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Judgment
ORDER
PER: SH. L. N. GUPTA, M(T) & SH. HARNAM SINGH THAKUR, M(J)
IA No. 2859/2023 : We take up first, the IA filed for intervention by M/s Jain Trading Co. (“Applicant) seeking full payment of goods supplied by it to the CD/Respondent. The Applicant claims to have supplied Rubber & Chemicals to M/s S.R. Industries Ltd (“Respondent”) for the last 10 years, and even after initiation of CIRP since 21.12.2021. The Applicant has annexed running account of the Respondent maintained in its books, which reads thus:
It is submitted that the Applicant filed Form B claiming an amount of Rs. 84,60,223.47 being the outstanding amount towards the goods supplied to CD during the moratorium period. But the claim of the Applicant was rejected by the RP stating that the claim, being made at a belated stage, was not payable and shall be paid after approval of the Resolution Plan.
On issuance of notice, the Respondent/ RP filed its reply dated 10.04.2024 vide diary no. 03866/01 and submitted that the Applicant has concealed and manipulated material facts. The Applicant is misleading by attempting to include the “operational debt” owed by the CD of period prior to the initiation of CIRP in the claim. It submitted that the outstanding amount against the Respondent/CD as on the initiation of CIRP and post-CIRP are as under:
Thus, the total costs of transactions entered since the initiation of CIRP on 21.12.2021 till the time the CD was ran as ‘a going concern’ till 29.02.2023, after adjustments and reconciliations, comes to mere Rs. 3,34,817.30/-.
As regards these dues pertaining to the period post-commencement of CIRP, it has been stated by RP that such cost shall form part of the CIRP and will be payable only after approval of the Resolution Plan by the Adjudicating Authority.
With respect to the claim pertaining to the period prior to the commencement of CIRP, the Applicant had filed Form-B. However, the same was not only inflated but was filed belatedly. Hence, the same was rejected.
A bare perusal of the statement of accounts corroborated with the invoices raised by the Applicant makes it clear that the Applicant has misrepresented its belated claim as CIRP costs to circumvent the provisions of the Code and the Regulations therein.
We heard the submissions of both the parties and perused the pleadings/documents placed on record. The RP has confirmed that an amount of Rs. 3,34,817.30 will form and be paid as CIRP cost. Hence, in our considered view, no further adjudication is required for the dues of the Applicant occurring after commencement of CIRP.
With respect to the claim of Rs. 69,58,779.16, we would like to visit and examine the Form-B (the claim form) filed by the Applicant, and Public Announcement made in Form-A. The Form-B (the claim form) filed by the Applicant, as available on record, reads thus:
xxx xxx xxx
When we refer to “Public Announcement” made by RP in Form-A, as available on record, the same reads thus:
Thus, from the conjoint reading of Form-A and Form- B (ibid), it is observed that the last date notified for filing the Claims was 04.01.2022, whereas the Applicant herein filed its claim in Form B only on 27.09.2023, which is more than 21 months beyond the last date. Hence, we find no illegality in action of RP by treating the claim of the Applicant as time-barred.
We are cognizant of the judgement of the Hon’ble Supreme Court in “M/s. RPS INFRASTRUCTURE LTD Vs MUKUL KUMAR & ANR.”, CIVIL APPEAL NO. 5590 OF 2021, which held the following
"20.Section 15 of the IBC and Regulation 6 of the IBBI Regulations mandate a public announcement of the CIRP through newspapers. This would constitute deemed knowledge on the appellant. In any case, their plea of not being aware of newspaper pronouncements is not one which should be available to a commercial party.
21.The mere fact that the Adjudicating Authority has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon. As described above, in Essar Steel, the Court cautioned against allowing claims after the resolution plan has been accepted by the COC.
22.We have thus come to the conclusion that the NCLAT’s impugned judgment cannot be faulted to reopen the chapter at the behest of the appellant. We find it difficult to unleash the hydra-headed monster of undecided claims on the resolution applicant.”
In sequel to the above, the IA-2859/2023 is dismissed, being devoid of merits.
