Allowed

Approval of Resolution Plan - Associated Lighting System Private Limited [I.a. 3618 of 2021 in Company Petition No. (IB)-1672 (ND)/2019]

NCLT3 Dec 2021I.A. 3618 of 2021 in Company Petition No. (IB)-1672 (ND)/2019

Case brief

AI extract

What is this about?

The NCLT approved a Resolution Plan for a Corporate Debtor approved by the Committee of Creditors (CoC) with 100% voting share. Relying on Supreme Court precedent, the Court held that the Adjudicating Authority cannot interfere with the CoC's commercial wisdom unless Section 30(2) grounds exist, finding no objections and allowing the Plan.

What did the court decide?

The Resolution Plan submitted by Arjun Nath is approved; the moratorium order ceases to have effect; the Monitoring Committee is directed to be set up within 07 days.

Approval of Resolution Plan - Associated Lighting System… — Insolvency and Bankruptcy | NCLT (2021)

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IN THE NATIONAL COMPANY LAW TRIBUNAL: NEW DELHI SPECIAL BENCH (COURT-II)

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I.A. 3618 OF 2021 IN Company Petition No. (IB)-1672 (ND)/2019

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IN THE MATTER OF:

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Alchemist Asset Reconstruction Company Limited

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...Financial Creditor

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Versus

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Associated Lighting System Private Limited

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…Corporate Debtor

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AND IN THE MATTER OF:

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Mr. Devendra Singh Resolution Professional of Associated Lightning System Private Limited D-54, Defence Colony New Delhi – 110024 …Applicant Order Delivered on : 03.12.2021

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SECTION: 30(6) read with 31(1) of the Insolvency and Bankruptcy Code, 2016.

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CORAM:

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SH. BHASKARA PANTULA MOHAN, HON’BLE MEMBER (J)

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SH. L. N. GUPTA, HON’BLE MEMBER (T)

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PRESENT:

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For the Applicant : Adv Jitesh Talwani For Resolution Applicant : Mr. Palash Singhai

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Page 1 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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ORDER

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PER: SHRI L. N. GUPTA, MEMBER (T)

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The IA No. 3618/2021 has been filed by Mr. Devendra Singh, the Resolution Professional of the Associated Lighting System Private Limited (hereinafter referred to as ‘ Applicant/ Resolution Professional’ ) for approval of the Resolution plan submitted by one Mr. Arjun Nath, ExDirector of the Corporate Debtor (hereinafter referred to as ‘ Successful Resolution Applicant ’).

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That the prayers made in the IA No. 3618/2021, which is taken up for consideration, are reproduced below :

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(a) Allow the present application;

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(b) Approve the Resolution Plan submitted by Mr. Arjun Nath in case of the Corporate Debtor, as approved by the CoC under Section30(4) of the IBC in the meeting held on 12.07.2021, in terms of Section 31 of the IBC;

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(c) Pass any other order(s) as this Hon’ble Tribunal may deem fit in the fact and circumstances of the present case.

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It is averred by the Applicant on Page 20-22 of its Application that :

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“1. The instant Application is being preferred by Devendra Singh (Applicant) the Resolution Professional of Associated Lightning System Private Limited (‘Corporate Debtor’), which falls under the category of Micro, Small & Medium Enterprises (MSME) having Registration no. UK05A0002463 dated 15.03.2018 under Section 30(6) R/w 31 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) seeking approval of Resolution Plan submitted by Mr. Arjun Nath, Ex-

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Page 2 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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Director of the Corporate Debtor (Power Suspended) residing at B-10, Mayfair Garden, Hauz Khas, New Delhi110016 (‘Resolution Applicant’) in case of the Corporate Debtor, as approved by 100% of members of the Committee of Creditors (‘CoC’) in the 7^th meeting of the CoC held on 12.07.2021. Copy of Resolution Plan submitted by Mr. Arjun Nath in case of Corporate Debtor is annexed herewith and marked as ANNEXURE A-1. A copy of the minutes of meeting of 7 CoC along with voting sheet dated 12.07.2021 is annexed herewith and marked as ANNEXURE A-2..”

