B.S.V. Prakash Kumar, Member - (1.) It is a miscellaneous application filed by Resolution Applicant namely Suyash Outsourcing Pvt. Ltd. against Bank of India (R1), Bank of Baroda (R2), UCO Bank (R3), Canbank Factors Ltd. (R4), IFCI Factors (R5), ICICI Bank Ltd. (R6 - the Financial Creditor who moved this CP 01 /2016 u/s. 7 of IBC), Innoventive Industries Ltd. (R7- It is the Corporate Debtor against which R6 filed this CP) seeking this Bench to grant reliefs: a. To declare that the position of law clarified by the Ministry of Corporate Affairs by general Circular No. IBC/01/2017 : MANU /DCAF/0093/2017-Notification No. 30/14/2017 - Insolvency dated October 25, 2017 would be applicable to the corporate insolvency resolution process of the Corporate Debtor; b. To declare that in view of the General Circular No. IBC/01/2017 -Notification No. 30/14/2017- Insolvency dated October 25, 2017, approval of shareholders of the Original Respondent for actions under the resolution plan for its implementation which would have been required under the Companies Act, 2013 or any other law would not be required and would be deemed to have been given upon approval of a resolution plan by this Bench; c. To allow this Applicant to submit revised Resolution Plan after reducing the time earlier envisaged for obtaining shareholders' approval from the period for making cash payments for fresh vote thereon; d. To direct the Resolution Professional to present to the Committee of Creditors, modified Resolution Plan after reducing the time earlier envisaged for obtaining shareholders' approval from the period for making cash payments under the Resolution Plan for fresh vote thereon; e. To direct the financial creditors comprised in the Committee of Creditors to cast votes on such modified Resolution Plan; The applicant says that this application has been filed by it and on behalf of other resolution applicants namely Kitara International Ltd. and Lighthouse Partners. It says that the Corporate Debtor (R7) is a multi-product company catering to applications in diverse sectors such as automobile, boiler and heat exchangers, energy, oil and general engineering. It specializes in processing various types of steels, faster development cycles, flexible production systems, effective supply chain management for efficient delivery and capability to make tubular transformations and it always comes out with continuous innovations.
(2.) The resolution applicant on September 3, 2017 submitted a term sheet along with proposed Resolution Plan for Rs. 284.3 crores (in present value terms) @13% discounting rate with a compulsory change in management of the company to make a cash payment of around Rs. 180 crores within a period of one year subject to all approvals and for conversion of residual debt Rs. 1191.9 crores) into Cumulative Convertible Optionally Redeemable Preferential Shares (CCORPS), redemption @ 0.01 % of which would be guaranteed by the promoter by way of personal guarantee payable in instalment at the end of 20 years, the coupons on CCORPS shall be paid annually to the Financial Creditor, the payment towards coupon on the proposed CCORPS shall not start before dissenting lenders are settled. Unsecured lenders having dues of Rs. 41.6 crores will be paid by converting Rs. 36.1 crores due to Canbank Factors Ltd. and IFCI Factors Ltd. shall be converted into 0.01% CCORPS payable in one instalment at the end of 20 years. The applicant has further stated that the Resolution Plan estimated total recovery of Rs. 284.3 crores as against proposed recovery of Rs. 135.4 crores through liquidation.
(3.) The sum and substance of this application is that in Committee of Creditors (CoC) meeting, the Resolution Plan given by this applicant has not been approved with 75% vote sharing of the Committee of Creditors (CoC) but since 66.57% of the CoC voted in favour of the Resolution Plan, the applicant shall be permitted to submit revised Resolution Plan after reducing the time earlier envisaged for obtaining shareholders' approval for change of period for making cash payments, consequently to direct Resolution Professional to present the modified Resolution Plan before CoC, basing on which, CoC be directed to cast votes on such modified Resolution Plan. The justification this applicant has given for seeking such reliefs is -- (i) That the Corporate Debtor provides employment to 1200 workmen. (ii) That the turnover of the Corporate Debtor for the years ended 31-3-2015, 31-3-2016 and 31-3-2017 is Rs. 372 crores, Rs. 368 crores, and Rs. 337 crores respectively, besides this, the Corporate Debtor has contributed approximately Rs. 70 crores towards taxes for the years ended 2015-16 and 2016-17. (iii) That the Resolution applicant is aggrieved of the wrongful rejection of the plan by CoC without giving an opportunity to the applicant to give revised Resolution Plan after considering the effect of the circular given by Ministry of Corporate Affairs on 25-10-2017. (iv) That the salient features of the proposed Resolution Plan are as follows: (a) There would be compulsory change in the management of the original Respondent. (b) Immediate cash payment (within 12 months) of Rs. 180 crores. (c) Conversion of loan into CCORPS, redemption of which would be guaranteed by the promoters of the Corporate Debtor. (d) The proposed Resolution Plan contemplated funds through Rights Issue/Preferential allotment of shares, which requires shareholders' approval under the provisions of Companies Act, 2013. (v) For the value of the Resolution Plan being more than double to the net liquidation value of Rs. 135.40 crores, it is the only viable alternative for liquidation. (vi) The requirement of 75% vote in favour of a resolution plan is directory and not mandatory, for saying this, the applicant relied upon judgments in between Dalchand v. Municipal Corporation, 1984 2 SCC 486, State of Haryana v. Raghubir Dayal, 1995 1 SCC 133 to say that the word "shall" in section 33(1) of the Code does not leave any discretion with this Bench is flawed. To support the contention of the applicant, it has also relied upon a decision given by NCLT (Bench-II) Mumbai in the case of Raj Oil Mills Ltd., 2017 144 SCL 114 giving approval for replacement of Interim Resolution Professional with Resolution Professional though 61.8% CoC voted in favour of change, which is in contravention to section 22(2) of the Code. (vii) The rejection of the proposed Resolution Plan amounts to arm twisting tactics by the dissenting financial creditors and holding up the Corporate Insolvency process of the Corporate Debtor. (viii) The rejection of the proposed plan would result in loss-loss situation for all stakeholders of the corporate debtor including the workmen and employees of the company. (ix) The dissenting financial creditors have not given any reason for rejection of the proposed resolution plan despite the fact that implementation of this plan would lead to higher recovery as against to recovery through liquidation. (x) The argument that this Bench cannot enter into the area of decision making of CoC as the Code is creditor-driven legislation is not justified, as no person can claim liquidation of a company as a matter of right.;