NCLT PB-ND (2022.11.02) in Mr Raj Kumar Ralhan Liquidator of M/S SU KAM Power Systems Limited [IA (IB) No.4087(PB)/2021 in CP (IB) No. 540(PB)/2017] held that;
With this order, the present application stands ALLOWED and the liquidation process stands closed. All the remaining/pending applications shall be proceeded in accordance to law
Excerpts of the Order;
# 1. The Present Application (IA 4087/2022) has been preferred by the Applicant for the closure of the liquidation process on account of the successful completion of the Sale of the Corporate Debtor as a going concern in terms of the provisions of the Code. read with Liquidation Regulations and consequent distribution of proceeds in terms of Section 53 of the Code.
# 2. Ld. Counsel, Ms. Misha for the Applicant made submissions and has prayed for the following reliefs in the present application:
"(a.) Allow the present application and take note of the successful completion of the liquidation process of the Corporate Debtor upon the sale of the Corporate Debtor as a going concern to the Successful Bidder and distribution of the proceeds in terms of Section 53 of the Code;
(b.) Direct the closure of the liquidation process of the Corporate Debtor in terms of Regulation 45(3) of the Liquidation Regulations;
(c). Pass such other order/orders as it may deem fit and proper in the facts and circumstances of the case."
Background Facts:
# 3. Corporate Insolvency Resolution Process (CIRP) was initiated w.r.t Corporate Debtor on 05.04.2018. On 15.11.2018, a resolution plan was received from a consortium comprising of M/s Phoenix ARC Ltd. and Mr. Kunwar Sachdev, ex-promoter/director of orporate Debtor. It is submitted by the Liquidator that it was the only Resolution Plan received in CIRP of the CD. It is further submitted by the Liquidator that in relation to the CIRP of CD, Mr. Kunwar Sachdev, ex-promoter/ Director of Corporate Debtor made an attempt to claim the ownership of the brand SU KAM, i.e. the most valuable asset of the CD. Another important fact is that subsequent to issue of EOI,a total of 18 EOIS were received by the RP. However, only the promoter consortium came forward to submit the resolution plan.
# 4. Liquidator submits that as per the findings of due diligence report and the legal opinion obtained by the RP, the promoter consortium was reported as ineligible in terms of Section 29(A)(h) of the Code on account of certain enforceable personal guarantees issued by Mr. Kunwar Sachdev in favour of certain financial creditor of CD which had been invoked by the relevant lenders but remained unpaid.
# 5. Afterwards, RP made one more attempt to get a Resolution Plan for the CD but no Resolution Plan was received in the fresh attempt as well. Therefore on 19.03.2019 in the meeting of CoC, RP apprised COC about the financial position of the CD and informed that since no Resolution Plan had been received he would be filing an application seeking liquidation before this Tribunal. On the same date COC proposed to replace to Mr. Rajiv Chakraborty with Mr. Raj kumar Ralhan as the RP of the CD vide order dated 03.04.2019.
# 6. Upon the initiation of Liquidation proceedings of the Corporate Debtor on 03.04.2019, the liquidator undertook the processes and procedures as per the Code. Upon the failure of the first auction, second and third public announcements was made under regulation 32 and 33 of the Liquidation regulations to invite bidders for acquisition.
# 7. The said sale of the Corporate Debtor has been undertaken pursuant to the acceptance of bid of a consortium of individuals namely Mr. Navraj Mittal (lead member), Mr. Vishnu Prakash Goyal, Mr. Ashok Kumar Gupta and Mr. Yajan Bansal (the "Successful Bidder") in the e-auction held on 12 October and 14 October, 2020 for acquiring the Corporate Debtor as a going concern on "as is where is" basis and "as is what is" basis in liquidation proceedings in accordance with the provisions of the process document dated 31 August 2020 ("Process Document") issued by the Liquidator, the Code and the Liquidation Regulations.
# 8. The Process Document specially contemplates approval of this Hon'ble Adjudicating Authority. The acquisition plan dated 28 September 2020 (as amended dated 11 November 2020, 28 November 2020 and 10 December 2020) ("Acquisition Plan") submitted by the Successful Bidder in the e-auction held on 12 October and 14 October, 2020 for acquiring the Corporate Debtor as a going concern has been confirmed and approved by this Hon'ble Adjudicating Authority vide order dated 11 May 2022 in IA 233/2021. Copy of the order of this Adjudicating authority is annexed as Annexure A-1 in the affidavit filed on behalf of the Liquidator.
