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Judgment
Shyam Babu Gautam, Member Technical and Justice P.N. Deshmukh, Member Judicial
The present Interlocutory application is filed by Mr. Mahesh Sureka the Applicant, Resolution Professional of Phadnis Resorts and Spa India Ltd., the Corporate Debtor by submitting a resolution plan under section 30(6) of the Insolvency and Bankruptcy Code, 2016 (Code) read with Regulation 39 (4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 seeking approval of the Resolution Plan submitted by Elysia Hospitality LLP. The Plan was duly approved by 100% of the Committee of Creditors (CoC).
The Applicant submits that Union Bank of India, the Financial Creditor initiated the Corporate Insolvency Resolution process (CIRP) against the Corporate Debtor under Section 7 of the Code on 14.03.2019 and appointed the Applicant herein as the Interim Resolution Professional (IRP) of the Corporate Debtor. The Public announcement regarding the initiation of CIRP was made on 15.04.2019.
The first CoC meeting was convened on 09.05.2019. The Applicant herein was confirmed as the Resolution Professional, (RP). The second CoC meeting was held on 01.06.2019. at the said meeting, the Applicant was informed that one of the directors of the Corporate Debtor was currently in judicial custody. The third CoC meeting was held on 07.06.2019.
Further, the Applicant published an invitation for Expression of Interest (EoI) in Form G on 12.06.2019, inviting prospective bidders to submit their EoI. There was no reply to the said EoI issued and hence the Applicant called for fourth COC meeting on 28.06.2019. Post the fourth CoC meeting, the Applicant once again issued a fresh invitation for EoI on 02.07.2018 and the last date was to be 17.07.2019. In response to the said EoI, the Applicant received only one EoI from Elysia Hospitality LLP.
Pursuant then to the Applicant requested for the Resolution Plan (RFRP) from the Prospective Resolution Applicant. Thereafter, in the fifth CoC meeting held on 18.07.2019, RFRP submitted by the Resolution Applicant was discussed. Further, a guarantee to an amount of Rs. 50,00,000/- was deposited by the Applicant in the Corporate Debtor’s Bank account. The Resolution Plan was submitted by the Resolution Applicant on 24.08.2019.
The Applicant informed the CoC that no transaction under section 43, 35, 50 were traceable as there were no books of accounts. Thereafter, in the eighth CoC meeting held on 08.11.2019 the Plan was explained in detail and was put for voting. The Plan was approved by 96.18%. pursuant to the same, the Resolution Applicant had also submitted a bank guarantee of Rs. 1,00,00,000/- along with a letter as an undertaking as per RFRP. However, the Applicant found some minor discrepancy as regard to the provision for monies to be paid to the Financial Creditors who were absent at the time of voting of the Resolution Plan.
Thereafter, the Resolution Applicant was asked to submit a revised Resolution Plan and to make the provision for the Financial Creditors who were absent at the time of voting the Resolution Plan. The Resolution Applicant submitted a revised Plan on 15.01.2020 with the said provisions. Further the other payment structure remains the same.
The revised Resolution Plan was discussed with the members of CoC on 21.01.2020. The members of the CoC voted on the revised Resolution Plan on 29.01.2020 to 03.02.2020 whereby the Plan was approved with 100% of voting in favour.
SALIENT FEATURES OF THE APPROVED RESOLUTION PLAN
A. Details About the Resolution Applicant (RA):
Name: Elysia Hospitality LLP
Date of Incorporation: - 12th June, 2019 (Reg. No. AAP 5826)
Business conducted by Resolution Applicant: Although not mentioned in the Plan, the Resolution Applicant has made a representation to the Resolution Professional/Committee of Creditors that one of its partners is currently employed as a hospitality consultant, and thus, possesses the requisite expertise to revive the Corporate Debtor.
