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2023 Supreme(Online)(NCLT) 2772
NATIONAL COMPANY LAW TRIBUNAL
(Retd) T. Krishnavalli, Shri. Manoj Kumar Dubey, JJ
Mr. Raghunathan Krishnasamy – Appellant
Versus
Union of India – Respondent
C.P.(IB) No. 36/BB/2021
For the Appellants/Petitioners: Shri. Gokul R.
The court ruled that a resolution plan lacking clarity on funding sources and implementation timelines cannot be approved under the Insolvency and Bankruptcy Code, highlighting the necessity of strict compliance with statutory requirements.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 10, 30, and 31 - Approval of Resolution Plan - The resolution plan was submitted for approval following the initiation of CIRP via CP(IB) No. 36/BB/2021, previously ordered on 08.04.2021. The Committee of Creditors (CoC) unanimously approved the plan with 100% voting share; however, the plan failed to fulfill the requirements of Section 30(2), particularly regarding implementation, source of funds, and due diligence compliance. The decision emphasized that an ambiguous plan with discrepancies cannot be approved, leading to the rejection of the proposed resolution plan. The resolution plan lacked clarity on various mandatory requirements outlined by the Code and was deemed uncertain and contingent. (Paras 18, 19)
(B) Requirements under IBC - The Resolution Plan must include clear terms of implementation and comprehensive details about funding sources and compliance with regulations, failing which it is subject to rejection. (Paras 12, 14, 16)
Facts of the case:
The Corporate Applicant, Royaloak Furniture India LLP, filed for CIRP, and a public announcement for claims was made, with the CoC approving the resolution plan during meetings. The total claims from government departments reached over Rs. 12,013.97 Lakhs, which were largely requested to be waived off.
Findings of Court:
The resolution plan was found to be uncertain and inappropriate for approval based on its failure to meet IBC requirements, including clarity on funding and terms.
Issues: The main issues addressed were whether the proposed resolution plan complied with the statutory requirements of the IBC for approval, including violations of mandatory content provisions.
Ratio Decidendi: The court concluded that due to several regulatory non-compliances and ambiguities in the plan, it could not be approved under Section 31 of the IBC.
Result: The proposed Resolution Plan is hereby rejected under Section 31(2) of the Code. I.A No. 199/2022 is disposed of accordingly.
| Table of Content |
|---|
| 1. approval of insolvency resolution process. (Para 1 , 4 , 5) |
| 2. details of claims and creditor payments. (Para 2 , 3 , 7 , 8) |
| 3. compliance with section 30(2) requirements. (Para 10 , 11 , 12) |
| 4. discrepancy in source of funds outlined. (Para 14 , 15) |
| 5. final dismissal of operational creditor application. (Para 18) |
| 6. rejection of the resolution plan due to non-compliance. (Para 19) |
ORDER
Per: Manoj Kumar Dubey, Member (Technical)
1. This Application is filed by Mr. Raghunathan Krishnasamy (hereinafter referred to as ‘Applicant/ Resolution Professional’) of Royaloak Furniture India LLP (RFIL) under section 31(1) of the IBC, 2016 seeking approval of the Resolution Plan filed by the IRP/RP.
2. Brief facts of the case are given hereunder:
(a) The main Company Petition bearing CP(IB) No. 36/BB/2021 filed by Corporate applicant i.e Royaloak Furniture India LLP u/s 10 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP)was admitted by this Adjudicating Authority, vide order dated 08.04.2021, and appointed Mr. Raghunathan Krishnasamy as the Interim Resolution Professional and he was directed to take necessary actions in accordance with relevant provisions of the Code and Regulations made thereunder.
(b) It is stated that IRP made a public announcement on 17.07.2021 in the prescribed form about the commencement of CIRP against Corporate Debtor in accordance with the provisions of Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Claims were invited by public announcement and the last date for submission of claims was30.07.2021.
(c) It is submitted that First Media print advertisement for Form G was released on 15.11.2021 and second advertisement on 07.02.2022. Further, during the 6th meeting of the COC held on 07.04.2022, the COC approved the resolution plan with 100% voting share of the Financial Creditors.
(d) It is submitted by the Registered Valuer that the average Fair Value for Plant and Machinery of the Corporate Debtor is INR 11.53 Lakhs and the average of Liquidation value of the Plant and Machinery of the Corporate Debtor is INR 8.60 Lakhs.
(e) Further, it is stated that the claims received by the RP and which were reflected in the Information Memorandum were addressed herein in this plan. Hence, any future claims on account of this & any existing/ fresh/ future claims under any of the Statutory Authorities like Income Tax, Provident Fund, ESI, VAT, GST, Excise Duty, Service Tax, Municipal Taxes, etc. and any claims of any known or unknown creditors to be waived off and liability of such is not binding on Resolution Applicant. Further, Payment of dues to various Government Departments, have not been considered for payment in the Resolution Plan. RA requests to waive off / nullify all these claims, if any, including those that may arise in the future.
(f) It is submitted that during the 6th CoC meeting five consortium members duly authorized Shri.D.Suresh as a Lead Member of the consortium. Further, they reviewed the financial plan and feasibility of implementation of financial settlement as stated in the Resolution Plan as below:
(a) CIRP Expenses INR 30 Lakhs as priority settlement within 30 days from the date of Order from the Hon’ble NCLT
(b) Financial creditors dues of INR 5.19 Lakhs as 100% claim as priority settlement (c-1) Operational Creditors (Other than Government Departments) submitted and accepted claim as INR 106.14 Lakhs as periodical financial settlement with in the periods of one year from the date of Order (c-2)
(i) Operational Creditors (Government Departments) submitted and accepted claim as INR 12013.97 Lakhs or 120.14 Crores and the Resolution Applicant has explained in the meeting that it cannot afford such huge financial burden of the CD and requested to waive off the entire claim from the Government Departments such as (a)customs Department (b) Income Tax Department
(ii) The meeting decided to g
