Approval of Resolution Plan - Coast Realtors Private Limited

The present IA No. 4513 of 2023 has been filed by Mr. Ajit Gyanchand Jain, Resolution Professional of M/s Coast Realtors Private Limited (hereinafter referred to as the ‘Applicant’) under Section 30(6) of IBC, 2016 praying for the following reliefs: “a) Pass an order and allow the present Application; b) Pass an order to approve and accept the Final Resolution Plan (Annexure - 17 i.e., Resolution Plan dated 05 June 2023); c) Pass an order to declare that upon approval of the Final Resolution Plan by this Hon'ble Adjudicating Authority, the provisions of the said Plan shall be binding on the Corporate Debtor, its creditors, members, directors, employees and other stakeholders in accordance with section 31 of the Code and shall be given effect to and implemented pursuant to the order of this Hon'ble Adjudicating Authority; d) Pass such orders or further orders as maybe deemed fit and proper in the facts and circumstances of the present case.

2. To put the facts concisely, the underlying main Petition CP (IB)- 776/(ND)/2021 was filed by L&T Finance Limited against the Corporate Debtor namely, Coast Realtors Pvt. Ltd. under Section 7 of IBC, 2016, which was admitted vide Order dated 14.07.2022 of this Adjudicating Authority and the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor was initiated. The Corporate Debtor is currently represented through its RP Mr. Ajit Gyanchand Jain, the applicant herein.

IA. No. 4513/ND/2023 in (IB)-776/(ND)/2021

3. It is stated by the Applicant that in terms of Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Applicant made a Public Announcement in Form-A on 15.07.2022 to invite claims, a copy of which was also uploaded on the website of Insolvency and Bankruptcy Board of India (IBBI). It is further stated by the Applicant that it had received the following claims:

4. It is submitted that thereafter RP constituted a Committee of Creditors (CoC) comprising of the sole Financial Creditor, namely, L&T Finance Limited.

5. The Applicant has further submitted that the ‘Form-G’ was published on 31.10.2023, 14.11.2022, 30.11.2022, 02.01.2023, and 23.01.2023 to invite Expressions of Interest (EOI) from the potential Resolution Applicants. It is added that as per the last Form-G dated 23.1.2023, the last date of submission of EOI was 31.01.2023. It is further added by the Applicant that it had received EOIs from 07 interested parties till the last date.

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6. It is averred by the Applicant that out of the 07 EOIs, only one Resolution Plan was received by CoC from M/s Wealth Clinic Pvt. Ltd.

7. It is stated by the Applicant that the Resolution Plan received from the RA M/s Wealth Clinic Pvt. Ltd was placed for consideration and approval in the 10th meeting of the Committee of Creditors (CoC) of the CD held on 06 (later adjourned to 08).06.2023. The Applicant/RP has placed the minutes of the said meeting on pages 579-597 of Vol. VI of its Application. The relevant extracts of the Resolutions considered and passed by the COC read thus:

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8. The minutes further records that when the adjourned COC meeting took place on 08.06.2023, the following deliberation/decision took place:

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9. It is submitted that as per the decision of the COC, the Applicant/RP filed an application IA-3545/2023 seeking extension of CIRP period, that was expiring on 10.06.2023, by further 45 days, which was allowed vide Order dated 11.07.2023 of this Adjudicating Authority.

10. It is further submitted by the Applicant that the Financial Creditor (FC), L&T Finance Limited had intimated the Applicant/RP vide their letter dated 03 July 2023 that with effect from 30 June 2023, the loan/facilities of the FC i.e., L&T Finance Limited granted to the CD were assigned on as is where is basis to Phoenix ARC Private Limited ("Phoenix ARC") in accordance with the Assignment Agreement dated 30 June 2023 (hereinafter referred to as the "Assignment Agreement") entered between the parties.

11. It is stated that the Applicant/RP vide its email dated 07 July 2023 has intimated the Phoenix ARC that pursuant to the Assignment Agreement, the Phoenix ARC shall now be the sole Financial Creditor and sole member of the CoC of the Corporate Debtor. It is added by the Applicant/RP that on 10 July 2023, the Applicant/RP had accordingly filed an application bearing number 071010205265/2023 intimating this Adjudicating Authority about the reconstitution of the COC, which is on DMS.

12. During the hearing, in response to a query made by the Bench that while the COC meeting dated 06/08.06.2023 was attended by the sole financial creditor L&T Finance Ltd., how come the e-voting held for approval of resolution plan on 22.07.2023 was done by the assignee, the Ld. Sr. Counsel for the Applicant/RP explained that on receipt of information vide letter dated 03 July 2023 from the FC i.e., L&T Finance Limited that with IA. No. 4513/ND/2023 in (IB)-776/(ND)/2021 effect from 30 June 2023, the loan/facilities of granted to the CD were assigned on to Phoenix ARC Private Limited, RP reconstituted the CoC. And accordingly, the RP called a meeting of the extended CoC with the assignee Phoneix ARC Private Ltd. on 14.07.2023, which is confirmed from the minutes of the said meeting placed by the Applicant/RP as Annexure-A (Page No. 596) to the Minutes of COC meeting dated 06/08.06.2023. The same, for the sake of convenience, is reproduced below:

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13. It was further submitted that the RP had briefed the assignee Phoneix ARC Private Ltd. about the Resolution Plan, Resolution Applicant and the voting scheduled on 22.07.2023.

14. As per the record and submissions made by the RP, the E-voting on the Resolution Plan received from RA M/s Wealth Clinic Pvt. Ltd took place on 22.07.2023, the result of which, as annexed by the RP, reads as under:

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On combined perusal of the abovesaid resolutions and e-voting sheets, it is observed that the Resolution Plan submitted by M/s Wealth Clinic Pvt. Ltd (hereinafter referred to as “Successful Resolution Applicant” or “SRA”) is approved by the CoC with 100% votes.