I.A. NO. (Plan) 1/2024
Now, we proceed to examine the IA No. 01 of 2024 filed by Mr. Rajender Kumar Jain, Resolution Professional of M/s. S.R. Industries Limited (“Applicant/ Resolution Professional”) under Section 30(6) read with Section 31 of the Insolvency and Bankruptcy Code (IBC), 2016 read with Regulation 39 of the IBBI (Insolvency Resolution Process of Corporate Debtor) Regulations 2016, for approval of the Resolution plan submitted by Bazel International Limited (“Successful Resolution Applicant” / “SRA”). The Applicant is seeking the following reliefs:
a. Allow the present Application;
b. Kindly approve the Resolution Plan dated 08.05.2023 along with its Addendums dated 28.07.2023 & 19.08.2023 submitted by Bazel International Limited as approved by the Committee of Creditors in its 34th CoC meeting convened on 12.10.2023 and the voting concluded on 17.10.2023 with 98.30% voting in favour,
c. Declare that upon approval of the Resolution Plan by this Adjudicating Authority, the provisions of the Resolution Plan shall be binding on the Company, its creditors, guarantors, members, employees, Statutory Authorities and other stakeholders in accordance with Section 31 of the Code, and shall be given effect to and implemented pursuant to the order of this Adjudicating Authority,
d. Approve the appointment of Mr. Rajender Kumar Jain as Monitoring Professional and constitute Monitoring Agency as stated in Clause 7.7 of the approved Resolution Plan duly approved by the Committee of Creditors;
e. Approve and grant reliefs and directions sought under the Resolution Plan by the Resolution Applicant;
To put succinctly, the facts of the case are that the Financial Creditor UCO Bank filed an application under Section 7 of IBC 2016 for initiating CIR Process against the Corporate Debtor M/s. S R Industries Limited. The said Application was admitted by this Adjudicating Authority vide Order dated 21.12.2021 and Mr. Rajender Kumar Jain was appointed as the Interim Resolution Professional (IRP) of the Corporate Debtor. Later, this Adjudicating Authority confirmed the Mr. Rajender Kumar Jain IRP as RP, who continued as RP of the Corporate Debtor during CIR Process.
It is submitted by the Applicant that in terms of Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016, the said IRP made/published a Public Announcement in Form-A 23.12.2021 in the newspapers ‘Financial Express’ (English Edition) and ‘Dainik Jagran’ (Hindi Edition) to invite claims. It is submitted that the said Public Announcement was also uploaded on the website of the Insolvency and Bankruptcy Board of India (IBBI).
It is further submitted that the RP constituted the Committee of Creditors (CoC) comprising of the following financial creditors:
As stated by the applicant, the following four Operational Creditors (Statutory Authorities) also submitted their claims:
Besides, the claims of the Workmen/Employees were admitted.
It is further stated by the Applicant that the ‘Form-G’ was published on 03.03.2022 in 03 daily newspapers, namely, Financial Express (English), Punjabi Jagran and Amar Ujala, in response to which the Applicant/RP received 13 Expressions of Interest (EOIs). However, the Resolution Plans were received from 04 Prospective Resolution Applicants (PRAs) only. However, as the amounts offered were not acceptable to the CoC, Form G was republished on 17.06.2022, and 11 Expressions of Interest (EOIs) were received.
It is submitted by the Applicant/RP that the Resolution Plans were received from 04 PRAs only, out of which 03 were found eligible as per Section 29 A of the IBC, 2016. These were from the PRAs namely, Bazel International Limited, M/s Novarra Foottech Private Limited, and Mr. Anil Khandelwal. All the 03 resolution plans received from PRAs were placed before the 32nd meeting of CoC of the Corporate Debtor held on 04.08.2023 vide the Agenda Resolution No. 32.07.(1A), Resolution No. 32.07.(1B) and Resolution No. 32.07.(1C) for consideration and approval. These agenda proposed in the 32nd meetings, were put for voting as Agenda Item No. 34.07 in the 34thCoC meeting held on 11-12.10.2023.
As per the averments and submissions made by the RP/Applicant, the Resolution Plan along with addendum submitted by Bazel International Limited was approved by the CoC with 98.30% majority in its 34th meeting held on 11-12.10.2023. The voting sheet, as placed (pages 569-570) of the application, is reproduced below:
The Applicant/RP has annexed the 29A Certificate of the Successful Resolution Applicant (SRA) Bazel International Limited from page No. 809 to 812 of the application, which is reproduced below for an immediate reference:
It is stated by the RP/Applicant that in terms of Regulation 36B(4A) of the IBBI (IRPCP) Regulations 2016, it received a Bank Guarantee No. 4620IGF231030419 dated 08.11.2023 of Rs. 1,17,00,000/- (One Crore Seventeen Lakhs) only from the SRA, a copy of which, as placed on pages 791-793, is reproduced below:
In compliance with Regulation 39(4) of the IBBI (IRPCP) Regulations 2016, the Applicant/RP has filed the “Compliance Certificate” in Form H (pages 794-808 of the application) certifying that the present Resolution Plan duly approved by the CoC members complies with all the provisions of the IBC and IRPCP Regulations, 2016. The same is reproduced below, for an immediate reference:
As regards the “term” of the Resolution Plan and its implementation schedule, it is proposed to be implemented within a period of 03 months from the “effective date” as per the following schedule (pages 642-643 of the application):
Regarding “Monitoring over implementation of the Resolution Plan”, it has been proposed to constitute a five-member Implementation and Monitoring Committee comprising of 02 representatives of SRA, 02 representatives from the Financial Creditors and the Resolution Professional. The relevant details given in the Resolution Plan (pages 643-645 of the application) are reproduced thus:
In support of its net worth, the SRA has annexed on page 662 of the application, a Certificate of Krishan Rakesh & Co. Chartered Accountants, which is stated to be Rs. 14,65,17,843/- as on 31.03.2022. The same is reproduced below:
As regards Means of Finance and Sources of Funds, the following has been stated in the Resolution Plan (page 640-641 of the Application):
It is further seen that the SRA has filed an undertaking regarding the resolution plan being binding and unconditional in response to the RFRP. The relevant extracts of the affidavit filed in this regard are reproduced below:
The details of distribution of the Resolution Plan Amount amongst Stakeholders, as submitted in Form ‘H’, are reproduced below:
Thus, it is observed that as per Form ‘H’ filed by the Applicant, the Fair Market Value (FMV) of the Corporate Debtor is Rs.14,44,58,265/- and its Liquidation Value (LV) is Rs. 9,64,40,059/-. However, the gross amount provided in the COC approved Resolution Plan for distribution amongst Stakeholders is Rs. 11,70,00,000/- including the CIRP cost etc., which comes to 121% of the Liquidation Value (LV) and around 81% of the Fair Market Value (FMV) of the Corporate Debtor.
