resolution Professional.

c. Any other direction/order in favour of the Applicant that this Hon'ble Tribunal may deem fit and proper.

IA No. 327 /JPR/2022 has been filed by the RP under section 43, 45, 66 & 67 of the Insolvency and Bankruptcy Code 2016 seeking avoidance of certain transactions being Preferential, Undervalued Fraudulent in nature, with the following prayer:

a. Declare the transactions undertaken by the Respondent No. 1 to 3 on behalf of the Corporate Debtor amounting to Rs. 399.75 Lakhs, Rs. 704.82, Rs. 6809.69 Lakhs, Rs. 431.14 Lakhs and Rs. 1179.92 Lakhs as fraudulent transactions u/s 66 of the Code.

b. Declare the transactions undertaken by the Respondent No. 1 to 3 on behalf of the Corporate Debtor amounting to Rs. 172.91 Lakhs as preferential transactions u/s 43 of the Code.

c. Declare that the Respondent No. 1 to 3 were carrying on the business of the Corporate Debtor in contravention with the provisions of the Code and with the intent to defraud the creditors of the Corporate Debtor and were knowingly the parties to the transactions which were both fraudulent and preferential in terms of Section 66 and 43 of the Code.

d. Direct the Respondent No. 1 to 3 to make necessary contributions to the asset of the Corporate Debtor to the tune of Rs. 9698.23 Lakhs.

e. To direct the Respondent No. 1 to 3 to provide the Applicant with all requisite documents to enable a comprehensive transaction audit.

f. Pass any other order or direction in favour of the Applicant that this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case.

IA No. 401/JPR/2022 has been filed by Mr. Amar Chand Soni under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 challenging the Order of Rejection by the RP of the claim filed by the Applicant herein, with the following prayer:

a. The Hon'ble Bench be pleased to allow the instant Application U/s 60 (5) of the Insolvency and Bankruptcy Code, 2016 and to direct the Resolution Professional to consider the Claim of the Applicant on merits rather than the only technical glitch of belated inadvertent filing

b. The Hon'ble Bench be pleased to condone the delay in submission of the Claim before the Resolution Professional by considering the mis-happening on account of the sad demise of Applicant's wife which is a natural consequence and beyond the control of the Applicant and also of false assurances of the Resolution Applicant;

c. Any other Order as this Hon'ble Tribunal may deem fit and proper in the interest of Justice.

IA No. 519/JPR/2022 has been filed by Employees Provident Fund Organization under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 12 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 for seeking directions from this Hon’ble Tribunal for taking the “Proof of Claim” filed by the Applicant “Employees Provident Fund Organization, RPFC, Jaipur” vide “Form B” before the Insolvency Resolution Professional Mr. Prashant Agarwal, seeking the following reliefs to:

a. Allow the present application and may please to direct the Resolution Professional Respondent to admit the claim of Applicant and the Respondent may be directed to pay the outstanding claim amount of the applicant EPFO as first charge giving priority on payment of Provident Fund over all other debts or else the applicant shall suffer irreparable loss and injury.

b. This application may kindly be allowed, in these facts and circumstances looking to the merits of the case and the delay of 59 days may be condoned in the interest of justice

c. Any other direction/order in favour of the Applicant that this Hon'ble Tribunal may deem fit and proper.

IA No. 581/JPR/2022 has been filed by Mr. Kailash Chand Jethlia under sec 60 (5) of the Insolvency and Bankruptcy Code, 2016, seeking adjudication of the claim of the Applicant herein and issuing necessary direction to the RP to revise the entire amount of the Applicant with the following prayer:

a. the present application may kindly be allowed and the claim of the applicant may be adjudicated by this Hon'ble Tribunal and the RP may further be directed to admit the entire amount of the claim of the applicant including the amount of interest as per the direction passed in the Order dated 04.03.2021 by the Comptroller Authority, payment of Gratuity Act.

b. Any other order or direction, which this Hon’ble Tribunal may deem fit in the facts & circumstances of the case, may also be passed in favour of the Applicant/Corporate Debtor.

IA No. 602/JPR/2022 has been filed by Shivam Sulz Pvt. Ltd. under section 60(5) of IBC, 2016 seeking the following reliefs:

a. The present application may kindly be allowed and the decision of the CoC in approving the resolution plan of the M/s. Sai Leela Synthetics Pvt. Ltd. may be quashed and set aside and the CoC may be directed to consider and approve the resolution plan of the applicant.

b. Any other direction/order in favour of the Applicant that this Hon'ble Tribunal may deem fit and proper.