# 9. Liquidator submits that the Acquisition Plan was to be implemented through various steps, inter alia,
(i) by way of infusion of funds by the Successful Bidder in the Corporate Debtor;
(ii) allotment of equity shares to the Successful Bidder and/or their nominees;
(iii) reduction of the existing share capital of the Company;
(iv) reconstitution of the Board of directors of the Corporate Debtor; and
(v) handover of the control of the Corporate Debtor to the Successful Bidder consortium.
Liquidator further submits that the following steps pertaining to the implementation of the Acquisition Plan have been undertaken:
Infusion of funds by the Successful Bidder: The Successful Bidder consortium were required to infuse a total amount of INR 49,95,00,000 (Rupees Forty Nine Crores Ninety-Five Lakhs only) in the Corporate Debtor ("Total Consideration"). On October 19, 2020, the Successful Bidder had already remitted 10% (ten percent) of the Total Consideration by way of RTGS towards performance security. Further, the Successful Bidder deposited the entire Balance Consideration (as defined under the Acquisition Plan), on 21 May 2022 itself in the following manner:
INR 5,00,00,000 (Rupees Five Crores only) towards the allotment of equity shares of the Corporate Debtor; and
INR 39,95,50,000 (Rupees Thirty-Nine Crores Ninety Five Lakhs Fifty Thousand only) by way of unsecured loan.
Accordingly, the Successful Bidder duly complied with the undertaking given before this Hon'ble Tribunal as recorded in the order dated 11 May 2022. Vide Order dated 06.07.2022 it has been recorded that the Auction purchaser has deposited the amount required to be paid in terms of e-auction and has already filed an affidavit dated 06.07.2022.
# 10. As far as distribution of funds is concerned, Liquidator submits that in addition to the total Consideration, the Liquidator had undertaken the sale of certain scrap assets pursuant to which an amount of Rs. 4,76,471/- (Rupees Four Lakh Seventy Six Thousand Four Hundred and Seventy One only) has been has been realized ("Scrap Value"). The Total Consideration and Scrap Value are collectively referred to as "Distributable Amount". To give effect to the provisions of the Code, the Liquidator distributed the Distributable Amount in the manner as prescribed in Section 53(1) of the Code read with the Liquidation Regulations from 23 May 2022 to 06 June 2022.
# 11. On perusal of the Application it was found that certain information with respect to the Liquidation process was not clear for which this Adjudicating Authority had asked for certain clarifications vide order dated 06.09.2022. For the same, Liquidator has filed an affidavit dated 17.09.2022 responding to the queries asked by this bench.
# 12. The queries were with respect to the following:
payment of workman dues as there is some ambiguous entry in Form H,
whether there are any workmen (at present) working for the CD,
amount involved in CA No. 1090 (PB)/2018 filed under section 43, 45 and 66 and whether the amount forms the part of the liquidation estate or not,
other than the CA 1090/2018 and IA 4432/2020, if there is any pending application?
# 13. Liquidator stated that there has been an inadvertent error by the Deponent as regards the Form H. As per the verification undertaken by the Liquidator, there are a total of 186 individuals who have filed their claims and who fall within the definition of workmen as prescribed under the provisions of the Code. Further, for the period from April 2018 to April 2019 the admitted claims of the identified workmen was Rs. 62,67,550 (Rupees Sixty-Two Lakh Sixty- Seven Thousand Five Hundred Fifty), and for the period from April 2017 to April 2018, the admitted claims of the workmen amounted to Rs. 11,73,247. Accordingly, the total admitted claim of the identified workmen for a period of 24 months preceding the liquidation commencement date was Rs. 74,40,797 (Rupees Seventy Four Lakh Forty Thousand Seven Hundred Ninety Seven) ("Total Workmen Workmen Claim"). Out of the Total Workmen Claim, an amount of Rs. 63,14.623 (Rupees Sixty Three Lakhs Fourteen Thousand Six Hundred Twenty Three) has been paid by the Liquidator.
