Vijaykumar V. Iyer vs Aircel Limited & Ors.

Per: Rajasekhar V.K., Member (Judicial) & Ravikumar Duraisamy, Member (Technical)

These three Interlocutory Applications (IAs) – IA No.1864/2019 in CP (IB) No.298/2018 (in the matter of Aircel Limited), IA No.1863/2019 in CP (IB) No.302/2018 (in the matter of Dishnet Wireless Limited) and IA No.1865/2019 in CP (IB) No.300/2018 (in the matter of Aircel Cellular Limited) have been filed by Mr Vijaykumar V. Iyer, common Resolution Professional of Aircel Limited, Dishnet Wireless Limited and Aircel Cellular Limited (collectively referred to as ‘Corporate Applicants’), under section 30(6) read with section 31(1) of the Insolvency & Bankruptcy Code (IBC), seeking approval of this Adjudicating Authority for the Resolution Plans submitted by UV Asset Reconstruction Company Limited for resolution of the corporate applicants.

Since there is substantial interweave of businesses between the three corporate applicants, the resolution plans are in pari materia. Therefore, all three IAs are being disposed of by means of a single order.

Aircel Limited filed an application under section 10 of the IBC read with rule 7 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, before this Adjudicating Authority. The same was numbered as CP (IB) No.298/2018. Similar applications were filed by Dishnet Wireless Limited, which was numbered as CP No.302/2018, and by Aircel Cellular Limited, which was numbered as CP No.300/2018. All three application were filed on the same day, i.e., 28.02.2018. After ascertaining that the Corporate Applicant fulfilled all the requisite conditions for admission, the company petition bearing CP (IB) No.298/2018 was admitted vide detailed order dated 12.03.2018,^{11.At pages 28-41 of IA 1864/2019 (Aircel Limited)} while CP (IB) Nos.300/2018 and CP (IB) No.302/2018 were both admitted on 19.03.2018.²

Mr Vijaykumar V. Iyer [Reg. No.IBBI/IPA-001/IP-P00261/2017-18/ 10490] was appointed as the common Interim Resolution Professional (IRP) of the Corporate Applicants.

Public announcement of the commencement of CIRP was made on 16.03.2018 in Business Standard (English) and Aj (regional language) newspapers, inviting creditors to file their claims with the IRP by 28.03.2018.³ Pursuant to this, the Committee of Creditors (CoC) was constituted. On 09.05.2019, the constitution of the CoC was revised upon receipt of new claims and revision of claims already filed.

The RP has stated that as on date of filing of the IAs, the verified and admitted financial debt of Aircel Limited stood at ₹19788,77,30,929/-(Rupees nineteen thousand seven hundred and eighty-eight crore seventy-seven lakh thirty thousand nine hundred and twenty-nine only). In the case of Dishnet Wireless Limited, the corresponding figure is ₹19488,73,02,930/- (Rupees nineteen thousand four hundred and eighty-eight crore seventy-three lakh two thousand nine hundred and thirty only) and that of Aircel Cellular Limited is ₹19484,70,62,390/- (Rupees nineteen

² At pages 38-51 of IA 1863/2019 (Dishnet Wireless Limited) and pp.28-41 of IA 1865/2019 (in

the case of Aircel Cellular Limited).

³ At pages 42-45 of IA 1864/2019, referred to in para 4 thereof thousand four hundred and eighty-four crore seventy lakh sixty-two thousand three hundred and ninety only).^{44.Para 4 in each of the IAs}

The constitution of the CoC and the voting share of each of the financial creditors are as follows:⁴

The first meeting of the CoC was held on 11.04.2018, at which the IRP was confirmed as the Resolution Professional (RP).^{55.Para 6 at page 4 of IA 1864/2019} Information Memorandum as required under section 29 of the IBC and regulation 36 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 was submitted to the CoC on 01.05.2018 after receiving confidentiality undertakings from each member of the CoC.

The Department of Telecommunications (DoT), Govt of India, has also been invited and has been attending meetings of the CoC from the third meeting held on 06.06.2018 and thereafter. The RP has confirmed that DoT has not raised any reservation as regards claim verifications, the resolution plan process, the conduct of the CIRP in general and the Resolution Plan itself.⁵

The liquidation value and fair value of the Corporate Applicant was determined by two registered valuers, viz., (1) RBSA Valuation Advisors LLP; and (2) Duff & Phelps India Private Limited, as laid down in regulation 27 and 35 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.^{66.Para 7 at pages 4-5 of IA 1864/2019}

The RP issued advertisements in the Business Standard inviting resolution plans from prospective resolution applicants.^{77.Para 8 at page 5 of IA 1864/2019, copies of advertisement and corrigenda collectively at pages} The last date for submission of resolution plans was 08.08.2018, which was extended from time to time, upto 07.12.2018.^{88.Page 61 of IA 1864/2019} The RP received a total of forty-five Expressions of Interest (EoIs). Out of them, twenty applicants executed the requisite

46-62 thereof confidentiality undertakings in terms of regulation 36(4) of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. A Process Note explaining the eligibility criteria, evaluation matrix, timelines, formats for submission of resolution plans, et al, was also prepared.