The Insolvency and Bankruptcy Code, 2016, defines Resolution Plan as a plan for Insolvency Resolution of the Corporate Debtor as a going concern. The Resolution Plan must resolve insolvency (rescue a failing, but viable business); should maximize the value of assets of the 'Corporate Debtor', and should promote entrepreneurship availability of credit arid balance the interests of all the stakeholders.

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. IBC 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 bringing a Resolution Plan were failed or it cannot be found workable in the larger public interest. Hence, now the approval of Resolution Plan by this Adjudicating Authority is rule as per the apex court's decision in the matter of K. Saahidhar Vs. Indian Overseas Bank & Ors.

Resolution Plan was heard by this Bench on 29.11.2022 at length in the presence of the CoC members, RP, SRA and their learned Counsels and this Bench had sought certain clarifications from them relating to the reason for accepting such higher percentage of haircut by the CoC, keeping higher side provision of CIRP cost for the CIRP period of less than one year, Possibility of infusion of additional funds, in addition to the total present offer made in the plan submitted, from the RA for the total claims of the employees & Employees Provident Fund, application of the Judgment of Hon'ble Supreme Court passed in the matter of State Tax Officer vs. Rainbow Papers Limited in civil Appeal No. 1661 in the Resolution Plan approved and submitted, distribution of recovery proceeds, if any, from the avoidable transactions & dealing of IAs No. 90/JPR/2022, 323/JPR/2022, 327/JPR/2022, 401/JPR/2022, 519/JPR/2022 and IA No. 581/JPR/2022. As observed by this Bench, the RP had called the ninth meeting of Committee of creditors on 05.12.2022 along with the Successful Resolution Applicant and the committee of creditors deliberated upon and considered all the points for which the clarifications were sought for by this Bench on 29.11.2022. Thereafter, the RP has filed the Affidavit on the basis of the discussions held at the CoC and the said affidavit has been taken on record as part of the Resolution Plan submitted.

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 99.99% voting. The value offered by the Resolution Plan is higher than the value of liquidation. The Resolution Plan also confirms to such other requirements as may be specified by the Board. The Resolution Professional has also certified that the Final Resolution Plan is in conformity with the provisions of the IBC. Further, vide the ninth meeting of committee of creditors dated 05.12.2022, the value of the Resolution plan has been increased to Rs. 31,85,79,727.00 exclusive of funds to the extent of Rs. 10 Crores estimated to be allocated for working capital in running the units of the Corporate Debtor. In addition, it is also found that the Financial Creditors have also realized Rs. 11,68,00,000.00 under SARFAESI by sale of property mortgaged before the commencement of CIRP.

IA No. 90/JPR/2022 (Application Section 19 r/w 60(5)(c) r/w Rule 11 of the NCLT Rules 2016), IA No. 323/JPR/2022 (Application u/s 25 of the Code); IA 327/JPR/2022 (Application u/s. section 43, 45, 66 & 67 of the Insolvency and Bankruptcy Code 2016) are pending before us. With regard to these IAs, as per the clause 10.4.9 of the Resolution Plan and also as discussed and agreed in the 9^th CoC meeting that the Successful Resolution Applicant would pursue the Applications before this Tribunal and any amount to be realized from the Applications shall be distributed as per the resolution plan among the secured financial creditors in accordance with the provisions of the code. The Suspended Directors are still not cooperating the RP and these IAs have no bearing on the approval of the Resolution Plan. Hence, the IA No. 90/JPR/2022, IA No. 323/JPR/2022 and IA 327/JPR/2022 are kept outside of the Resolution Plan and the same shall be heard and disposed of by this Bench later on. The Registry is directed to list these three IAs on 07.02.2023 for hearing.

IA 220/JPR/2022 has been filed under sec. 14 read with sec. 60(50 of IBC, by the Suspended Director of CD, Mr. Rajendra Prasad Maheswari with a prayer to declare the registration of sale certificate by the Respondent No. 4 in favour of Respondent No. 3 (Shorya Business (India) Ltd.) null & void ab-initio as the same is contrary to the provisions of section 14 of IBC.

The Applicant submits that an application filed by M/s. Sangam (India) Ltd. under Section 9 of IBC was admitted on 31.01.2022 and even though the Sale Certificate came to be issued on 14.08.2020, however, no registration of the sale deed was effected till the passing of the CIRP Order dated 31.01.2022 by the Hon’ble NCLT, Jaipur Bench. Despite the existence of moratorium and prohibition of initiating any action under Securitization Act, 2002, the IDBI Bank Ltd. and the Sub-Registrar, Tonk got registered the Sale Certificate in favour of Shorya Business (India) Ltd. on 14.03.2022. The aforesaid action of the Non-Applicant is violation of Section 14 of the IBC and therefore, registration of the Sale Certificate by the Respondent No. 4 is null & void ab-initio.

