Approval of Resolution Plan - JSSI Hydraulics Private Limited

ORDER IA-3577/2023: The captioned application has been preferred by the RP, in terms of the provisions of Section 30(6) of IBC, 2016 seeking approval of the Resolution plan, approved by the CoC seeking the following reliefs:

“a. Allow the present application and approve and accept the Resolution Plan submitted by JM Hydraulic Solutions Pvt. Ltd. as approved by the Committee of Creditors with 100% voting share in its 4th CoC meeting in respect of the Corporate Debtor i.e., JSSI Hydraulics Private Limited; b. Declare that upon approval of the Resolution Plan by this Hon'ble Adjudicating Authority, the provisions of the Resolution Plan shall be binding on the Company, its creditors, guarantors, members, employees, Statutory Authorities and other stakeholders in particular HSIDC, 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; c. Approve the appointment of the monitoring agency as state-in the Resolution Plan and confirmed by the Committee of Creditors; d. Approve and grant reliefs and directions sought under the Resolution Plan by the Resolution Applicants; e. Pass such other further order/order (s) as may be deemed fit and proper in the facts and circumstances of the present case.”

2. To put the facts concisely, the underlying main petition C.P.(IB)- 66/(ND)/2022 was filed by State Bank of India against the Corporate Debtor namely, Jssi Hydraulics Private Limited under Section 7 of the IBC, 2016, which was admitted vide Order dated 12.07.2022 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. Debashis Nanda, the Applicant herein.

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

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). The details of the Committee of Creditors along with their Voting Share are extracted below:

4. The details of the meetings of the CoC conducted by the RP along with the Resolutions approved therein are as under:

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

5. As stated by the Applicant, the ‘Form – G’ was published on 04.10.2022 and the last date for submission of an Expression of Interest was 19.10.2022. It is further added that pursuant to the invitation of EOI, a total of 8 Prospective Resolution Applicants (PRAs) had submitted their EOI out of which only 5 Resolution Plans were received from the following PRAs:

1. Action Construction Equipment Limited.

2. JM Hydraulic Solutions Pvt. Ltd.

3. Mr. Hardeep Singh and/JSSI Hydraulics Private Limited

4. Kundan Care Products Limited.

5. Sunrise Industries.

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

5.1 These resolution plans and the withdrawal proposal of the suspended board were put to vote (for e-voting) on 02.03.2023, which concluded on 28.04.2024 and the CoC unanimously approved the Resolution Plan submitted by JM Hydraulic Solutions Pvt. Ltd.

6. The Applicant/RP has filed an application IA-6341/2022 on 13.12.2022 seeking an extension of the CIRP period, which was expiring on 18.01.2023, by a further 90 days, which was allowed vide Order dated 02.01.2023 of this Adjudicating Authority. Further, an extension of the CIRP period by another 30 days beyond 18.04.2023 i.e., 270 days from the CIRP date was sought in view of the extension of the voting line sought by Financial Creditor - State Bank of India, and the same was allowed by this Adjudicating Authority vide its order dated 01.05.2023. Accordingly, the e-voting concluded on 28.04.2023 and the CoC unanimously approved the Resolution Plan submitted by JM Hydraulic Solutions Private Limited.

7. The Fair Value and Liquidation Value in a tabular format along with remarks are extracted below:

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

7.1 It is stated that there are dues of Rs. 23,98,03,865/- as per the letter dated 31.05.2019 of HSIIDC but a claim has not been filed. Further, the said demand by HSIIDC is being challenged in court. It is noted that the Resolution Applicant has also provided an undertaking that it shall pay the dues of HSIIDC subject to the outcome of the Court’s proceedings.

7.2 In its Addendum to the Resolution Plan dated 18.02.2023 prepared by JM Hydraulics Solution Private Limited (SRA), the Resolution Applicant has offered to pay Rs. 41 crores instead of Rs. 39 crores offered initially in the Resolution Plan within a period of 240 days. Further, the SRA has envisaged that the amount proposed in the Resolution Plan will not exceed Rs. 46,50,00,000/- in totality including payment of dues to PF Department, HSIIDC, if ordered by NCLT or any other competent authority.

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

8. The brief contours of the Resolution Plan as revised in the Addendum filed on 18.02.2023 are as follows:

“

9. It is clarified that there were some typographical errors showing a total of Rs. 1,89,00,01,000/- in the original Form H and hence to correct the same, a Revised Form H was filed on 18.09.2023. The Addendum to the plan dated 18.02.2023, indicates an amount of Rs. 137.75 Lakh to be paid to all IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited operational creditors within 90 days from the effective date. The Revised Form H reflects the same amount under the head Operational Creditor. For the sake of clarity, the Revised Form H is extracted below:

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

9.1 As indicated above, the Liquidation value to be paid to the Operational Creditors is Nil as the amount of admitted claims of the Secured Financial Creditors is more than the Liquidation Value of the Corporate Debtor and is paid in priority to financial creditors. However, an amount of Rs. 137.75 lakhs is to be paid to the operational creditors as per the details enclosed with the Addendum to the Resolution Plan dated 18.02.2023. 9.2 The RA proposes to pay Rs.9,46,000/- to the employees and workmen which is the total admitted claim of the Employees and workmen (100% Payment is being made to employees and workmen) within a period of 90 days from the effective date. 9.3 The RA proposes to pay Rs.50,16,000/- to the Operational Creditors (Other than employees, workmen and statutory dues) which is 2% of the total admitted claim within a period of 90 days from the effective date. 9.4 The RA proposes to pay Rs.9,24,000/- to the Operational Creditors (Statutory dues i.e. Income Tax and GST) which is 30% of the total admitted claim within a period of 90 days from the effective date.

