Approval of Resolution Plan - JMT Auto Limited

The present IA No. 1067 of 2023 has been filed by Mr. Pardeep Kumar Sethi, Resolution Professional of JMT Auto Limited (hereinafter referred to as, the ‘Applicant’) under Section 30(6) of IBC, 2016, seeking the following reliefs: “a) Consider and allow the instant IA. No. __of 2023 seeking approval of Resolution Plan under Section 30(6) read with Section 31; b) Consider and approve the revised Resolution Plan dated 11 November 2022 submitted by Ramkrishna Forgings Ltd which has been approved by the Committee of Creditors (CoC) u/s 31(1) of the Code; c) Consider closure of the corporate insolvency and resolution process of the Corporate Debtor on approval of the Resolution Plan under the Code; d) Consider declaring u/s 31(3)(a) of the Code that the moratorium u/s 14(1) of the Code shall cease to have effect from the date the Hon’ble NCLT passes an order approving the Resolution Plan. e) Pass such other order(s) and/or direction(s) in the interest of justice which this Hon’ble Tribunal deems fit.”

2. To put the facts succinctly, the underlying main Petition CP (IB)- 1088/(ND)/2018 was filed by Axis Bank Limited against the Corporate Debtor namely, JMT Auto Limited under Section 7 of IBC, 2016, which was admitted vide Order dated 23.02.2022 of this Adjudicating Authority and the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor was initiated. Mr. Pradeep Kumar Sethi was appointed as IRP, who was later confirmed as RP in the first CoC meeting held on 22.03.2022. IA. No. 1067/ND/2023 in (IB)-1088/(ND)/2020

3. It is submitted by the Applicant that in terms of Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the IRP made a Public Announcement in Form-A on 28.02.2022 to invite claims, which was also uploaded on the website of Insolvency and Bankruptcy Board of India (IBBI). The Applicant has submitted that he received claims aggregating to Rs. 52,40,52,376/- including the claim received from workmen and employees.

4. It is further submitted that the RP constituted a Committee of Creditors (CoC) comprising the following members:

5. It is stated by the Applicant that the ‘Form-G’ was published on 11.05.2022 to invite Expressions of Interest from the potential Resolution Applicants. It is added that as per Form G, the last date for submission of EOI was 26.05.2022, and for submission of Resolution Plans was 10.07.2022, which was subsequently extended from time to time.

6. It is stated by the Applicant that it received a total 7 EOIs from Prospective Resolution Applicants (“PRAs”). Out of the 07 PRAs, only 2 PRAs namely, Ramkrishna Forgings Limited and RKG Fund I submitted the Resolution Plans. IA. No. 1067/ND/2023 in (IB)-1088/(ND)/2020

7. It is further submitted by the Applicant that due to the negotiations between the PRAs and CoC, the last date to submit the Resolution plan was finally extended to 11.11.2022. The applicant has submitted that the Resolution Plans as received from both the PRAs were placed before and put to vote in the 12th CoC meeting held on 17.11.2022. The relevant Resolutions placed before the CoC for voting read thus:

xxxx xxxx xxxx xxxx xxxx

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8. The E-voting results of the CoC over the said 02 Resolutions, as annexed by the Applicant/RP, read as under:

On combined perusal of the abovesaid resolutions and e-voting sheets, it is observed that the Resolution Plan submitted by Ramkrishna Forgings Limited (hereinafter referred to as “Successful Resolution Applicant” or “SRA”) was approved by the CoC with 84.61% votes in its favour.

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

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10. As per the abovementioned Form ‘H’ filed by the Applicant on record, the Fair Market Value of the Corporate Debtor is Rs.144.19 Crores and the Liquidation Value of the Corporate Debtor is Rs.105.03 Crores. The total amount provided under the CoC-approved Resolution Plan is Rs. 125 Crore which is over 50% of the total amount claimed by various stakeholders and is 119% of the Liquidation Value of the Corporate Debtor.

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11. The Applicant/RP has placed on record the Affidavit of the Whole Time Director of the SRA stating that they are not barred under Section 29A to submit the Resolution Plan. The said affidavit reads thus:

IA. No. 1067/ND/2023 in (IB)-1088/(ND)/2020

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

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13. It is contended by the Applicant/RP and seen on perusal of the Resolution Plan that the SRA is a financially sound company having a net worth of Rs. 1094 Crore in 2021-22. The financial strength and resources as set out in the Resolution Plan read thus:

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14. As regards the implementation schedule/provisions of the Resolution Plan, the following is provided in the Resolution Plan:

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15. Further, the following is stated by the SRA in the Resolution Plan with regard to the “Payment date” when the payment will be made to the stakeholders of the Corporate Debtor:

xxxx xxxx xxxx xxxx xxxx IA. No. 1067/ND/2023 in (IB)-1088/(ND)/2020 xxxx xxxx xxxx xxxx xxxx

16. We heard the Applicant/RP and went through the pleadings on record. It is seen from the record that there is no application moved by any person objecting to the Resolution plan. Further, During the course of the hearing, the Resolution Plan was not objected to by any of the stakeholders. Hence, we find no impediment in proceeding ahead with the matter.

17. The role of the 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),

IA. No. 1067/ND/2023 in (IB)-1088/(ND)/2020 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 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 IA. No. 1067/ND/2023 in (IB)-1088/(ND)/2020 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.”

18. 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 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.

19. 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 Axis Bank valid till 18.01.2024, shall be renewed in the name of and kept by “Monitoring Committee of the Corporate Debtor” till the Resolution Plan is fully implemented.

IA. No. 1067/ND/2023 in (IB)-1088/(ND)/2020 (iii) The Monitoring Committee as provided in the Resolution Plan shall be set up by the Applicant within 07 days of passing of this Order, which shall take all necessary steps for implementation of the Resolution Plan as per approval.

(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.

20. The Court Officer and Resolution Professional shall forthwith send a copy of this Order to the CoC and the Resolution Applicant for immediate necessary compliance. 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)

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