AI Structured Summary
Not yet generated for this judgment
Judgment
Ina Malhotra, J
A resolution plan has been submitted for turning around the business of the Corporate Debtor. Vide order dated 8th December, 2017, the petition for initiating the Corporate Insolvency Resolution Process of the Corporate Debtor was admitted. Though an Interim Resolution Professional was appointed vide the aforesaid order, due to various lapses, the RP could only be appointed and confirmed on 26th November, 2018 upon which the actual resolution process was put on track. Mr. Arvind Garg, the Resolution Professional has taken steps in accordance with the statutory requirements which include appointment of Registered Valuers and inviting expressions of interests. Extensions and exclusions were prayed for during this period before a resolution plan was approved by the COC and submitted before this Bench. The same however, could not be taken up on account of objection being filed by one of the Ex-Directors, Mr. Atul Jain. The said objections has been dismissed vide our separate order and we therefore proceed to consider the Resolution Plan.
The Corporate Debtor was incorporated in the year 1991 and was engaged in the business of manufacture of textiles marketing them under brand name "Charming". However, there has been no business activity for more than two years. The authorized share capital of the company was Rs. 30 Crores. divided into 3,00,000/- equity shares of Rs. 100/- each, while the issued, subscribed and paid up share capital was for Rs. 2,87,34,700/- being 2,87,347 equity shares of Rs. 100/- each. The Corporate Debtor owns fixed assets on which their manufacturing units were established, being plant & machinery installed on industrial plots D/157, D/170, D/171 at Noida. In addition, the Corporate Debtor owns seven commercial shops as well as residential premises apart from 11 luxury cars.
The Corporate Debtor's business suffered a downslide incurring large debts. At the instance of Rachna Sarees, one of the Creditors, the Resolution was set into motion.
The valuation of the assets of the Corporate Debtor were conducted and the average value arrived at is as follows:
Average Fair Value : Rs. 26,50,40,057/-
Average liquidation value : Rs. 16,16,18,307/-
Upon appointment of the RP, publication was effected and the claims were collated. The claims of the Financial Creditors who constituted the COC are as under:
Name of the Financial Creditor
Amount of Claim Filed (Rs.)
Amount of Claim Admitted (Rs.)
% Share
Security Status
HDFC Bank Ltd.
11,07,15,107.97
11,07,15,107.97
76.76%
Secured
Kotak Mahindra Bank
2,77,21,531.56
2,77,21,531.56
19.22%
Secured
HDFC Bank Ltd.
26,38,533.30
26,38,533.38
1.83%
Unsecured
IndusInd Bank
14,83,127.30
14,83,127.30
1.03%
Unsecured
Bajaj Finance Ltd.
16,72,730.00
16,72,730.00
1.16%
Unsecured
Total
14,42,31,030.21
14,42,31,030.21
100.00%
Claims from about 18 operational creditors were received by the RP for a sum of Rs. 53548856/-, against which the claim admitted by him was for Rs. 3,49,03,924/-.
No other claim of any other class of claimants has been admitted. Since the business operation of the Corporate Debtor had come to a complete halt for the last two years, there were no employees/workmen. However, claims received from workmen/employee remained unsubstantiated and were therefore not admitted.
It is submitted that upon invitation for expressions of interest, though seven prospective resolution applicants had evinced an interest, only one resolution applicant actually submitted a resolution plan. Having been duly vetted by the Resolution Professional and being satisfied that it meets the basic criterion required under the Code, it was put up for approval of the COC. The Resolution Plan was proposed by one Mr. Sanjay Singhal. His affidavit along with required declarations as required under the Code are on record. Affidavit deposing that the RA does not suffer from any disqualifications under section 29A of the Code has been filed.
The back ground of the resolution applicant is that he has diversified business interests and shall be investing mainly through its existing business of stockbroking carried out by his LLP under the name Agroha Stock Broker LLP. The partners of the LLP are Mr. Sanjay Singhal and his wife Smt. Anita Singhal. The financial statements of Mr. Sanjay Singhal for the last three assessment years were taken into consideration. His various assets and financial worth was duly appraised. The resolution plan proposed by him was renegotiated several times till the final proposal was duly approved by the COC in its 10th meeting. The said plan was approved by 97.81% in terms of the voting power as under:
Sl. No.