The CoC appointed Alvarez & Marsal India Private Limited [CIN: U74140MH2007PTC234641] as Process Advisor for evaluating the resolution plans, at its meeting held on 06.06.2018.^{99.Para 13 at pages 4-5 of IA 1864/2019}

Eventually, there were only two Resolution Applicants who presented their Resolution Plans in terms of the Advertisements and the Process Note, as follows: -

The Resolution Plans were opened in the presence of, amongst others, the Process Advisor, the legal advisors to the RP and the CoC, and the representatives of the resolution applicants, on 31.12.2018. Since the plans were received after the last date, i.e., 07.12.2018, the RP convened a meeting of the CoC on 02.01.2019 to seek their views on whether the plans received after the last date should be considered. At the meeting, all the CoC members except GTL Infrastructure Limited resolved to consider the plans received. GTL Infrastructure Limited abstained from voting. RP has stated that GTL Infrastructure Limited has since been classified as “Operational Creditor.”

Eight Capital withdrew its Resolution Plan after the first round of discussions, in which various concerns were raised on the compliance of the Resolution Plan that it had submitted, with the provisions of the IBC and the regulations framed thereunder.^{1010.Para 17 at page 7 of IA 1864/2019} That left only one Resolution Applicant (RA), viz., UVARC, in the field.

The RP, along with his advisors, evaluated UVARC’s plan. He also obtained written clarifications on several aspects. The matter was also discussed at various meetings of the CoC held on 02.01.2019, 07.01.2019, 08.01.2019, 11.01.2019, 14.01.2019, 14.02.2019.¹¹ After concluding that UVARC’s Resolution Plan conformed to the law, the RP presented the plan to the CoC for consideration and approval. The Process Advisor prepared a detailed viability and feasibility report which was tabled before the CoC on 25.03.2019 for its consideration.

Based on the discussions at the CoC meeting of 25.03.2019, the RA submitted a revised plan on 30.03.2019, which was found to be compliant with the IBC. The RA also does not suffer from the ineligibilities set out in section 29A of the IBC. UVARC has also submitted an affidavit dated 29.12.2018 to this effect.^{1212.Para 21 at page 9 of IA 1864/2019}

The Resolution Plan was placed before the CoC for its consideration at its meeting held on 30.03.2019, at which the RA was also present. Based on

¹¹ Para 20 at pages 4-5 of IA 1864/2019 specific concerns raised in the meeting by the participants, UVARC submitted a further letter dated 14.05.2019 (“Addendum Letter”).^{1313.Addendum Letter dated 14.05.2019 placed at pages 117-118 of the Additional Affidavit filed by the RP on 10.10.2019.} Thereafter, the Resolution Plan was put to vote.

The CoC at its 19^th meeting held on 13.05.2019 approved UVARC’s Resolution Plan^{1414.Resolution Plan placed at pages 27-116 of the Additional Affidavit filed by the RP on} by a margin of 73.88%, which is more than the statutory minimum of 66%. The Resolutions are placed at p.221. The minutes of the meeting are at p.186. The CoC also authorised the RP to file necessary application under section 30(6) of the IBC for approval of this Adjudicating Authority under section 31(1) of the IBC.

The RP has also submitted a detailed checklist showing compliance with the various provisions of the IBC and the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, along with the written submissions.^{1515.Pages 9-14 of the written submissions.}

In the meantime, this Adjudicating Authority had, vide order dated 09.08.2018 in MA No.754/2018, granted exclusion of time of thirty days from the CIRP period. Accordingly, the CIRP was to come to an end on 08.10.2018. By a further order dated 16.10.2018 in MA No.1137/2018, this Adjudicating Authority had also extended the CIRP period by a further period of 90 days, by invoking section 12(3) of the IBC. In the same order, it was specifically directed that the period during which the application

10.10.2019. remained pending before the Adjudicating Authority, i.e., from 03.10.2018 to 15.10.2018, shall also be excluded from the CIRP period.

Before we come to the Resolution Plan itself, we may notice the corporate history of the RA.

The common Resolution Applicant, viz., UV Asset Reconstruction Company Limited (“UVARC” or “RA” for short), is an unlisted public company limited by shares. It was incorporated on 23.08.2007 under the Companies Act, 1956, with the Registrar of Companies (RoC), Delhi, with Corporate Identity Number (CIN) U74900DL2007PLC167329.