B. Amounts paid to Creditors excluding performance guarantee of Rs.1 crore:
a. Rs. 13,00,00,000/- (Rupees Thirteen Crores Only)
Last Tranche to be paid within 3 ½ years of approval of Resolution Plan by NCLT
The performance guarantee amount Rs.1,00,00,000/- (Rupees One Crore) being refundable Performance Guarantee at the completion of all the terms of the resolution plan.
b. The timeline for paying out the Rs. 13,00,00,000/- is as under,
i. Within 30 days from the date of Resolution Plan approval by NCLT Rs. 65,00,000.
ii. Within 180 days from the date of Resolution Plan approval by NCLT Rs. 35,00,000.
iii. Within 365 days from the date of Resolution Plan approval by NCLT Rs. 2,00,00,000.
iv. Within 730 days from the date of Resolution Plan approval by NCLT Rs. 2,00,00,000.
v. Within 913 days from the date of Resolution Plan approval by NCLT Rs. 2,00,00,000.
vi. Within 1095 days from the date of Resolution Plan approval by NCLT Rs. 2,00,00,000.
vii. Within 1186 days from the date of Resolution Plan approval by NCLT Rs. 2,00,00,000.
viii. Within 1277 days from the date of Resolution Plan approval by NCLT Rs. 2,00,00,000.
The disbursement amount to the creditors of the Corporate Debtor has been specifically set out in the Annexure marked as Exhibit 50 @ Page 478 of the revised Resolution Plan submitted vide Additional Affidavit dated 26.02.2020. Pertinently, this table also sets out the amounts payable to each class of Creditors at time intervals mentioned hereinabove. Though this amount will get changed due to increased cost of CIRP and will be adjusted in the disbursement amount to secured creditors. The Original amount of CIRP cost has been taken at 11,00,000/- which has increased over a passage of time with members of the CoC approval. Beside this there are certain applications filed by some of the depositors of the Corporate Debtor in NCLT before initiation of CIRP period and total claim filed for Rs.19,63,155/- and if these amounts are to be considered as part of resolution plan than disbursement to creditors will again be worked out as per Section 53 of IBC, 2016 or as per instruction of Adjudicating Authority.
c. The liquid assets i.e. bank balance as on 23.08.2019 was Rs. 1,13,83,108/-which is reduced to Rs.79,52,386/- as on 14.02.2022. The deficit of same will be debited to Financial Creditor after making adjustments for original CIRP cost of Rs.11,00,000/- provided subject to any increase in cost.
d. Pay-out to Creditors:
For convenience, a table encapsulating the list of this disbursement mechanism has been set out after considering the claim filed by ESIC for which the hon’ble bench has allowed the application and RP has accepted the claim for Rs.21,306/-. This has been considered under Section 53(f) as claim belongs to 2015 or before. After considering, increasing the CIRP cost and original cost, the table shows the deviation.
Class of Creditors/ Nature of
Payment
Amount Claimed
Amount Provided in Amended
Resolution Plan
Amount Provided Reworked on Deficit for increase in CIRP
Cost
Insolvency Resolution
Process Costs
Rs.11,00,000/-
Rs.11,00,000/-
Rs.35,68,722/-
Secured
Rs.21,79,88,406/-
Rs.12,12,47,016/-
Rs.11,98,46,029/-
Financial
Creditors
-Union Bank of
India
Rs.14,05,55,956/-
Rs.9,69,97,613/-
Rs.9,64,40,100/-
-Jalgaon People
Co-op. Bank
Rs.7,74,32,450/-
Rs.2,42,49,403/-
Rs.2,34,05,929/-
Unsecured
Financial Creditors
Rs.56,48,058/-
Rs.56,48,058/-
Rs.56,48,058/-
Operational
Creditors
-Sales Tax Department
-Commissioner of Customs
-Income Tax Dept. Pune
-TDS
-ESIC
Rs.23,10,86,656/- Rs.75,40,716/-
Rs.5,38,07,159/-
Rs.1,37,810/-
Rs.21,306/-
Nil Nil
Rs.20,05,203/-
Nil
Nil
Nil Nil
Rs.9,37,191/-
Nil
Nil
Workmen’s
Dues
There were no workmen’s and/or employee’s dues. There were no outstanding debts under this head of claim, and therefore, a question of
making a provision for payment did not
arise.
Note 1: A detailed break-up of the claims of various creditors has been provided as above without considering the additional applications filed in NCLT by certain depositors.
Note 2: Other than statutory liabilities, there were no other operational debts of the Corporate Debtor.
Note 3: As regards secured financial creditors, the Plan also records as follows:
“For maximization value of assets, it has been proposed that the RA will take over corporate debtor as going concern and will continue the same business and will also add new capital for modification and renovation in fixed assets. For this, the Financial Creditors will continue to hold assets that were mortgaged by the Corporate Debtor in the same manner as it was before the CIRP process commenced. This mortgage will continue till the amounts as set out hereinabove in Clauses 4a) to 4h) have been paid as proposed in this amended Resolution Plan.”
