December 22, 2021
An application was filed by the RP seeking approval of the resolution plan submitted by an RA, which was duly approved by the CoC by a vote share of 94.3%.
The tribunal analysed the plan thoroughly and observed that the amounts to be paid to the OCs were not in compliance with Section 30(1) of the Code, Nil amount to be paid to the statutory dues to government of India/other authorities was not a genuine proposal. The plan provided for generation of income from the company’s ongoing operations, from existing liquid investment, sale of certain assets etc. and no upfront money was brought in by the RA. On a close scrutiny of the entire plan, the tribunal observed that the plan did not take into account the interest of all the stakeholders, sought several waivers & exemptions, and contained a lot of uncertainties and speculations.
Also, the tribunal noted that the Statement of Purpose of the plan stated that “lenders would hold majority equity in the company, run its operations and over a period endeavour to find a suitable investor/buyer for the same”. Referring to the NCLAT’s decision in Binani Industries case, the tribunal held that “resolution plan should be plan for insolvency resolution of the Corporate Debtor as a going concern and not for the addition of value and intended to sale the Corporate Debtor.”
The tribunal also took note of the unsuccessful bidders and held that they came with a mala fide nature and not with an intent to resolve the company. Accordingly, it imposed a cost of Rs. 20 Lakhs on each of the three un-successful bidders namely ARCS Ship Build Services Pvt Ltd., Mr. Ricky Nathanial and Geotech Investment and Holding LLC as provided under Section 235A of the Code. Also, the tribunal directed the IBBI to frame suitable guidelines to ensure that only genuine/financially capable/serious players participate in the resolution process and bidders (who drag on the proceedings unnecessarily) are prohibited.
The tribunal thus rejected the resolution plan under Section 31(2) of the Code and directed the CD to be liquidated as per the provisions of Regulation 32(b) & (e) of the IBBI (Liquidation Process) Regulations, 2016. Considering the national importance attached to product line of the company, the tribunal directed the liquidator to sell the CD company as a going concern within six months from the date of the order. Also, if the efforts to sell the company as a going concern failed during the stipulated period of six months, then the process under Chapter III of the Code and relevant regulations of IBBI had to be followed.
Full text of the order accessible here.
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