Srei Equipment Finance Ltd vs Sree Metaliks Ltd

Srei Equipment Finance Limited ...Appellant

Vs.

Sree Metaliks Limited ...Respondent

Present: For Appellant: - Mr. Abhijeet Sinha, Mr. Arjit Mazumdar, Mr. Diwakar Maheshwari, Mr. Saunak Mitra, Mr. Saikat Sarkar and Mr. Aditya V. Singh, Advocates.

For Respondent:- Mr. Akasht Singh, Advocate and Ms. Kiran Sharma, C.S for R-3.

Mr. Pritpal Singh Nijjar, Advocate for R-11.

Mr. Rajiv R. Raj, Advocate for JMF ARC

Mr. Anand Shankar Jha and Mr. Arpit Gupta, Advocates for R-6.

Mr. Ramji Srinivasan, Senior Advocate with Ms. Gauri Rastogi, Mr. Ronak Dhillon Ms. Sylona Mohapatra, Mr. Karan Khanna and Ms. Ananya Dhar Chaudary, Advocates for R-2.

Mr. Diwakar Singh, Advocate for R-10.

ORDER

13.12.2018─ This appeal has been preferred by 'Srei Equipment

Finance Limited'- ('Financial Creditor') against the order dated 7th

November, 2017, whereby and whereunder, the 'Resolution Plan'

submitted by Mr. Mahesh Kr. Agarwal has been approved by the

Adjudicating Authority (National Company Law Tribunal), Kolkata

Company Appeal (AT) (Insolvency) No. 289 of 2017 2

Bench, Kolkata, on the ground that the 'Resolution Plan' discriminates

between two similarly situated 'Financial Creditors'.

2. The appeal was heard on numerous occasions and opportunity was

given to the 'Successful Resolution Applicant' to decide whether it intends

to address the grievance of the Appellant and other similarly situated

'Financial Creditors'. Pursuant to the said observations, the 2nd

Respondent- Mr. Mahesh Kr. Agarwal, the 'Successful Resolution

Applicant' has filed supplementary additional affidavit dated 4th

December, 2018 wherein following statement has been made:

"5. In order to obviate any grievance of the

Appellant and without prejudice to its rights and

contentions, the Respondent No.2, the successful

Resolution Applicant hereby offers to treat all

secured Financial Creditors similarly, as set out in

Paragraph No. 6.1 below. Therefore upon request

of the Respondent No.2, this Hon'ble Tribunal by

its order dated November 29, 2018 was pleased to

permit the Respondent No. 2 to file a

Supplementary Additional Affidavit.

6. The Settlement amounts payable under the

original Resolution Plan submitted to the

Adjudicating Authority were as follows:

Company Appeal (AT) (Insolvency) No. 289 of 2017 3

PAYMENTS TO FINANCIAL CREDITORS (As per RS LACS Original Plan) NAME OF THE SR. FINANCIAL PRINCIPAL SETTELMENT INT.FREE NO CREDITOR AMOUNT AMOUNT TERM LOAN

1 EDELWEISS ( Class A) 27,811.21 20,858.41 (75%) 6,952.80

2 JM ( Class A) 6,510.61 4,882.96 (75%) 1,627.65

3 PEGASUS ( Class A) 581.21 435.91 (75%) 145.30

4 OBC ( Class A) 5,216.95 3,912.71 (75%) 1,304.24

ICICI BANK ( Class A) 1,530.03 1,147.52 (75%) 382.51

6 SREI ( Class B) 10,346.00 5,173.00 (50%) 5,173.00

7 IFCI ( Class B) 8,505.00 4,252.50 (50%) 4,252.50

8 KOTAK ARC ( Class B) 230.00 115.00 (50%) 115.00

TOTAL 60,731.01 40,778.01 19,953.00

Notes:

1) Interest will be payable to all Financial Creditors on the Settlement amount as per the approved Resolution Plan.

6.1 The settlement amounts payable under the

revised Resolution Plan as proposed are as follows:

PAYMENTS TO FINANCIAL CREDITORS RS LACS (REVISED) NAME OF THE INT.FREE SR. FINANCIAL PRINCIPAL SETTELMENT TERM LOAN NO CREDITOR AMOUNT AMOUNT (@ 75%) (BAL 25%)

1 EDELWEISS 27,811.21 20,858.41 6,952.80

2 JM 6,510.61 4,882.96 1,627.65

3 PEGASUS 581.21 435.91 145.30

4 OBC 5,216.95 3,912.71 1,304.24

5 ICICI BANK 1,530.03 1,147.52 382.51

6 SREI 10,346.00 7,759.50 2,586.50

7 IFCI 8,505.00 6,378.75 2,126.25

8 KOTAK ARC 230.00 172.50 57.50

TOTAL 60,731.01 45,548.26 15,182.75

Company Appeal (AT) (Insolvency) No. 289 of 2017 4

Notes:

1) Interest will be payable to all Financial Creditors on the Settlement amount as per the approved Resolution Plan.