Its registered office is at No.704, Deepali Building (7^th Floor), No.92, Nehru Place, New Delhi 110 019.

UVARC’s authorised capital is ₹50,00,00,000/- (Rupees fifty crore only) and its issued, subscribed and paid-up share capital is ₹42,02,50,000/-(Rupees forty-two crore two lakh and fifty thousand only).

As per Register of Charges maintained on the Ministry of Corporate Affairs (MCA) web portal, UVARC has a subsisting charge on its book debts to the tune of ₹1,00,00,00,000/- (Rupees one hundred crore only).

UVARC is an ACTIVE-compliant company, with returns filed upto 31.03.2019 with RoC Delhi.

We now evaluate the Resolution Plan submitted by the RA.

The Resolution Applicant, viz., UVARC, has submitted Resolution Plan for all the three corporate applicants – (1) Aircel Limited; (2) Dishnet Wireless Limited; and (3) Aircel Cellular Limited. The Resolution Plan so submitted has been envisaged to be a comprehensive strategy spanning all three corporate applicants.

In submitted the Resolution Plans, the RA has adopted an “all-or-none” strategy, meaning thereby, the Resolution Plan submitted in respect of each Corporate Applicant is subject to, and dependent on, the approval of the Resolution Plans submitted in respect of the other two corporate applicants.^{1616.Clause 10.1.2 of the Resolution Plan} This is because of the following reasons: -

Dishnet Wireless Limited and Aircel Cellular Limited are subsidiaries of Aircel Limited.

There is substantial interweave and interdependence amongst the three corporate applicants and the businesses are also inextricably interlinked and intertwined. The corporate applicants depended on a common set of assets for their individual functioning. The entities in the Aircel group have material dependence on each other in carrying out their business operations.

Each of the three corporate applicants carried out telecom business under the common brand of “Aircel.” The brand itself is owned by Aircel Limited. There was an arrangement between Aircel Limited, Dishnet Wireless Limited and Aircel Cellular Limited to pay brand royalty to Aircel Limited.

The telecom business of Aircel group is spread across twenty-three circles across India, with about 53,761 Base Transceiver Stations, 143 Mobile Switching Centres and 433 Base Station Controllers, which are operated by Aircel group entities for their respective circles. This interconnected network was commonly used by all the three corporate applicants to run telecom operations across the country under the common brand name of “Aircel.”

The top management of all the three corporate applicants remained the same throughout. Additionally, there were also employees rendering services to one or more of the corporate applicants in the discharge of their official duties, while remaining on the payroll of any one of the corporate applicants.

The financial creditors of the corporate applicants have acknowledged the interlinkage between the three corporate applicants even in the past, as may be seen from the fact that most of them have extended facilities to the corporate applicants as co-obligors under common documentation.^{1717.Annexure 2A in the case of Aircel Limited Annexure 2B in the case of Dishnet Wireless Limited Annexure 2C in respect of Aircel Cellular Limited.}

There is also technical interdependence of each of the corporate applicants on the other two. Post CIRP, the IT infrastructure such CRM, SAP, billing platform, Email server etc. will be commonly used across the three companies to reduce cost and bring synergies in operations. The resolution applicant will render service under the brand name of “Aircel” already established, since it enjoys easy brand recall amongst the clientele.

The asset monetisation strategy in respect of all the three corporate applicants is also common, except for the fact that the assets will be monetised in the respective corporate applicants.

The CIRP was commonly undertaken for all the three corporate applicants. Even though three separate petitions under section 10 of the IBC came to be filed, the entire CIRP was conducted on a comprehensive basis at a group level only, owing to the interconnected nature of the businesses of each of the corporate applicants. The constitution of the CoC is identical to all the three corporate applicants, save that Standard Chartered Bank is an additional financial creditor in the case of Aircel Limited.

Obtaining of all regulatory approvals from RBI, if required, as mentioned in clause 5 (Implementation Schedule, Supervision of Implementation and Term -Regulatory approvals).

The RP has submitted that the rationale behind the Resolution Plan is as follows: -

The Resolution strategy is to take over the corporate applicants and rebuild a low capex business on the strength of the brand value of Aircel by utilising some infrastructure and at the same time monetising assets where sale value is higher than value of use (Page no. 47 - Clause 4.2.1 - Resolution Strategy).

The identified businesses which the RA finds feasible to generate revenue are bulk SMS, data centre and leasing of towers. This is expected to generate a revenue of sixty-nine crore rupees in the first year, ninety-six crore rupees in the second year and one hundred and twenty-five crore rupees in the third year (Page nos. 47 & 48 - Clause 4.2.2 - Resolution Strategy) .

The existing employees in relation to these three businesses will be retained and a sum of three crore rupees will be brought out of equity commitment to restart these operations (Page no. 49 - Clause 4.2.2 - Resolution Strategy).