Name of Creditors
Voting Shares (%)
Voting for Resolution Plan (Voted for/Dissented/ Abstained)
1
HDFC Bank
78.59
Voted for resolution plan
2
Kotak Mahindra Bank
19.22
Voted for resolution Plan
3
IndusInd Bank
1.03
Abstained from voting
4
Bajaj Finance Ltd
1.16
Abstained from voting
Total
100
The resolution applicant has proposed to take over the business of the Corporate Debtor by making an input of Rs. 17 Crore. The same shall be arranged for from his personal resources. The RP and the COC have been satisfied about the financial worth of the Applicant which is more than Rs. 100 Crores.
The RP has annexed all documents and submitted full details. The relevant facts which are duly addressed and provided for under the Resolution Plan are as under: -
Particulars
Rs.
Insolvency Resolution Process Costs (100%)
25,50,000
Financial Creditors (100%)
14,42,31,030
Operational Creditors
1,50,00,000
Lump sum payment to secured financial Creditors (HDFC Bank & Kotak Mahindra Bank) in lieu of interest for the payment period of 6 months)
18,00,000
Provision towards Cost of Monitoring, Compliances and Contingencies
30,54,141
Provision for Contingencies - Workmen/ Employee Claims under verification
33,64,829
TOTAL
17,00,00,000
The disbursement of the said amount would be as under:
Time Period from effective Date (T)
Instalments
CIRP Cost
Operational Creditors
Secured Financial Creditors
Secured Financial Creditors in lieu of interest
Unsecured Financial Creditors
Provisions for Monitoring, Compliance & Contingency*
Within T + 30 days
5,00,00,000
25,50,000
1,50,00,000
2,80,85,171
43,64,829
Within T + 90 days
5,00,00,000
4,81,00,000
9,00,000
10,00,000
Within T + 180 days
7,00,00,000
6,22,51,469
9,00,000
57,94,390
10,54,141
Total
17,00,00,000
25,50,000
1,50,00,000
13,84,36,640
18,00,000
57,94,390
64,18,970
All the assets of the Corporate Debtor shall be acquired by the resolution professional on an "As is where is basis" which include movable and immovable assets, as well as proprietary rights over the registered trade mark/brand "Charming".
In addition, the resolution applicant shall also contribute up to Rs. 2 Crores. as additional capital expenditure required for refurbishing the plant and machinery which have been lying idle and for the margin money required as the working capital.
It is also proposed that the existing equity shares of the company shall be cancelled and the new equity shall be issued to the resolution application and his nominees. The existing shareholders shall not be entitled to any demand or compensation. The existing Board of Directors shall be replaced by new Members to be nominated by the resolution applicant. Due steps be taken with the ROC at the relevant stage. The resolution applicant has worked the projection for sales over the next five years.
The resolution applicant also seeks waiver of the past liabilities of the Corporate Debtor. We make it clear that the resolution applicant shall only be liable for the claims received by the resolution professional during the CIR process and which have been duly provided for in the resolution plan.
The resolution plan has provided for constitution of a monitoring committee which shall be headed by the Resolution Professional and two other persons, one each to be nominated by the two secured Financial Creditors namely, the HDFC Bank and Kotak Mahindra Bank to monitor full implementation of the resolution plan. The Resolution plan has been submitted with Form H along with necessary affidavits and declarations, and adheres to the requirements in terms of section 30(2) of the Code.
This Bench, upon due consideration of the facts placed before us is satisfied that the plan as approved by the COC by 97.81% votes in terms of their financial claims, with no dissent from any other claimant, meets the requirements under the Code. It Therefore receives the consent and seal of approval from this Bench. The Resolution Plan accepted by the COC stands approved. The moratorium order shall cease to have effect. The business of the Corporate Debtor shall be managed by the new Board Members. Due compliances shall be made with the ROC. Any penalty on the Corporate Debtor for non-filing of the statutory Returns by the previous management till date shall stand waived off.
The Resolution Professional shall forward all records relating to the CIR process and the resolution plan to the Board to be recorded in its database.
CA No. 842/2019 stands allowed and disposed off.