During the course of hearing, Ld. Counsel for the applicant confirmed that the SRA has not sought any particular relief and concession. However, he indicated that the effects of approval of the resolution plan are indicated in Chapter 8 of the Plan (page 646-647). Ld. Counsel for the Applicant confirmed that the Resolution Plan shall be implemented even if no relief and concession is granted.
However, the SRA has filed an Affidavit that it will not stake any claim to the proceeds of the PUFE transactions application filed by RP with this Adjudicating authority. The relevant extracts of which (page no. 669 of the application) reads thus:
We are sanguine of the fact that the SRA shall be eligible to get protection as available under Section 32A of IBC, 2016 and reliefs and concessions as admissible under the relevant law.
We heard the Ld. Counsel for the Applicant/RP and gone through the Application, and all other documents placed on record. After going through the pleadings, we observe that the Committee of Creditors of the Corporate Debtor has duly considered and approved the Resolution Plan and addendums submitted by the SRA by a voting majority of 98.30% in its 34th meeting convened on 12.10.2023 and the voting concluded on 17.10.2023.
The role of the Adjudicating Authority has been examined by the Hon’ble Supreme Court in Civil Appeal No. 10673 of 2018 in the matter of “K. Sashidhar Vs. Indian Overseas Bank & Ors.”, the relevant extracts of which are reproduced below, for an immediate reference:
“35.Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code.”
“38.Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I & B Code and not to act as a court of equity or exercise plenary powers.”
In view of the decision of Hon’ble Supreme Court (Supra), it has become a well settled principle of law that the Adjudicating Authority is not required to interfere with the decision taken by the CoC in its commercial wisdom, save and except the circumstances referred to in Section 31(2) of the IBC, 2016. We find the Resolution Plan conforming to the requirement of Section 31(1) of IBC.
In sequel to the above, we have no other option but to approve the Resolution Plan as approved by the CoC and as placed by the Applicant before this Adjudicating Authority. We, therefore, allow the present IA and approve the COC approved Resolution Plan dated 08.05.2023 along with its Addendums dated 28.07.2023 & 19.08.2023, placed before us by the Applicant/RP, with the following directions in respect of the Corporate Debtor:
The Resolution Plan along with its Addendums dated 28.07.2023 & 19.08.2023 shall become effective from the date of passing of this Order and shall be implemented by the Monitoring Committee strictly as per the term of the Resolution Plan and Implementation Schedule given therein, i.e., within 90 days from the effective date/of this order;
The reliefs and concessions, if any, sought by the Resolution Applicant shall be available subject to their admissibility under the relevant law, regulations, and rules;
The SRA will not stake any claim to the proceeds of the PUFE transactions application filed by RP with this Adjudicating authority. These Applications shall continue to be pursued by RP/Monitoring Committee. The proceeds of these PUFE transactions shall go to the Stakeholders in terms of Waterfall Mechanism under Section 53(1) of IBC 2016.
The Performance/Bank Guarantee submitted by SRA of Rs. 1,17,00,000/- (One Crore Seventeen Lakhs) issued by the Kotak Mahindra Bank valid till 26.10.2024, shall be ensured to be valid/extended by the Monitoring Committee till the period of implementation of the Resolution Plan.
The order of the moratorium in respect to the CD passed by this Adjudicating Authority under Section 14 of the IBC, 2016 shall cease to have effect from the date of passing of this Order; and
The RP shall forward all the records relating to the conduct of CIRP and Resolution Plan to IBBI for its record and database.
The Applicant/Resolution Professional (RP) shall forthwith send a copy of this Order to the CoC and the Successful Resolution Applicant for necessary compliance.
A copy of this order shall also be sent by the Applicant to the IBBI for their record.
The IA-01/2024 is allowed and disposed of accordingly.