According to the RA, this is the most viable resolution strategy. The RA has also engaged the services of an ex-senior official of DoT for this purpose (Page no. 49 - Clause 4.2.3 - Resolution Strategy).

The strategy is similar for all the three corporate applicants (Page no. 49 -Clause 4.2.4 - Resolution Strategy).

There will be capital reduction whereby the existing share capital, both equity and preference, will stand extinguished for NIL consideration. Only the RA and the financial creditors shall remain the shareholders of the CD (Page no. 54 - Clause 5.1.1 - Capital Reduction).

The strategy also envisages issue of equity shares at face value and without premium to the RA whereby the RA will hold 76% of the share capital (Page no. 54 - Clause 5.2.1 - Infusion by Resolution Applicant).

A portion of the verified financial debt owed to the financial creditors reduced by the Debenture Verified Financial Debt shall be converted into equity shares, as a result whereof the Financial creditors shall hold 24% of the share capital in the Company. Equity shares will be issued at a premium and will be reflected in the share premium account (Page no. 55 - Clause 5.3.1 - Conversion of Verified Financial Debt into Equity).

Equity shares will be issued to financial creditors in proportion to their verified financial debt (Page no. 55 - Clause 5.3.2 - Conversion of Verified Financial Debt into Equity);

Verified Financial Debt amounting to ₹3750 crore owed to the financial creditors to be converted into Zero-Coupon Optionally Convertible Debentures (ZOCDs) on the terms set out in Annexure C of the Plan (See Page 94) (Page no. 55 - Clause 5.4.1 - Conversion of Verified Financial Debt into Debentures);

ZOCDs will be secured by creating Security Interest as existed before the Effective Date (Page no. 55 - Clause 5.4.3 - Conversion of Verified Financial Debt into Debentures).

Post payment of CIRP Costs as per the Resolution Plan and the payments to the Operational Creditors and employees as envisaged in the Resolution Plan, ZOCDs will be redeemed out of funds forming part of the Financial Creditor Fund Pool that are received within five years from the issue of ZOCDs or any other longer period as decided by the Reconstituted Monitoring Committee. Any ZOCDs that are not redeemed because of unavailability or insufficiency of the aforesaid funds received within the aforesaid five-year period will be converted into Equity Shares held by Financial Creditors (including Equity Shares held before aforesaid conversion) is 74% of the entire share capital of the corporate applicants (comprising of only equity share capital of the corporate applicants) with UVARC holding Equity Shares equivalent to 26% of the entire share capital of the Company (comprising of only equity share capital of the Company).

The entire CIRP costs, payment to employees and operational creditors will be paid in priority to the issue of equity shares; redemption of any ZOCDs or any payment to the financial creditors in respect of the ZOCDs (Page no. 55 - Clause 5.4.4 - Conversion of Verified Financial Debt into Debentures).

The Resolution Plans provide for broadly a common resolution strategy as set out in Clause 4.2 of the Resolution Plans.

There are some differences in the actual business to be continued, the amounts to be infused by the RA in each corporate applicant^{1818.₹5 crore each in Aircel Limited and Dishnet Wireless Limited and ₹1 crore in Aircel Cellular Limited} and the amounts being paid to each class of stakeholders in each of the Resolution Plans, as stated infra. However, the treatment of each class of stakeholders is broadly similar in each of the Resolution Plans.

The Resolution Plan provides for amounts to various classes of stakeholders as follows: -

# Amount provided over time under the Resolution Plan and includes estimated value of non-cash components and not NPV.

The entire balance portion of the verified financial debt after reducing the ZOCD amount is being converted into equity shares of the Corporate Applicant

Amount admitted excludes ₹5,460.82 crore verified as contingent claim

Amount admitted excludes ₹404.62 crore verified as contingent claim

# Amount provided over time under the Resolution Plan and includes estimated value of non-cash components and not NPV.

The entire balance portion of the verified financial debt after reducing the ZOCD amount is being converted into equity shares of the Corporate Applicant.

Amount admitted excludes ₹5,460.82 crore verified as contingent claim.

Amount admitted excludes ₹404.62 crore verified as contingent claim.

# Amount provided over time under the Resolution Plan and includes estimated value of non-cash components and not NPV.

The entire balance portion of the verified financial debt after reducing the ZOCD amount is being converted into equity shares of the Corporate Applicant

Amount admitted excludes ₹1,384.18 crore verified as contingent claim.

Amount admitted excludes ₹178.61 crore verified as contingent claim.

Under the Resolution Plans, the following amounts have been accounted for as Available & Generated Funds:

The RP submitted that on account of recoveries made from litigation in the Hon’ble Supreme Court during the CIRP, an amount of ₹639 crore was recovered, part of which has already been utilised for payment of CIRP costs of the corporate applicants.

