NCLT Chandigarh (13.03.2020) in the matter of F.M. Hammerle Textiles Limited (Approval of resolution plan) [CA No.893/2019 In CP (IB) No.30 /Chd/Pb/2017] while granting approval of the resolution plan, examined whether;
(a) The Resolution Plan is approved by the CoC under Section 30(4) of the Code;
(b) The Resolution Plan so approved meets the requirements as referred to in Section 30(2) of the Code;
(c) The Resolution Plan has provisions for its effective implementation.
Excerpts of the order;
CA No.893/2019 is filed by the Resolution Professional (RP) under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) seeking approval of resolution plan dated 25.01.2018 and Amendment made on 18.09.2019 as submitted by M/s New Ram Traders.
2. It has been submitted that petition was filed by F.M. Hammerle Textiles Limited (Corporate Debtor) under Section 10 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP) and the same was admitted vide order dated 27.06.2017 and the CIRP of the corporate debtor was initiated.
35. The conditions provided for in Section 31(1) of the Code for approval of resolution plan are therefore: -
(a) The Resolution Plan is approved by the CoC under Section 30(4) of the Code;
(b) The Resolution Plan so approved meets the requirements as referred to in Section 30(2) of the Code;
(c) The Resolution Plan has provisions for its effective implementation.
The satisfaction of the conditions is discussed below.
36. It is submitted by the RP that the resolution plan has been approved by a vote of 100% of voting share of the financial creditor and therefore, the conditions provided for by Section 30(4) of the Code are satisfied.
37. The provisions of Section 30(2) of the Code are as follows: - The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—
(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor;
(b) Section 30(2)(b) provisions have been extracted above and may be seen;
(c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the time being in force;
(f) confirms to such other requirements as may be specified by the Board.
38. The compliance of Section 30(2) of the Code is given in para No.9 of Form H (supra). The same is being further examined as under: -
Section 30(2)(a): The resolution plan provides for the payment of ₹1050 lakhs as CIRP cost (estimated till 31.03.2019) which will be first made in priority to all other creditors of the corporate debtor. It is also stated that the Resolution Applicant undertakes that any incremental CIRP Cost till the date of approval of the plan by the AA will be paid in full and in priority before making any payments to other creditors.
Section 30(2)(b): It is stated in Form H that the average liquidation value of the corporate debtor is ₹66,57,53,000/-. It is further stated that as the debts of financial creditors are higher than liquidation value as estimated by Resolution Applicant, there is no amount left as such for payment to operational creditors in the event of liquidation of the Corporate Debtor. The amount of dues of operational creditors as admitted by the RP is ₹977.16 lakhs. However, the RA proposes to offer 2.5% of the admitted amount (on pro rata basis) for payment against dues for operational creditors and the said payment will be made to the operational creditors in priority over the payment to secured and unsecured financial creditors. Hence, the amount offered to operational creditors is ₹24.43 lakhs. Further, it is stated in the resolution plan that the RA proposes to pay 0.1% of ₹574.65 crores (the total admitted claim of the Corporate Guarantee) i.e.₹0.58 crore in full and final settlement within 30 days of the approval of the plan. The resolution plan provides payment of ₹20.88 lakhs towards 100% of dues of workmen.
Section 30(2) (c) & (d):The resolution plan provides complete and detailed plan for management of the affairs of the corporate debtor (page 190 of the application). As per para VII of the resolution plan and upon the AA Approval, the corporate debtor will be managed by the Interim Monitoring Committee (IMC) which will comprise of one person appointed by the financial creditor and one person appointed by RA. The tenure of the IMC will be for a maximum period of 90 days and will be dissolved on completion of payments made towards CIRP cost and towards different class of persons. Further, it is stated in the resolution plan that the RA will retain all the employees of the corporate debtor but the board of directors and Key Managerial Personnel of the corporate debtor will be reconstituted and appointed. As mentioned in para 7.2 of the plan, the Board of Directors of the Resolution Applicant will consist of Mr. Shirishkumar Ramkrishna Sonavane, Mr. Kunal Sonavane and Mr. Rohit Sonavane. It is also stated in para 7.3 of the plan that Mr. Sanjeev Sinha will be the CEO of the CD.
Section 30(2) (e): In Form H (supra) (para No.4), the RP has certified that the resolution plan complies with the provisions of the Code and Regulations and does not contravene any of the provisions of law for the time being in force.