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2. It is submitted that the Resolution Plan of Mr. Arjun Nath is above the liquidation value of the Corporate Debtor. It is further submitted that in the instant case, the time limit for completion of CIRP proceedings of the Corporate Debtor, pursuant to the orders passed by this Hon’ble Tribunal, came to an end on 18.07.2021. The CoC by exercising its commercial wisdom has approved the Resolution Plan of Mr. Arjun Nath on 12.07.2021. Therefore, the Resolution Plan has been approved by the CoC within the stipulated time limit as prescribed under Section 12(1) of the IBC and has passed the following resolution:

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“RESOLVED THAT the Resolution Plan submitted by Mr Arjun Nath, Resolution Applicant along with the requisite documents as placed and presented by the Resolution Professional before the CoC in terms of Section 30(3) of the Insolvency and Bankruptcy Code, 2016 be and is hereby approved by the member of Committee of Creditors in terms of Section 30(4) of the Insolvency and Bankruptcy Code, 2016 and Regulation 39(3) of the Insolvency and

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Page 3 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) regulations, 2016.

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RESOLVED FURTHER THAT the Committee of Creditors authorized the Resolution Professional to submit the resolution Plan as approved herein to the Adjudicating Authority for approval in terms of Section 30(6) of the Insolvency and Bankruptcy Code, 2016 and other applicable provisions, if any, of the insolvency and Bankruptcy Code, 2016 and in accordance with rules and Regulations made thereunder.”

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It is also submitted that Mr, Arjun Nath ie Resolution Applicant has provided a Performance Bank Guarantee amounting to Rs. 50,00,000/(Rupees Fifty Lakhs Only) vide cheque of HDFC Bank, having no. 624790, drawn in the favour of Alchemist Asset Reconstruction Company Limited on 17.07.2021, Pursuant to the Letter of Intent dated 15.07.2021, (As per the provisions of RFRP document). A copy of said cheque is annexed herewith and marked as ANNEXURE A-3. (Emphasis Supplied)

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To put succinctly, the facts of the case are that the Financial Creditor, M/s. Alchemist Asset Reconstruction Company Limited filed an Application bearing No. IB-1672(ND) 2019 under Section 7 of IBC, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s. Associated Lighting System Private Limited . The said Application was admitted by this Tribunal vide Order dated 21.10.2020 and the Applicant was appointed as the Interim Resolution Professional (IRP). It is added that the IRP was confirmed as RP in the 1^st Meeting of CoC held

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on 18.11.2020.

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Page 4 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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It is submitted that in terms of the Regulation 6(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the said Interim Resolution Professional made a public announcement in Form-A on 23.10.2020 with the last date for submission of claims being 04.11.2020. It has been added that the copy of the same was uploaded on the website of Insolvency and Bankruptcy Board of India (IBBI).

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It is further submitted that the Resolution Professional constituted a Committee of Creditors, which comprised of sole Financial Creditor i.e. M/s. Alchemist Asset Reconstruction Company Limited having 100% voting rights.

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It is stated by the Applicant that the ‘Form-G’ were published first, on 18.12.2020 and subsequently on 20.02.2021 in the newspapers namely, Business Standard (Hindi & English - All India Edition). That the last date for submitting the EOI against the initial publication of Form G was 02.01.2020. However, with the second time publication of Form G, it was kept as 13.03.2021. That the last date for submission of Resolution Plan was fixed for 28.04.2021

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It is further stated that the Applicant received Expressions of Interest (EOIs) from the following 03 applicants till the last date for submission i.e., 13.03.2021:

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a) Arjun Nath

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b) Atambhu Buildwell Private Limited c) R.K.G Asset Management LLP

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Page 5 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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It is submitted by the Applicant that the aforesaid EOIs were perused, verified and vetted and thereafter, provisional list containing names of 2 PRAs namely, Arjun Nath and Atmbhu Buildwell Private Limited were published on 23.03.2021.