The following sources have been identified as Generated Funds:^{1919.Pages 7 & 8 of the Report by Alvarez & Marsal India Private Limited appointed by the CoC for evaluating the Resolution Plans}

The current cash balance available with the corporate applicants is as follows:

The available funds may not be enough to make necessary payments, as indicated above. The payment for the shortfall shall, therefore, be made from Generated Funds. As indicated by the RA, the first tranche of Generated Funds is likely to be generated within a period of three months from the Effective Date through the sale of fibre assets, as set out below in the paragraph dealing with “Asset Monetisation.”

The corporate applicants do not have any workmen and hence payment to workmen is not applicable. Payment to other operational creditors shall be made from a pool of Available Funds and Generated Funds. Such payments shall be first made from available funds to the extent available and the remaining payments shall be made from Generated Funds. As indicated by the RA, the first tranche of Generated Funds is likely to be generated through sale of fibre within a period of three months from the Effective Date and payments to operational creditors shall be made as soon as the funds are available.

With respect to payment to employees, the RP has stated that an amount of ₹0.94 crore is envisaged to be paid against the total verified claim of about ₹56.73 crore. Out of the verified claim, about 97% pertains to performance-linked and other incentives like bonus payable to employees for pre-CIRP period. The entity wise break up is as follows:

The RP and the RA have submitted that, broadly, the following assets of the corporate applicants are proposed to be monetised as follows:

The entity-wise value of unabsorbed depreciation and accumulated losses for Assessment Year 2017-18 is as follows:

The RA proposes to monetise identified assets and utilise the proceeds towards redemption of debentures. The process will continue till the time all assets other than unabsorbed depreciation and carry forward losses have been monetised and corresponding number of debentures have been redeemed.

The RA expects that ideally by this time the outstanding debentures should be equivalent to the value expected to be realised from unabsorbed depreciation and carry forward losses only.

However, if the value of outstanding debentures is higher at this stage, it would mean either some of the assets could not be monetised or the realisation has taken place at a value lower than expectation. The RP submits that in either case, it would not be an event of default as the values are only indicative.

If the situation envisaged above arises, there would be unabsorbed depreciation and carry forward losses remaining in the corporate applicants. At this stage the outstanding ZOCDs shall be converted into equity in a way that financial creditors hold 74% of the equity and RA the remaining 26%. The Resolution Applicant will then engage with a prospective buyer of these tax benefits and merge the Corporate Debtor companies with such prospective buyers. The shareholders of the Corporate Debtor (financial creditors: 74%; RA: 26%) will get shares in such prospective buyer which can be monetised to realise the value which would actually be the consideration for sale of unabsorbed depreciation and carry forward losses.

The RP submits that the proposed repayments to financial creditors are based on the value of realisable assets in respective companies. However, due to the existence of obligor/co-obligor structure across all three companies, financial creditors are getting compensated for lower recovery in one of the corporate applicants by higher recovery in another corporate applicant where realisable value of assets is higher.

The Resolution Applicant has proposed to offer 24% equity to financial creditors with a view to –

The financial creditors get representation on the Board of Directors by virtue of being shareholders in the company. With affirmative voting rights, their larger participation has been ensured. Besides Board of Directors, the financial creditors also get representation in Monitoring Committee for overseeing the implementation of the Resolution Plan.

Therefore, the RA has proposed 76% equity to be in position to implement the Resolution Plan, but participation of financial creditors has been ensured at every stage by allocation of 24% to them.

Further, to demonstrate the seriousness of the RA and to ensure that the RA does not exit the Company, and that the RA cannot transfer the shares it is issued upon Equity Commitment till redemption of ZOCDs or conversion of ZOCDs into Equity Shares as envisaged in the Resolution Plan, RA will pledge its shares with the Financial Creditors on terms to be mutually agreed between them prior to Effective Date.

On and from the Approval Date and until the Effective Date, it has been proposed that the Corporate Debtor will be managed and controlled by a Monitoring Committee of three persons, as follows: -

The Monitoring Committee constituted for the purposes of supervision of the implementation of the Resolution Plan between the Approval Date and the Effective Date shall stand dissolved upon the Effective Date.

Upon the Effective Date, the Monitoring Committee shall be reconstituted as follows: -

The Monitoring Committee will take important decisions such as –

The RA will use all efforts to make payments towards CIRP cost and creditors’ payments within five years from the Effective Date. If such payments are not paid, ZOCD will be converted into equity shares. (Page no. 62 - Clause 5.11 - Term and Implementation Schedule).

The Applicant submits that the average liquidation value arrived at by two registered valuers appointed by the Applicant is much lower than the resolution plan value of the corporate applicants.