39. We are now examining the compliance of the proviso to Section 31(1) of the Code that the resolution plan has provisions for its effective implementation. The resolution plan states that upon NCLT Approval Date, an Interim Monitoring Committee will be constituted. The constitution of the Committee is given in para no VIII of the plan. The terms of the plan and its implementation schedule is stated to be 90 days from the approval of the plan by the Adjudicating Authority. The RA will make full and final payment of ₹5150 lakhs to secured financial creditor i.e. SBI out of which ₹500 lakhs will be deposited at the end of 30 days from the approval of the resolution plan and the balance ₹4650 lakhs will be paid in an Escrow Account within 90 days from the approval of the resolution plan. The payment of ₹24.43 lakhs to operational creditors is proposed to be made in priority over secured and unsecured financial creditors. Payment of dues to workmen and employees is proposed to be made within 30 days of approval of resolution plan by AA in the manner provided for in Para 11.2 of the Resolution Plan.
40. The sources of funds are stated to be infusion of ₹1700 lakhs towards Equity to be issued by the Corporate Debtor within 30 days of the approval of the resolution plan; infusion of funds to the tune of ₹233 lakhs by way of loans from friends/ relatives/ associates; and ₹4500 lakhs as term loan from Bank (Bharat Corporation Bank). Also, the resolution plan provides for ₹130 lakhs towards working capital requirement.
41. We have discussed above that the requirements under Section 31(1) of the Code are satisfied in the present case. In para No.4 of Form H (supra) the RP has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force. The RP has also certified that the resolution applicant New Ram traders has submitted affidavit pursuant to Section 30(1) of the Code confirming its eligibility under Section 29A of the Code to submit the resolution plan and the contents of the said affidavit are in order. The RP has submitted that the resolution plan has been approved by the CoC with 100% voting share in accordance with the provisions of the Code and CIRP Regulations made thereunder and after considering the feasibility and viability and other requirements specified by the CIRP Regulations. It has been held in para 42 of K. Sashidhar Vs. Indian Overseas Bank &Ors. (Civil Appeal No. 10673 of 2018 dated 05.02.2019) by the Hon’ble Supreme Court inter alia that no corresponding provision has been envisaged by the legislature to empower the resolution professional., the Adjudicating Authority (NCLT) or for that matter the Appellate Authority (NCLAT), to reverse the “commercial decision” of the CoC. It was also held that whereas, from the legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority. In view of the above discussion, the decision taken by the financial creditors falls within the ambit of its commercial and banking wisdom and is therefore, not being interfered with.
42. We may add that in the case of Maharashtra Seamless Limited vs. Padmanabhan Venkatesh & Ors. In Civil Appeal Nos.4242 of 2019, it has been held in para 26 thereof that “No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016….”
43. In view of the above discussion, the decision taken by the financial creditors falls within the ambit of its commercial and banking wisdom and is therefore, not being interfered with.
44. We shall now discuss the requirements of Regulation 39(4) of the Regulations. It can be observed that as per the terms of the process document dated 12.12.2017 issued by RP, a Proposal Performance Guarantee (PPG) to the tune of ₹1,00,00,000/- was submitted by the Resolution Applicant. Copy of the minutes wherein the request for the resolution plan was approved, a copy of the RFRP and the Performance Guarantee is attached as Annexure-4 (Colly) of affidavit filed vide Diary No.1287 dated 17.02.2020. As per Amendment No.3 dated 19.11.2019, the validity of the Bank Guarantee is presently 16.05.2020 and the claim expiry date is 16.06.2020. It is thereby submitted that the requirements of performance security under Regulation 39(4) of the Regulations read with 36B(4A) of the Regulations are complied with.
45. On the basis of discussion made above and in view of the provisions of Section 30(4) of the Code, we approve the resolution plan submitted by M/s. New Ram Traders as approved by the CoC. The resolution so approved shall be binding on the corporate debtor and its employees, members, creditors including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.
46. Under the provisions of Section 31 (3) of the Code, we also direct as under:-
a) The moratorium order passed by the Adjudicating Authority under Section 14 of the Code on 27.06.2017 shall cease to have effect; and
b) The RP shall forward all records relating to the conduct of the CIRP and the resolution plan to the Board to be recorded on its database.
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