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

10. The objectives of the Resolution Plan as stated in the plan are as under:

“The resolution plan for JSSI Hydraulic Private Limited is intended on clearing the due payments of the Financial Creditors. Operational Creditors and Workmen & Employee Claims of the Corporate Debtor. On completion of consultation and assessment of viability of the resolution plan the entire payment is proposed to be cleared within 180 days from the Effective Date.

As stated in the Insolvency Bankruptcy Code, the purpose of the proposed resolution plan is to enable an efficient recovery of financially distressed companies in order to balance the rights and interests of all the relevant stakeholders.

The objective of the proposed Resolution Plan as set out in the Code is to develop and implement a plan that clears out the payments of the creditors and revives the operations and thus promotes entrepreneurship avails credit and balances the interest of all stakeholders including alteration in order to pay Government dues by consolidating and amending the laws concerning the reorganization and insolvency resolution of corporate person in a time bound manner and to maximize the value of assets of such persons and matters connected therewith or incidental thereto.

This proposed Resolution Plan seeks to rescue the company by implementing the proposal set out herein and providing the stakeholder with information to obtain a better outcome under Resolution for all stakeholders when compared to liquidation. The Resolution Plan has taken into consideration all the provisions for its effective implementation. Terms of the plan are feasible and viable and its implementation is possible.”

11. The other compliances filed along with the Resolution Plan are as under:

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

11.1 The compliance affidavit of Section 29A reads thus:

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

11.2. The details of compliances under Section 30(1), Section 30(2), Regulation 37(1), Regulation 38(1), Regulation 38(2), Regulation 38(3) of IBC, 2016, and IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 are extracted below:

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

11.3 As regards the payments towards EPF/ESI, an Affidavit was filed on 21.03.2023. The relevant excerpts of the affidavit reads thus :

This has been reconfirmed in the Affidavit dated 12.02.2024, the relevant extract of which is as below:

11.4 With regard to the payment towards HSIIDC, the following undertaking is given in the Affidavit dated 29.02.2024

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

12. The details of the Payment Schedule as per Form H are extracted below:

13. As per the Definitions contained in the Resolution Plan, the Effective Date means the date of receipt of the Certified Copy of the Order of the Adjudicating Authority approving the Resolution Plan (unless the operation of such Order has been stayed by court of competent authority, in which the event the Effective Date shall be the date on which any such stay has been vacated by a court of competent authority). However, as per direction contained in para 20 (i) of this order, the Plan will be effective from the date of this order, but the implementation schedule would commence from the date of uploading the order on DMS. IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

14. The details of the Monitoring Committee are as under:

15. The Implementation Schedule as per the Resolution Plan is as under:

16. The other notable aspects of the Resolution Plan are as follows:

16.1 As per the Resolution Plan, no PUFE transactions have taken place.

16.2 The Corporate Debtor is a going concern within the meaning of Section - 5(26) of the Code.

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

16.3 In compliance with the Order dated 21.08.2023 and 18.10.2023, the Applicant has furnished its Compliance Affidavit affirming its stand of being an MSME.

16.4 The matter was relisted on 25.04.2024 to seek clarification and Ld. Counsel for the RP clarified that the Resolution Applicant is a related party and would not be entitled to the benefit of Section 32A of IBC, 2016. It was further made clear that these are the promoters only who have submitted the Resolution Plan.

17. The Applicant has sought various reliefs and concessions under the Resolution Plan, which are as under: -

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

18. The aforementioned indicates that the relief or concession that the SRA is generally seeking relates to the renewal of licences for the CD without requiring the payment of interest, penalty fees, or composition fees. An additional concession proposed in the plan is the exemption from the licence acquisition restriction, if applicable. As previously mentioned, the plan also requests a multitude of additional concessions and forms of relief. It is clear IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited from Section 31(4) of IBC 2016 that the Resolution Applicant must obtain the required approval under any law in force at the time within one year from the date of the order passed under Section 31(1) of IBC 2016, in accordance with the Resolution Plan approved under sub-Section 1 of Section 31 of IBC 2016. Furthermore, in accordance with the stipulations outlined in Section 14 of the Code, licences, permits, registrations, quotas, concessions, clearances, or comparable rights granted by the Central Government/State Government, Local Authorities, Sectoral Regulators, or any other authority established under any other law in effect at the time shall remain unaffected even during the CIRP period, provided that no default occurs. So long as the aforementioned facilities remain accessible to the CD only in the absence of default in payment of current dues, even during the moratorium period, the SRA/CD cannot be placed in a more advantageous position upon resolution plan approval.