C. Infusion of Fresh Funds: - Rs. 4,00,00,000/- (Rupees Four Crores Only) to be infused immediately in the business as fresh capital by the Resolution Applicant (without any creation of charge on assets of the Corporate Debtor which shall be over and above the bank balance available as on the date of EoI). These funds, as and when required will be spent on the resorts at Lonavala and on the properties at Alibaug as obtained under this Resolution Plan in the first year only.
D. Monitoring & Supervision: -
A monitoring committee is to be formed comprising one representative of the RA and one representative of the Secured Financial Creditors. The tenure of the Monitoring Committee will be termed as complete once the committee has completed all acts required to be done on upfront payment by the RA as envisaged under the amended resolution plan i.e. the tenure of the managing committee shall be terminated after 30 days of the approval of the amended resolution Plan by this Hon’ble Tribunal, after the RA has paid the first tranche. Further, the RA will provide an MIS of the business as required by financial creditors from time to time.
The Applicant further submits that the Resolution Plan submitted is in compliance with Section 30 (2) of the Code and Regulation 38 (A) of the CIRP Regulations. The RP has provided a compliance certificate in “FORM H” as mandated under the Code for seeking approval of the Resolution Plan from this Hon’ble Bench.
OBSERVATIONS OF THE ADJUDICATING AUTHORITY
We have heard the Applicant and perused the Resolution Plan and related documents submitted along with Application.
It is seen that there were Applications filed by many deposit holders under section 73(4) of the Companies Act, 2013. This Tribunal on 13.12.2021 had passed an Order directing the RP to submit a report on the claims filed by deposit holders of the Corporate Debtor. The RP had filed its report dated 07.01.2022 wherein the claims of the deposit holders were verified based on the documents/Applications received by the RP. The said claims as verified by the RP in different Applications is set out as under :-
Serial No.
Application No.
Principal Amount
Interest up-to Maturity
date
Interest up- to filing Application
Total
1.
690/2017
2,40,000
1,08,642
46,142
3,94,744
2.
694/2017
1,62,000
74,334
29,890
2,66,224
3.
948/2017
6,00,000
1,19,748
-
7,19,748
4.
949/2017
21,000
9,506
-
30,506
5.
950/2017
1,00,000
45,277
-
1,45,277
6.
951/2017
65,000
28,033
-
93,033
7.
952/2017
70,000
31,682
-
1,01,682
8.
953/2017
1,00,000
22385
-
1,22,385
9.
954/2017
72,000
17,556
-
89,556
Total
19,63,155
The RP further states that no original documents were available neither any books of accounts of the Corporate Debtor were available to the RP for verification of the claims. Hence, the above report has been prepared upon the verification on the details available from the Applications filed by the deposit holders in NCLT Registry, Mumbai.
The Resolution Applicant vide its Written submissions dated 23.02.2022 clarified the distribution and treatment for the said deposit holders. The Resolution Applicant submits that in the Resolution Plan as approved by the 100% members of the CoC a provision has already been made to the tune of Rs. 56,48,058 for distribution to the unsecured financial creditors. Therefore, the said depositors are similarly to be placed along with the creditors and within the amount allocated towards the same as approved under the Resolution Plan. Therefore, the said amount as allocated to unsecured financial creditors will have to be redistributed amongst all the unsecured financial creditors including the deposit holders.
Further, it is observed that Section 30 (2) of the Code as amended up to date enjoins upon the Resolution Professional to examine each Resolution Plan received by him to confirm that such plan,
a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor;
b) 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,
i. the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or
ii. the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.
Explanation - For the purpose of this section –
(i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients if the proceeds are insufficient to meet the debts in full; and
(ii) the term “workmen’s dues” shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013 (18 of 2013).
c) Provides for the management of the affairs of the Corporate debtor after approval of the resolution plan;
a) The implementation and supervision of the resolution plan;
b) Does not contravene any of the provisions of the law for the time being in force;
c) Confirms to such other requirements as may be specified by the Board.