15. The details of the CIR process, fair value and liquidation value of the CD, the distribution of the resolution plan value amongst the stakeholders, and compliances are given in the “Compliance Certificate” filed by the RP in Form ‘H’, which is reproduced below for the immediate reference:

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16. As per the Form ‘H’ (ibid) filed by the Applicant, the Fair Market Value of the Corporate Debtor is Rs. 85,13,10,113/- and the Liquidation Value of the Corporate Debtor is Rs.79,09,77,001/-. The total amount provided for distribution to various stakeholders under the CoC - approved Resolution Plan is Rs. 7500.092 Lakhs, which is 72% of the total amount claimed by various stakeholders and is around 95% of the Liquidation Value of the Corporate Debtor. However, if we add the additional contribution of Rs 6000 Lakhs to be made by the SRA to M/S Supertech towards the construction cost for completion of the project, the total Plan value goes up to Rs 135 Crore, which is 170% of the Liquidation Value of the Corporate Debtor. IA. No. 4513/ND/2023 in (IB)-776/(ND)/2021

17. The Applicant/RP vide its Affidavit dated 12.10.2023 has also placed on record the Affidavit of the Director Ms. Sumita Raheja, Director of the SRA stating that they are not barred under Section 29A to submit the Resolution Plan.

18. The Applicant/RP has also filed on record, the proof of the Performance Bank Guarantee (PBG) issued by Yes Bank in favour of the SRA. The said PBG is valid till 18.01.2024 and reads thus:

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19. It is stated by the Applicant/RP that the aforesaid deposits made by the SRA towards the Performance Guarantee have been renewed from time to time.

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20. As regards the payment schedule and payout proposals, the following details are provided in the Resolution Plan:

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21. As regards the Supervision and Monitoring over its implementation, the Resolution Plan has the following provision:

22. The SRA has also sought various reliefs and concessions as narrated on internal Pages 54 to 62 of the Resolution Plan. During the hearing on 05.12.2023, the Ld. Sr. Counsel appearing for the RP categorically stated that the SRA will implement the Resolution plan, even if no relief and concession is granted.

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23. During the hearing on 06.11.2023, the following was observed and directed by this Adjudicating Authority:

24. In compliance with the aforesaid directions, L&T Finance Ltd. and Phoenix ARC Pvt. Ltd. had filed their Affidavits. During the hearing on 05.11.2023, this Adjudicating Authority observed the following:

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25. We heard the arguments in detail on behalf of the Applicant/RP and went through the pleadings and affidavits on record. It is seen from the record that there is no application moved by any person objecting to the Resolution plan. Further, even during the hearing, the Resolution Plan was not objected to by anyone. Hence, we find no impediment in proceeding ahead with the matter.

26. The role of this Adjudicating Authority has been examined by the Hon’ble Supreme Court in a catena of judgments. The relevant extract of the Judgement of the Hon’ble Supreme Court in Civil Appeal No. 10673 of 2018 in the matter of “K. Sashidhar Vs. Indian Overseas Bank & Ors.” is reproduced below: “35. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 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. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board.

The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been IA. No. 4513/ND/2023 in (IB)-776/(ND)/2021 delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code.”

“38. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I & B Code and not to act as a court of equity or exercise plenary powers.”

27. In view of the Judgement (ibid), it is a well-settled principle of law that the Adjudicating Authority is not required to interfere with the decision IA. No. 4513/ND/2023 in (IB)-776/(ND)/2021 taken by the CoC in its commercial wisdom, save and except the circumstances referred to in Section 30(2) of the IBC, 2016. In terms of the Compliance Certificate filed in Form-H by the Applicant/RP, the Resolution Plan does not contravene any of the provisions of the law for the time being in force.

28. In the sequel to the above, we are inclined to approve the Resolution Plan as approved/recommended by the CoC and as placed by the Applicant before this Adjudicating Authority. We, therefore, allow the present Application and approve the COC-approved Resolution Plan as placed before us by the Applicant/RP with the following directions:

(i) The approved Resolution Plan shall become effective from the date of passing of this Order and shall be implemented strictly as per the term of the plan and implementation schedule given in the Plan;

(ii) The Performance Guarantee with the Yes Bank shall be renewed in the name of and kept alive by the “Monitoring Committee of the Corporate Debtor” till the Resolution Plan is fully implemented.

(iii) The SRA/CD would be entitled to no other reliefs/ concessions/waivers except those are available/permissible to it as per the provisions of Section 31(1) and 32(A) of IBC, 2016.

(iii) The Monitoring Committee as provided in the Resolution Plan shall be set up by the Applicant/RP within 07 days of passing of this Order, which in turn, shall take all necessary steps for time bound implementation of the Resolution Plan as per approval.

IA. No. 4513/ND/2023 in (IB)-776/(ND)/2021 (iv) The order of the moratorium in respect to the corporate debtor passed by this Adjudicating Authority under Section 14 of the IBC, 2016 shall cease to have effect from the date of passing of this Order; and (v) The Resolution Professional shall forward all the records relating to the conduct of the CIRP and the Resolution Plan to the IBBI for its record and database.

29. The Court Officer and Resolution Professional (RP) shall forthwith make available/send a copy of this Order to the CoC and the Successful Resolution Applicant (SRA) for immediate necessary compliance.

30. A copy of this order shall also be sent by the Court Officer and Applicant to the IBBI for their record.

Sd/- Sd/- (L. N. GUPTA) (ASHOK KUMAR BHARDWAJ) MEMBER (T) MEMBER (J)

IA. No. 4513/ND/2023 in (IB)-776/(ND)/2021