2) In case of Pegasus, they have already received the Liquidation value of Rs. 32 lacs and have issued their No Due Certificate.

7. Further, this Hon'ble Tribunal vide order

dated November 28, 2017 stayed the

implementation of the Resolution Plan.

Subsequently, this Hon'ble Tribunal, by its order

dated December 15, 2017, had directed the

management to ensure that the Corporate Debtor

continues as a going concern. In view of the

pendency of this matter for more than one year,

with an interim order staying the implementation of

the Resolution Plan in force, the Respondent No. 2

humbly requests for an extension of the

implementation period of the Resolution Plan,

proportionately, i.e., approximately one year."

3. Learned counsel appearing on behalf of the Appellant- 'Srei

Equipment Finance Limited' submitted that the amount as shown

payable to the Appellant under the proposed 'Revised Resolution Plan' is

acceptable to the Appellant.

4. Mr. Dinkar Singh, learned counsel appearing on behalf of M/s.

Pegasus', another 'Financial Creditor' submits that the said 'Financial

Company Appeal (AT) (Insolvency) No. 289 of 2017 5

Creditor' having equated with the other 'Financial Creditors' has no

objection to the 'Revised Proposed Resolution Plan'. However, objection

has been made with regard to Note No.2 below the proposal wherein it is

mentioned that the 'M/s. Pegasus' has already received the liquidation

value of Rs. 32 lacs and have issued their 'No Due Certificate'. However,

the fact being that 'M/s. Pegasus' has already received Rs. 32 lacs, we do

not want to interfere with Note-2, as M/s. Pegasus' is entitled for the rest

of the amount after adjusting Rs. 32 lacs as per 'Proposed Revised

Resolution Plan'.

5. Ms. Kiran Sharma, Company Secretary appearing on behalf of the

3rd Respondent- 'Edelweiss Asset Reconstruction Company Limited',

(another 'Financial Creditor') submits that they have moved before the

Hon'ble Supreme Court against the order dated 29th November, 2018,

which reads as follows:-

"29.11.2018 We have discussed the matter

and heard the parties. Hearing remained

inconclusive.

Learned Counsel appearing on behalf of the

successful Resolution Applicant prays for and is

allowed time till 4th December, 2018 to file

Supplementary Additional Affidavit with copy to

all the parties.

Company Appeal (AT) (Insolvency) No. 289 of 2017 6

Post the case for further hearing under the

heading 'for orders' on 5th December, 2018."

6. However, as we want to dispose of the case on the basis of

'Proposed Revised Resolution Plan', we have heard the parties.

7. The question relating to discrimination between two similarly

situated 'Financial Creditors' fell for consideration before this Appellate

Tribunal in "Binani Industries Limited Vs. Bank of Baroda & Anr. -

Company Appeal (AT) (Insolvency) No. 82 of 2018 etc.", this Appellate

Tribunal by its judgment dated 14th November, 2018 observed and held

as follows:

"23. However, the 'I&B Code' or the Regulations

framed by the Insolvency and Bankruptcy Board

of India do not prescribe differential treatment

between the similarly situated 'Operational

Creditors' or the 'Financial Creditors' on one or

other grounds."

xxx xxx xxx

"27. In "Central Bank of India Vs.

Resolution Professional of the Sirpur Paper

Mills Ltd. & Ors.─ Company Appeal (AT)

Company Appeal (AT) (Insolvency) No. 289 of 2017 7

(Insolvency) No. 526 of 2018", this Appellate

Tribunal while noticed the provisions of

Regulation 38 of the Insolvency and Bankruptcy

Board of India (Insolvency Resolution Process for

Corporate persons) Regulations, 2016, observed

and held as follows:

"8. From the aforesaid provisions of I&B Code

it is clear that the Board may make regulation

but it should be consistent with the I&B Code

and rules made therein (by Central

Government) to carry out the provisions of the

Code. Therefore, we hold that the provisions

made by the Board cannot override the

provisions of I&B Code nor it can be

inconsistent with the Code.