The RP has also submitted that the average of fair value computed by the two registered valuers is about ₹3,282 crore. The comparison between the Resolution Plans and the liquidation scenario under various parameters is shown in the Report of the Process Advisor.

Therefore, the resolution of the corporate applicants as per the Resolution Plans now submitted is likely to fetch much better value for the stakeholders of the corporate applicants than the liquidation of the corporate applicants.

The Resolution Applicant has sought certain reliefs in terms of clause 9 of the Resolution Plans. These are considered in detail later in this order.

Mr Ravi Kadam, learned Senior Counsel for the RP, submitted right at the outset that the three Resolution Plans will have to be considered indivisibly since there was substantial interweave between the businesses. He submitted that the obligor/co-obligor status exists in respect of all the three companies. Hence, he submitted that the figures given in the Resolution Plans should not be looked at in an isolated manner, but as a comprehensive whole.

Mr Ravi Kadam, learned Senior Counsel, further submitted that at the moment, the Resolution Plans submitted could probably be called “deferred resolution.” While it may not be the best possible plans, they are the only are the only viable workable plans at the moment.

Mr Ravi Kadam also submitted that a hard commercial decision has been taken by the CoC to accept the Resolution Plans. Further, in the creditor-driven regime envisaged by the IBC, the commercial wisdom of the CoC should not be second-guessed by the Adjudicating Authority.

Mr Ravi Kadam submitted that since the Resolution Plans are fully compliant with the requirements under the IBC, approval of the Adjudicating Authority be granted as prayed for.

Mr Pradeep Sancheti, learned Senior Counsel for the RA, submitted that in preparing the Resolution Plans, the RA had to strike a balance between curating and preserving the assets of the corporate applicants or allowing it to go into liquidation.

He submitted that the biggest value of the corporate applicants was its subscriber base, which has been completely lost. Further, the corporate applicants had only 2G and 3G licences. In terms of clause 10.2(c) of the Licence Agreement for provision of Unified Access Services entered into by the corporate applicants with DoT (the Licensor), the licence was liable for suspension, revocation or termination in the event the licencees were to go into liquidation or is ordered to be wound up. However, the licences were protected from cancellation by an order of this Adjudicating Authority.^{2020.Common Order dated 27.11.2019 in MA 337/2018 in CP (IB) 298/2018 (in the matter of Aircel Limited) and MA 336/2018 in CP(IB) 302/2018 (in the matter of Dishnet Wireless Limited) passed by this Adjudicating Authority.} In case the Resolution Plans are not accepted, and the corporate applicants are ordered to be liquidated, then the licences will be revoked or terminated by DoT. Apart from the licences, the corporate applicants also have certain Enterprise Business Solutions.

Mr Pradeep Sancheti, learned Senior Counsel, submitted that the RA will control four asset categories if this Adjudicating Authority accepts the Resolution Plans, as follows: -

On the other hand, the Resolution Plan is aimed at maximising the value of assets of the corporate applicants, as follows: -

Mr Pradeep Sancheti further submitted that the Resolution Plan will be implemented using only the following sources of funds: -

The aforesaid funds will be utilised as follows:

As regards the serviceable portion of the debt, the ZOCDs which will be issued to the Financial Creditors will be secured by the same security as is being held by the secured creditors as on date.

The ZOCDs are contemplated to be redeemed in entirety over a period of five years from the Available Funds and Generated Funds. The resolution plans protect the interests of the Financial Creditors by proposing that the ZOCDs which remain unredeemed after the expiry of such period will be converted into equity in such a manner that the Financial Creditors will hold 74% of the equity and the Resolution Applicant will hold 26%.

All the resolution plans propose that every recovery made by the Resolution Applicant during implementation of the plans, shall go towards recovery of the dues by the various categories of creditors.

For the avoidance of doubt, the entire mechanism for redemption of ZOCDs is based on the amount realised from the various identified sources of funds i.e., Available and Generated Funds.

In so far as the reliefs and concessions proposed in the Resolution Plan in clause 9 is concerned, Mr Pradeep Sancheti, learned Senior Counsel, urged that this be granted in full.

Mr Chetan Kapadia, learned Counsel appearing for the CoC, completely agreed with the submissions of the learned Senior Counsel for the RP and for the RA. He, however, added that at the end of the process, there was only one RA who was found to be compliant with the stipulations laid down in IBC and the regulations framed thereunder. The one other prospective RA, Eight Capital, backed out during negotiations.

Mr Chetan Kapadia, learned Counsel, submitted that the inferior economic outcome in the event of liquidation, arising out of the possible loss of value attributable to the spectrum, weighed in the minds of the CoC in recommending this resolution plan for approval.