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It is further submitted by the Applicant that vide mail dated 27.04.2021, the eligible Prospective Resolution Applicants sought an extension to submit the Resolution Plan on account of curfew/lockdown imposed by the State Government of Delhi amidst the rising cases of during the Covid-19 pandemic, which was communicated to the member of the CoC. Subsequently, vide mail dated 28.04.2021, the CoC granted extension of time till 19.05.2021 for the submission of the Resolution Plan.

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It is submitted by the Applicant that vide order dated 28.04.2021, this Adjudicating Authority was pleased to allow its application seeking extension of 90 days w.e.f. 19.04.2021 (beyond 180 days) for completion of CIRP, extending the last date of the Corporate Insolvency Resolution Process of Corporate Debtor till 18.07.2021.

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It is further submitted by the Applicant that vide mail dated 21.05.2021, the eligible PRAs, once again sought another extension of 60 days to submit their Resolution Plan, on account of facing great difficulties due to continued curfew/lockdown imposed by the State Government of Delhi amidst rising cases of Covid-19. The Applicant communicated the said request to member of CoC and accordingly, vide mail dated 28.05.2021, the member of CoC granted extension of 15 days for PRAs to submit their Resolution Plan by 05.06.2021.

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Page 6 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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It is added by the Applicant that on 05.06.2021, it received a Resolution Plan from one Mr. Arjun Nath along with the Ernest Money deposit of Rs.10,00,000/-(ten lakhs) only.

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It is submitted by the Applicant that pursuant to the submission of Resolution Plan by Arjun Nath - the Resolution Applicant, the Applicant vetted and examined the said Resolution Plan in order to check that the Plan is in compliance with the provisions of the Code and Regulation made thereunder. Accordingly, queries/observations raised on perusal of the said plan were communicated to the Resolution Applicant vide mail dated 16.06.2021, in response to which, the Resolution Applicant submitted clarifications vide his mail dated 21.06.2021.

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It is further submitted by the Applicant that on perusal of the clarifications provided by the Resolution Applicant and confirming that the Resolution Plan along with the addendum complied with the provisions of the IBC, 2016 and Regulations made thereunder, the Applicant shared copy of the said Resolution Plan along with the addendum to the member of the CoC vide email dated 24.06.2021.

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It is submitted by the Applicant that the Resolution Plan was considered by the CoC in its 7^th Meeting held on 12.07.2021 and was put to vote of CoC as the Agenda item No. B1. The scanned copy of the relevant resolution which was considered and voted by the CoC is reproduced overleaf :

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Page 7 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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It is further submitted by the Applicant that the plan submitted by

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RA Mr. Arjun Nath was approved by the CoC by 100% votes in its 7^th Meeting held on 12.07.2021. The scanned copy of the voting sheet of the CoC is reproduced overleaf :

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Page 8 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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It is added that the Applicant vide letter dated 15.07.2021 issued Letter of Intent (LOI) declaring Mr. Arjun Nath as successful Resolution applicant and asked him to submit Performance Guarantee of Rs. 50,00,000/- (Fifty Lakhs) only. Subsequently on 17.07.2021, the Resolution Applicant provided Performance Guarantee amounting to Rs.50,00,000/- vide Cheque no. 624790 dated 17.07.2021 drawn on HDFC Bank in the favour of the Sole Financial Creditor - Alchemist Asset Reconstruction Company Limited (AARCL).

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Page 9 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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That the details of payments proposed to be made as per the Resolution Plan to the various stakeholders of the Corporate Debtor are given in Form ‘H’ of the Resolution Plan. The scanned copy of the relevant

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extracts of the same are reproduced below :

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Page 10 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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That as per Form ‘H’ placed on record, the Liquidation value of the Corporate Debtor is disclosed as Rs.432.51 Lakhs and the Fair Market Value of the Corporate Debtor is disclosed as Rs.681.27 Lakhs. The size of the Resolution Plan is higher than the liquidation value of the Corporate Debtor and satisfies the claims of creditors to the extent of 48.77%.