9. Clause (b) and (c) of Regulation 38(1) being

inconsistent with the provisions of I&B Code,

and the legislators having not made any

discrimination between the same set of group

such as 'Financial Creditor' or 'Operational

Creditor', Board by its Regulation cannot

mandate that the Resolution Plan should

provide liquidation value to the 'Operational

Company Appeal (AT) (Insolvency) No. 289 of 2017 8

Creditors' (clause (b) of regulation 38(1)) or

liquidation value to the dissenting Financial

Creditors (clause (c) of regulation 38(1)). Such

regulation being against Section 240(1) cannot

be taken into consideration and any

Resolution Plan which provides liquidation

value to the 'Operational Creditor(s)' or

liquidation value to the dissenting 'Financial

Creditor(s)' in view of clause (b) and (c) of

Regulation 38(1), without any other reason to

discriminate between two set of creditors

similarly situated such as 'Financial Creditors'

or the 'Operational Creditors' cannot be

approved being illegal."

xxx xxx xxx

"43. From the two 'Resolution Plans', it will be

clear that the 'Rajputana Properties Private

Limited' in its 'Resolution Plan' has discriminated

some of the 'Financial Creditors' who are equally

situated and not balanced the other stakeholders,

such as 'Operational Creditors'. Therefore, the

Adjudicating Authority has rightly held the

Company Appeal (AT) (Insolvency) No. 289 of 2017 9

'Resolution Plan' submitted by 'Rajputana

Properties Private Limited' to be discriminatory."

8. Civil Appeal preferred by 'Rajputana Properties Private Limited

vs. Ultratech Cement Limited and Ors.' against the aforesaid

judgment in "Binani Industries Limited" (Supra) has been dismissed

by the Hon'ble Supreme Court by order dated 19th November, 2018 in

Civil Appeal No. 10998 of 2018.

9. Decision in "Central Bank of India" as referred to in the said

judgment at Paragraph 27 was also challenged before the Hon'ble

Supreme Court and by order dated 19th November, 2018 passed in Civil

Appeal No. 10737 of 2018, the Hon'ble Supreme Court dismissed the said

appeal.

10. In the present case, as we find that the Appellant-'Srei Equipment

Finance Limited' ('Financial Creditor'), 'M/s. Pegasus'- ('Financial

Creditor') and some other 'Financial Creditors' were discriminated qua

similarly situated 'Financial Creditors' in the 'Resolution Plan' originally

submitted by Mr. Mahesh Kr. Agarwal and now the 'Successful

Resolution Applicant' with a view to remove the discrimination has

proposed 'Revised Resolution Plan'. For the said reason, we accept the

'Revised Resolution Plan' submitted by Mr. Mahesh Kr. Agarwal

'Successful Resolution Applicant' which should be treated to be part of

the original 'Resolution Plan' as approved by the Adjudicating Authority.

Company Appeal (AT) (Insolvency) No. 289 of 2017 10

The substitution aforesaid is in part and is in addition to the rest of the

proposal as made in the main 'Resolution Plan'.

11. We have noticed that the stand taken by the 3rd Respondent-

'Edelweiss Asset Reconstruction Company Limited' that they have moved

against the order of adjournment before the Hon'ble Supreme Court. In

absence of any order of stay and as the 'Corporate Insolvency Resolution

Process' has completed more than 270 days, we decided to dispose of the

appeal, to give effect to the approved 'Resolution Plan', not challenged by

'Edelweiss Asset Reconstruction Company Limited'.

12. This apart, we have noticed that in the 'Revised Resolution Plan',

has not changed its proposal in so far it relates to 3rd Respondent-

'Edelweiss Asset Reconstruction Company Limited' and thereby the 3rd

Respondent will not be affected on acceptance of 'Revised Resolution

Plan'. The 3rd Respondent- 'Edelweiss Asset Reconstruction Company

Limited' has also not challenged the original 'Resolution Plan' before this

Appellate Tribunal and thereby seems to be happy with the proposal as

made in the original 'Resolution Plan' in respect to it.

13. Taking into aforesaid facts and circumstances of the case, we

exclude the period of pendency of this appeal before this Appellate

Tribunal i.e. from 22nd November, 2017 till today for calculating the

period of 270 days. The 'Resolution Plan' as revised pursuant our order

be given effect and implemented with effect from the date of issuance of

free certified copy of this order.

Company Appeal (AT) (Insolvency) No. 289 of 2017 11

14. The appeal stands disposed of with aforesaid observations and

directions.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member(Judicial) Ar/uk

Company Appeal (AT) (Insolvency) No. 289 of 2017