Section 30 (4) of the Code reads as follows:
“(4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six percent. of voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section(1) of section 53, including the priority and value of the security interest of a secured creditor and such other requirements as may be specified by the Board.
Section 30(6) of the Code enjoins the Resolution Professional to submit the Resolution Plan as approved by the CoC to the Adjudicating Authority. Section 31 of the Code deals with the approval of the
Resolution Plan by the Authority, if it is satisfied that the Resolution Plan as approved by the CoC under section 30(4) meets the requirements provided under section 30(2) of the Code. Thus, it is the duty of the Adjudicating Authority to satisfy itself that the Resolution Plan as approved by the CoC meets the above requirements.
On perusal of the Resolution Plan, it is observed that the Resolution Plan provides for the following:
Payment of CIRP Cost as specified u/s 30(2)(a) of the Code.
a) Repayment of Debts of Operational Creditors as specified u/s 30(2)(b) of the Code.
b) For management of the affairs of the Corporate Debtor, after the approval of Resolution Plan, as specified u/s 30(2)(c) of the Code.
c) The implementation and supervision of Resolution Plan by the RP and the CoC as specified u/s 30(2)(d) of the Code.
The RP has certified through affidavit that the Resolution Plan is not in contravention to any of the provisions of law, for the time being in force, as specified u/s 30(2)(e) of the Code. In terms of Regulation 27 of the Regulations, Liquidation value was ascertained through two registered valuers. The aggregate of the average of Fair Value is Rs. 17,42,58,608 /-and that of the Liquidation Value is Rs. 15,87,85,608/-.
The RP has complied with the requirement of the Code in terms of Section 30(2)(a) to 30(2)(f) and Regulations 38(1), 38(1)(a), 38(2)(a),38(2)(b), 38(2)(c) & 38(3) of the Regulations.
The RP has filed Compliance Certificate in Form-H along with the Plan. On perusal the same is found to be in order. The Resolution Plan includes a statement under regulation 38(1A) of The Regulations as to how it has dealt with the interest of the stakeholders in compliance with the Code and the Regulations.
The Resolution Plan has been approved by the CoC in the with 100% votes in terms of Section 30(4) of the Code.
In K Sashidhar v. Indian Overseas Bank & Others (in Civil Appeal No.10673/2018 decided on 05.02.2019) the Hon’ble Apex Court held that if the CoC had approved the Resolution Plan by requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2). The Hon’ble Court observed that the role of the NCLT is ‘no more and no less’. The Hon’ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 and is 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.
In CoC of Essar Steel (Civil Appeal No. 8766-67 of 2019 decided on 15.11.2019) the Hon’ble Apex Court clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved. In para 42 Hon’ble Court observed as under:
“Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and section 32 read with section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar (supra).”
In view of the discussions and the law thus settled, the instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37, 38, 38(1A) and 39 (4) of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. We are thus inclined to dispose of the Application in the following terms. Hence Ordered.
ORDER
(i) The Application IA No. 3969 of 2019 in CP 3603 of 2018 be and the same is allowed. The Resolution Plan submitted by Elysia Hospitability LLP is hereby approved. It shall become effective from this date and shall form part of this order. It shall be binding on the Corporate Debtor, 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 is due, guarantors and other stakeholders involved in the Resolution Plan.
(ii) Further in terms of the Judgment of Hon’ble Supreme Court in the matter of Ghanshyam Mishra and Sons Private Limited v/s Edelweiss Asset Reconstruction Company Limited, on the date of approval of the Resolution Plan by the Adjudicating Authority, all such claims which are not a part of Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim which is not a part of the Resolution Plan.
(iii) TheMemorandumofAssociation (MoA) and Articles of Association (AoA) shall accordingly be amended and filed with the concerned Registrar of Companies (RoC), for information and record. The Resolution Applicant, for effective implementation of the Plan, shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed.
(iv) The moratorium under Section 14 of the Code shall cease to have effect from this date.
(v) The Applicant shall supervise the implementation of the Resolution Plan and file status of its implementation before this Authority from time to time, preferably every quarter.
(vi) The Applicant shall forward all records relating to the conduct of the CIRP and the Resolution Plan to the IBBI along with copy of this Order for information.
(vii) The Applicant shall forthwith send a certified copy of this Order to the CoC and the Resolution Applicant, respectively for necessary compliance.