On the other hand, the Resolution Professional of the CD, Mr. Prashant Agarwal and Respondent No. 2 IDBI Bank submit that:

Further the Respondent No. 3 submits that:

Heard both sides. Considering the materials made available, arguments of learned counsels of the Petitioner and Respondents and the facts mentioned hereinabove, it is found that the Corporate Debtor had taken various financial assistance from the Consortium of Banks in lieu of which security interest was created in the said property of the Corporate Debtor in favour of the Banks. The accounts of the Corporate Debtor were declared as Non-Performing Assets by all the member banks and action under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was initiated issuing public auction notice for the sale of the property in question vide public notice dated 17.06.2020. The Respondent No. 3 was declared as the successful bidder and purchased the property for a sum of Rs. 11,68,00,000.00. Accordingly, a sale confirmation letter was issued by Respondent No. 2 vide letter dated 31.07.2020 in favour of Respondent No. 3. Upon receipt of complete payment, Respondent No. 2 issued a Sale certificate dated 14.08.2020 and also handed over the possession of the property on 21.08.2020. Respondent No. 3 paid the applicable stamp duty and submitted the necessary documents before the Sub-Registrar, Tonk for the issuance of Sale Deed in favour of Respondent No. 3. It is a well settled law that Sale certificate issued in favour of the auction purchaser conveys the right, title and ownership of the said Purchaser. Once the sale of a secured asset is completed in public auction as per Section 13(4) of SARFAESI Act which ended in issuance of a sale certificate as per Rule 9(7) of the 2002 Rules, the same is complete and absolute. In this matter, the entire process right from the public auction notice for sale, payment of sale consideration, issuance of the Sale Certificate and handing over the possession of the property has been completed between 17.06.2020 to 21.08.2020 when the commencement of CIRP of the Corporate Debtor started almost after one and half year i.e., on 31.01.2022. SARFAESI action is an independent proceeding of the CIRP proceedings which was initiated by the Lenders and closed well before the commencement of the CIRP. Moreover, the Resolution Plan received has been approved by the same members of CoC with 99.99% voting share and the plan has been submitted before us for approval. The realisation of Rs. 11,68,00,000.00 is in addition of the amount offered in the plan by the RA.

It is further found that the Applicant here is a suspended Director of the Corporate Debtor and IAs No. 90/JPR/2022 (Application Section 19 r/w 60(5)(c) r/w Rule 11 of the NCLT Rules 2016), IA No. 323/JPR/2022 (Application u/s 25 of the Code); IA 327/JPR/2022(Application u/s. section 43, 45, 66 & 67 of the Insolvency and Bankruptcy Code, 2016) filed for non-cooperation of the suspended management, non-availability of the assets to take possession, reported transactions under Preferential, Undervalued Fraudulent in nature for Rs. 172.91 Lakhs, Rs. 399.75 Lakhs, Rs. 704.82, Rs. 6809.69 Lakhs, Rs. 431.14 Lakhs and Rs. 1179.92 Lakhs are pending before us. It is clear that present Application filed by the Suspended Director is with malafide intention to delay the CIRP and derail the IBC proceedings.

Hence, we don’t find any reason to entertain this IA. It is a fit case to dismiss the IA with heavy penalty on the Suspended Director but we take a lenient view and the IA 220/JPR/2022 in CP(IB) 275/9/JPR/2019 is hereby summarily rejected without putting any penalty on the Suspended Director.

With regard to IAs No. 401/JPR/2022, IA NO. 519/JPR/2022, IA 581/JPR/2022, during the course of hearing of these matter, it has been agreed by the SRA that the same % payment is to be made these claimants. Further, as per the Ninth CoC meeting, the SRA has proposed

a. to increase the amount for the class of employees and workmen

b. to pay the claimed amount of EPFO in its entirety and

c. In the case of IA 581/JPR/2022, the claimant is to be paid Rs. 1,11,306.00 with simple interest @12% per annum on the amount of Rs. 1,11,306.00 from 19.11.2016.

The same have been incorporated in the Resolution Plan and as a consequence, the value of the Resolution plan is now Rs. 31,85,79,727.00. The undertaking/affidavit to this effect provided by the Successful Resolution Applicant, agreed by the CoC and filed by the Resolution Professional is taken on record.