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That as part of the Resolution Plan, the Resolution Applicant has also enclosed his Affidavit dated 05.06.2021 stating that he is not barred under Section 29A of IBC, 2016 to submit the Resolution Plan. The scanned copy of the same is reproduced overleaf :

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Page 11 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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Page 12 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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Page 13 of 24

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With regard to compliances under the Resolution Plan, the Applicant

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has stated in the Form ‘H’, the following :

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Page 14 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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Page 15 of 24

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Page 16 of 24

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Page 17 of 24

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Page 18 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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23. That further, the payment schedule as stipulated in the Resolution

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Plan for payments to Financial Creditor is reproduced below:

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As regards the payment to the Operational Creditors, it is stated by

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the Applicant in the Resolution Plan and reiterated during the course of hearing held on 22.11.2021 that the Operational Creditors filing claims are

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the related party to the Corporate Debtor. Therefore, they are paid ‘NIL’

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value against their claims in the Resolution Plan.

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Page 19 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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That with regard to the management of the Corporate Debtor upon

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approval of the Resolution Plan, the following has been stated by the Applicant. The scanned copy of the relevant extracts of Resolution Plan is

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reproduced below :

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Page 20 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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That on noticing that the Resolution Plan has been submitted by the Ex-Director of the CD, vide order dated 18.08.2021 this Adjudication Authority has directed the Applicant to issue notice through publication in the two newspapers, one in English and other in Hindi, circulated within the area, where the registered office of the Corporate Debtor is situated for the purpose of inviting objections, if any, towards the approval of Resolution Plan. The scanned copy of the order dated 18.08.2021 is reproduced below:

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That the Applicant in compliance of the aforesaid direction, has filed

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its Affidavit dated 30.08.2021 stating that the notice inviting objections was duly published in the newspapers namely, Jansatta (Hindi) and Financial

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Express (English) on 28.08.2021.

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Page 21 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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That pursuant to the said Publication of notice, no objections were received by this Adjudicating Authority.

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After going through the Application and documents placed on record, we observe that the CoC has approved the Resolution Plan submitted by the Resolution Applicant Mr. Arjun Nath by 100% votes in its 7th Meeting held on 12.07.2021. We also observe that no objection whatsoever challenging the Resolution Plan were filed before this Adjudicating Authority at any stage. Even pursuant to publication inviting objections in the newspapers namely, Jansatta (Hindi) and Financial Express (English) on 28.08.2021, no objection to the Resolution Plan has been received. The role of the Adjudicating Authority has been examined by the Hon’ble Supreme Court in a catena of decisions. The relevant portion of the decision of the Hon’ble Supreme Court in

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CIVIL APPEAL NO.10673 OF 2018, in the matter of K. Sashidhar Vs. Indian Overseas Bank & Ors. is reproduced below:

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“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), 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

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Page 22 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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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.”

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“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 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.”

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In view of the decision referred to Supra, it is a settled principle of law that the Adjudicating Authority shall not 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.

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In sequel to the above, we have no other option but to approve the Resolution Plan as approved by the CoC and placed by the Applicant before this Adjudicating Authority. We, therefore, approve the Resolution Plan

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Page 23 of 24

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IA 3618 of 2021 in C.P. No. (IB)1672(ND)/2019 Alchemist Asset Reconstruction Company LimitedVs. Associated Lighting System Private Limited

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submitted by the Applicant along with the following directions in respect of the Corporate Debtor :

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(i) The order of the moratorium 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.

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(ii) 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.

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(iii) The approved Resolution Plan shall become effective from the date of passing of this Order.

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(iv) The Monitoring Committee as provided in the Resolution Plan shall be setup within 07 days of passing of this Order which shall take all necessary steps for implementation of the Resolution Plan.

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