We have perused the three IAs and the Resolution Plans. We have also heard at length Mr Ravi Kadam, learned Senior Counsel for the RP, Mr Pradeep Sancheti, learned Senior Counsel for the RA, and Mr Chetan Kapadia, learned Counsel for the CoC. We have also considered the written submissions filed by the RP, and the brief note submitted on behalf of the RA.

The IAs have been filed under section 30(6) of the IBC seeking approval of this Adjudicating Authority under section 31(1) of the IBC. Section 31(1) ibid mandates that the Adjudicating Authority shall by order approve the resolution plan if it is satisfied that such resolution plan as approved by the CoC under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30. The relevant portions of section 30 are extracted below: -

Section 31 of the IBC which empowers the Adjudicating Authority to approve or reject the resolution plan, reads as follows: -

Thus, the Adjudicating Authority is mandated by law to see, in the first instance, whether the requirements as mentioned in section 30(2) of the IBC are fulfilled or not. These requirements are: -

That the resolution plan provides for payment of CIRP costs in priority to all other debts;

The amounts payable to the operational creditors shall not be less than the amounts to be paid to such creditors in the event of liquidation of the corporate debtor, (or) The amounts payable to the operational creditors respects the waterfall method of payments envisaged under section 53(1) of the IBC, whichever is higher; and

The amounts payable to the financial creditors who do not vote in favour of the resolution plan shall not be less than the amount to be paid to such creditors envisaged under section 53(1) of the IBC in the event of a liquidation of the corporate debtor.

We could not but help undertake a critical and conscientious analysis of the approved Resolution Plan. Our observations are as follows: -

The source of funds has been stated to be the following:

Refund of ₹298.01 crore by DoT to Aircel Limited and Dishnet Wireless Limited.

Return of Bank Guarantee of ₹453.73 crore from Bharati Airtel Limited to Aircel Limited and Dishnet Wireless Limited.

₹11 crore equity commitment from the Resolution Applicant.

An amount of ₹639 crore already recovered from litigation and part of the same has already been utilised for making payment of CIRP costs of all the corporate applicants which shows that the Resolution Applicant did not either bring – or was not capable of meeting – even the primary expenditure towards CIRP costs, which is the cost to be borne by the Resolution Applicant before other costs or dues are paid. Further, the total cost of CIRP of all the corporate applicants is ₹298.48 crore approximately, as mentioned in the Resolution Plan.

Monetisation of unabsorbed depreciation of ₹22,116 crore and carry forward business losses of ₹23,895 crore of both Aircel Limited and Dishnet Wireless Limited, totalling to ₹46,011 crore approximately and realisable value is ₹4000 crore approximately.

In the event of a contingency as mentioned in para 4.8.5 of this order, the outstanding ZOCDs shall be converted into equity in a way that financial creditor will hold 74% of the equity and the Resolution Applicant 26%.

The Resolution Applicant will engage with a prospective buyer of these tax benefits and merge the corporate applicants with such prospective buyers. The shareholders of the corporate applicants will get shares in such prospective buyer which can be monetised to realise the value which would actually be the consideration for sale of unabsorbed depreciation and carry forward losses.

Further as per various provisions of Income Tax Act, the benefit of unabsorbed Depreciation can be availed only if the business is continued. However, from the perusal of the plan the Resolution Applicant is planning to monetise most of the assets and will continue only with a small portion of the business operations as stated above. Therefore, we feel that the Resolution Plan is not in accordance with the provisions of Income Tax Act and the existing benefits envisaged thereunder may not be available.

The plan also gives commercial logic for issuing 24% of equity to Financial Creditor as passing on the value garnered by the companies during continuous operations of five years. However, we are afraid that the Resolution Applicant may generate very negligible amount from actual business operations for three years as stated above. Therefore, this logic also appears to be flawed.

It is stated that the Monitoring Committee will take important decisions such as identification of the buyer of the assets and approval of the value of sale, approval of the timing of conversion of ZOCDs into equity etc. If this is the role of the Monitoring Committee, then we wonder what the role of the newly constituted Board of Directors would be.

In Implementation schedule as stated in para 4.12 above, it is stated that the Resolution Applicant will use all efforts to make payment towards CIRP cost and other payment to creditors. However, in other places it was mentioned that the entire CIRP costs had borne out of the recoveries made pursuant to the orders of the Hon’ble Supreme Court.

It was also submitted that the licences were protected from cancellation by an order of this Adjudicating Authority. Mr Pradeep Sancheti, learned Senior Counsel for the Resolution Application also submitted that with regard to optical fibre network, the Corporate Applicant proposes to rectify and maintain the assets whereas the entire plan is to monetise the assets of Corporate Applicants.

The Resolution Plan also states that the workmen and employees working at present will be retained but in other places it is stated the CA s stopped its operations since Feb/March 2018.