Since the SRA has already agreed to pay the claims during the course of hearing and the same has also been incorporated in the Resolution Plan as discussed in the Ninth CoC meeting, IA No. 401/JPR/2022, IA NO. 510/JPR/2022, IA 581/JPR/2022 have become infructuous and hence stand disposed of accordingly.

IA No. 602/JPR/2022 has been filed by Shivam Sulz Pvt. Ltd. under section 60(5) of IBC, 2016, an unsuccessful RA, praying for the rejection of the decision of the CoC in approving the resolution plan of the M/s. Sai Leela Synthetics Pvt. Ltd submitted before this Bench for approval and direction to the CoC to consider the resolution plan of the applicant. Heard both sides and it is found that the applicant was given sufficient opportunities by the RP/CoC to submit a viable Resolution Plan but the applicant has failed to do show. It is also further found from the records submitted, the applicant has a very small amount of net worth, not submitted any concrete source of funds for the plan submitted, depending mainly on the probable sanction of loan from the bank and sale of the non-core assets of the CD under CIRP. The CoC has rightly rejected the proposal of the Applicant and we don’t find any merit in this IA to consider the prayer. It is also observed that the Resolution Plan submitted by the Applicant here is a sham one and the intention of the applicant is only to delay the CIRP. Hence it is a fit case to dismiss the IA with heavy cost but we take a lenient view and the IA is dismissed so as to no cost.

On perusal of the Resolution Plan, we are of the considered view that the Resolution Plan meets the requirement of Section 31 r/w Section 30(2) of the Code. Therefore, the present application IA (IBC) No. 590/JPR/2022 is allowed and the Resolution Plan is approved with the certain observations and compliances of the following Conditions:

Approval of the Resolution Plan does not mean automatic waiver or abetment of legal proceedings, if any, 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 Applicant on approval of the Plan may approach those Competent Authorities/ Courts /Legal Forums/ Offices - Govt. or Semi Govt./State or Central Govt. for appropriate reliefs sought for in the plan. This is not going to make any hindrance for proper implementation of the Resolution Plan as those are the subject matter of the concerned/appropriate Competent Authorities. The Resolution Applicant has liberty to approach Competent Authorities for any concession, relief or dispensation as the case may be.

The Monitoring Committee would be three members monitoring committee consisting of one member/representative of the SRA, (ii) representative of Financial Creditor having highest voting share in the CoC and (iii) Mr. Prashant Agarwal Resolution Professional, as Head of Monitoring Committee. The Resolution Professional is hereby appointed as the Head/Chairman of the monitoring Committee for supervision of the implementation of the Resolution Plan. The Monitoring Committee needs to be wound up at an early date on implementation of the Resolution Plan. Fees of the RP as the Chairman of the Monitoring Committee is to be Rs. 1,50,000.00 per month till the full implementation of the Resolution Plan and the same shall be borne by SRA.

It is further directed that:

The approved Resolution Plan shall come into force with immediate effect.

The moratorium order passed under section 14 of the Code on Suzuki Textiles Limited shall cease to have effect from today;

The Resolution Professional, Mr. Prashant Agrawal is discharged from the duties of the resolution professional of the CD but he is to work as the Chairman of the Monitoring Committee till the Plan is implemented.

This Adjudicating Authority holds that it is beyond its scope to grant any Concessions/waivers etc. in respect of any dealings/transactions between the different parties, and/or as regards any statutory obligations/liabilities that are visualized or may arise subsequently while giving effect to the Plan, as the same would be dealt with by the SRA.

The Resolution Plan shall be subject to the various existing laws in force and shall also confirm to such other requirements specified by the Board and other Statutory/Competent Authorities as the case may be.

The Resolution Applicant shall pursuant to the Resolution Plan approved under section 31(1) of the Code, obtain the necessary approvals required under any laws for the time being in force within a period of one year from the date of approval of the Resolution Plan by the Adjudicating Authority under section 31(1) or within such period as provided for in such law, whichever is later or as the case may be.

All relevant parties in relation to the Final Resolution Plan are to be bound by the terms and conditions mentioned therein in accordance with Section 31(1) of the IBC 2016.

All relevant parties are directed to extend full cooperation to carry out the terms and conditions of the Final Resolution Plan. lf there is any deviation in implementing the Final Resolution Plan, the concerned parties/entity will be liable for punishment as per Chapter 7 (Offences and penalties) of the IBC, 2016.

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 on its database.

Accordingly, IA (IBC) No. 590/JPR/2022 in CP No. (IB)-275/9/JPR/2019 is allowed and the Resolution Plan is approved with the above Observations and Directions.