18.1 Under the Code, the Creditors in class, operational creditors, financial creditors, workers and employees, and other creditors may present their claims before the IRP/RP in accordance with the provisions of sections 13 and 15 of the Insolvency and Bankruptcy Code 2016 and regulations 6, 6A, 7, 8, 9 and 9A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016. The resolution of the claims is carried out by the Insolvency Resolution Process for Corporate Persons (IRP) in accordance with Section 18(b) of the Insolvency and Bankruptcy Code, 2016 and Regulations 12(A), 13, and 14 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, respectively. The RP is then required to prepare an Information Memorandum in accordance with Regulation 36(2) of the 2016 IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited

IBBI (Insolvency Resolution Process for Corporate Persons) Regulations. The Memorandum includes, among other things, a list of creditors that details the variety of creditors, the amounts they have claimed, the amount of their admitted claim, and any security interest that may exist with respect to such claims. In accordance with Regulation 36(A) of the Regulations, the RP is required to publish brief particulars of the invitation for Expression of Interest in Form G of Schedule I to the Regulations no later than sixty days after the Insolvency Commencement Date. Prospective resolution applicants who are interested and eligible to do so must submit resolution plans by that date. The RP is obligated to provide the Request for Resolution Plans, Information Memorandum, and Evaluation Matrix within five days from the date of issuance of a provisional list of eligible Prospective Resolution Applicants (as specified in Regulation 36(A)(10) of the Regulations). In consideration of the Information Memorandum and Evaluation Matrix, the RP submits a Request for Resolution Plan. The request for a resolution plan specifies the manner and objectives of each interaction between the prospective resolution applicant and the resolution professional, as well as each step of the procedure. Following the Committee of Creditors' review of the IM, EM, and RFRP, the submitted Resolution Plan is subsequently assessed. However, it must adhere to the stipulations outlined in Regulations 37 and 38 of the current set of regulations. As soon as the CoC grants its approval to the plan in accordance with Regulation 39 of the aforementioned Regulations, it effectively transforms into a legally binding agreement between the CD, represented by RP and SRA, and its creditors. Upon receiving approval from the Adjudicating Authority, the plan enters into force for the Corporate Debtor and its members, creditors

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited (including the Central Government, any State Government, or any local authority to which a debt is owed for the payment of dues arising under any law currently enforced, including authorities to which statutory dues are owed), guarantors, and other stakeholders engaged in the Resolution Process (as per Section 31 (1) of the Code).

18.2 In addition, the provisions of Section 32A, which were added to the Code by Act No.1 of 2020 on 28.12.2019, pertain to liability for prior offences. As a result of the stipulations outlined in Section 32A(2), no legal action is initiated against the assets of the corporate debtor concerning a transgression committed prior to the initiation of the corporate insolvency resolution process of the debtor-debtor (CD) or where such assets are encompassed within a Resolution Plan sanctioned by this governing body under Section 31, and which transfers control of the CD to an individual who was not a promoter, manager, or control of the corporate debtor or the CD.

19. Based on the preceding analysis and discussion, it is evident that the CD/SRA cannot be absolved of the obligation to remit the dues or fees associated with the necessary licence, permit, registration, quota, concession, clearance, or comparable grant or right. This is true unless there is substantial evidence to suggest that withholding a particular relief would have an adverse impact on the Corporate Debtor's ability to continue as a going concern. Regarding the current matter, no such case has been established. Therefore, the SRA/CD would have an obligation to obtain necessary approval from relevant authorities within a timeframe of one year from the date of this order or within the timeframe specified in applicable legal provisions, whichever

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited occurs later. However, liberty is accorded to the SRA to approach the concerned authorities with the request for any relief and concession, who would then expeditiously examine these claims in accordance with the stipulations of the applicable legislation.

20. In the sequel to the above, we are inclined to approve the Resolution Plan along with its Addendum dated 18.02.2023 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/FD 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) of IBC, 2016. The SRA is, however, at liberty to approach the relevant authorities who would consider these claims as per the provisions of the relevant law in an expeditious manner.

IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited (iv) The relief under Section 32A of the Code, is not allowed to the applicant SRA, as the management or control of the Corporate Debtor continues to remain in the hands of the promoters of the Corporate Debtor.

(v) Payments towards HSIIDC and PF/Gratuity be made as undertaken by the Resolution Applicant in the Affidavits filed.

(vi) 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.

(vii) 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 (viii) 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.

21. 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.

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

Sd/- Sd/- (SUBRATA KUMAR DASH) (ASHOK KUMAR BHARDWAJ) MEMBER (T) MEMBER (J) IA-3577/2023 in CP(IB)-66/ND/2022 State Bank of India Vs. Jssi Hydraulics Private Limited