It is also proposed that in respect of the non-serviceable debt, the Financial Creditor will be getting upfront equity to the extent of 24% and will therefore be entitled to the profits from the scaled down operations of the Corporate Applicants. However, nowhere in the plan has it been mentioned as how much 24% of equity translates into and what the source of funds for the same would be, whether the same is tied up, etc. It is also not mentioned how much approximately amount, percentage will be realised, redeemed and to be converted in to equity etc. in case of any shortfall from the projected realisation, the ways of compensating the same etc.

A bare reading of this entire proposal is very optimistic at best and comes with lot of uncertainties. Therefore, the plan does not appear to a Resolution plan but appears to be a winding up, liquidation plan while just retaining a small portion of the business operations of the corporate applicants.

In K. Sashidhar v Indian Overseas Bank & others,^{2323.(2019) 12 SCC 150, decided by Hon’ble Supreme Court on 05.02.2019} the Hon'ble Supreme Court examined the situations arising in terms of section 31 of the IBC and held that the legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC. Further, it was laid noticed that the commercial wisdom of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the IBC. In laying down the law, the Hon’ble Supreme Court observed that –

In para 53, the Hon'ble Court noticed that in the report of the Bankruptcy Law Reforms Committee of November 2015, primary has been given to the CoC to evaluate the various possibilities and make a decision.

The Hon'ble Court went on to observe in para 55 that –

The Hon'ble Court then stated in para 59 as follows: -

Mr Ravi Kadam, learned Senior Counsel appearing for the RP, Mr Pradeep Sancheti, learned Senior Counsel appearing for the RA, and Mr Chetan Kapadia, learned Counsel appearing for the CoC, all stressed on this judgment of the Hon'ble Supreme Court and urged that the resolution plan as approved by the CoC be approved in respect of all the three corporate applicants.

In Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta & others,^{2424.(2019) SCC Online SC 1478, decided on 15.11.2019} the Hon’ble Supreme Court noticed the decision in K Sashidhar (supra) and held that –

The law laid down by the Hon'ble Supreme Court is binding in terms of Article 141 of the Constitution, and we are duty bound to follow it.

In this background, our first task is to evaluate the Resolution Plan presented against the requirements of section 30(2) of the IBC. The following table captures the position:

We have examined the relevant clauses of the Resolution Plan and find the same to be in conformity with the law. Further, the Resolution Plan has provisions for its effective implementation.

Approval of the Competition Commission of India (CCI) under sections 5 and 6 of the Competition Act, 2002, has already been obtained by the RA.^{2525.Clause 5.14.1 at p.38 of the Resolution Plan.}

The RA is an asset reconstruction company, having been licensed to act as such by RBI. Hence, RA will require approval of RBI to acquire shares in the corporate applicants. The RA submits that it shall apply for such approval after the Resolution Plan is approved by this Adjudicating Authority.^{2626.Clause 5.14.2 at p.38 of the Resolution Plan.}

The RA further undertakes that if any other approval is required for any of the transaction contemplated in the Resolution Plans, including conversion of Debenture Verified Financial Debt into ZOCDs, redemption of such ZOCDs, conversion of Converted Verified Financial Debt into equity with reference to any financial creditor, then such approval shall also be taken by the corporate applicants acting through the Monitoring Committee, after the plan is approved by this Adjudicating Authority. This undertaking is accepted.

Since the corporate applicants are licencees of spectrum by DoT, approval of DoT for Spectrum Transaction and AL Fibre and Business Transactions, and activities ancillary thereto or required therefor, will also be taken by the corporate applicants acting through the Monitoring Committee after the Resolution Plans are approved by this Adjudicating Authority.

The RA has sought certain reliefs, concessions and dispensations in clause 9 of the Resolution Plans. These are ordered as follows: -

The existing members of the suspended Board of Directors of each of the corporate applicants shall be deemed to have resigned from their directorships effective from today.

The Resolution Plans placed on record in respect of all the three corporate applicants, viz., (1) Aircel Limited; (2) Dishnet Wireless Limited; and (3) Aircel Cellular Limited, is hereby approved with the modifications mentioned in para 6.7.1 supra. The same shall be binding on the respective corporate applicant, its members, creditors, guarantors, employees and other stakeholders, as also the Resolution Applicants.

The order of moratorium which has come into effect from 12.03.2018 (in the case of Aircel Limited) and 19.03.2018 (in the case of Dishnet Wireless Limited and Aircel Cellular Limited) by virtue of the orders of admission passed on those dates by this Adjudicating Authority under section 14 of the IBC shall cease to have effect from the date of passing of this Order.

The Resolution Professional shall forward all records relating to the conduct of the CIRP and the Resolution Plans to the IBBI as mandated by the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

A copy of this order be filed with the Registrar of Companies, Maharashtra, Mumbai.

Ordered accordingly. File be consigned to the record.