# 14. Liquidator further stated that in view of equal rank given to workmen's dues and debts owed to secured creditors under Section 53(1)(b) of the Code, on account of an inadvertent error on part of the Liquidator, an amount of Rs. 47,073 (Rupees Forty-Seven Thousand Seventy Three) was found to be due and payable to the workmen. It is respectfully submitted that the said amount now stands fully paid and, in this regard, the relevant proof of payments towards workmen dues for the period of April 2017 to April 2018 dated 17.09.2022 have been annexed herein as ANNEXURE A-3.
# 15. As far as the query of workmen (if any) working for the CD is concerned, Liquidator submits that there have been no operations/ production in the factories of the Corporate Debtor since January 2019 primarily on account of shortage of funds to run the factories. It is to be noted that before CIRP began, the business model of the Corporate Debtor was on a credit basis i.e., credit received from suppliers. However, owing to the initiation of the CIRP of the Corporate Debtor, the suppliers were hesitant in providing credit. Accordingly, the Corporate Debtor was constrained to shift from a credit based revenue model to a cash and carry mechanism wherein distributors were required to provide an advance to the Corporate Debtor in order to even initiate production of batteries/inverters etc. as opposed to finding the same on the shelf for ready purchase. This unavoidable shift in the model of business of the Corporate Debtor in a competitive market reduced the market reach and market share of the Corporate Debtor leading to a liquidity crunch, which in turn led to the complete non-functioning of the Corporate Debtor from January 2019 itself when no more funds were available to run the factories of the Corporate Debtor. As a consequence,it is stated that there are no workmen in the Corporate Debtor since January 2019 and the employees were discharged with effect from the date of initiation of liquidation of the Corporate Debtor.
# 16. Liquidator further stated that in the CA No. 1090(PB)/2018 filed under section 43, 45 and 66 of the Code ("Avoidance Application"), the entire amount sought to be avoided under the Avoidance Application is approximately Rs. 62 crores ; however, on account of certain transactions being beyond the look back period amounting to Rs. 25.44 crores (Rupees Twenty Five Crore Forty Lakh Forty Four Thousand), the amount involved under the Avoidance Application would be Rs. approximately Rs. 36 crores. Further Liquidator stated that above amounts under the Avoidance Application have not been included within the liquidation estate. He highlighted that the plan submitted by the Successful Bidder consortium provides that the Successful Bidder shall have the right to recover/proceed against any against any party whose account is recoverable in the books of the Corporate Debtor. Accordingly, the Avoidance Application shall be pursued by the Successful Bidder and it is understood that the Successful Bidder are in the process of taking the necessary steps with respect to the same including but not limited to filing a substitution application before this Hon'ble Tribunal to replace the Liquidator for pursuing the said application.
# 17. As far as pending applications are concerned, liquidator stated that apart from the Avoidance Application bearing CA 1090(PB)/2018 and IA. 4432/2020 (as already noted by this Hon'ble Tribunal), the following are the pending applications before this Hon'ble Tribunal in relation to the present liquidation process: . . . . ..
# 18. Additionally, the bank details of certain stakeholders of the Corporate Debtor, to whom payments were required to be made in terms of Section 53 (1) of the Code as aforesaid, were not available with the Liquidator. In respect of the said stakeholders, the Liquidator, in order to comply with its obligations under Section 53 (1) of the Code and in the interest of such stakeholders, caused the Corporate Debtor to issue demand drafts thereby duly allocating amounts towards the said stakeholders.
# 19. Further, an amount of Rs. 25,00,000 (Rupees Twenty-Five Lakhs only b) is being held by the Liquidator in a fixed deposit for HDFC Bank Limited (which realized its security interest in terms of Section 52 of the Code). This amount is subject to the outcome of the application filed by HDFC Bank Limited bearing IA Number 4432/2020, before this Hon'ble Adjudicating Authority. Further, in terms of the Acquisition Plan and the Plan Approval Order, an amount of Rs. 1,00,00,000/- (Rupees One Crore) has been set. aside as a corpus for any expenses that the Liquidator may incur from the transfer date for liquidation related processes and form filings. Further, in light of the conclusion of the process and handover of the Corporate Debtor to the Successful Bidder in accordance with the approved Acquisition Plan on 23 May 2022, the Liquidator has issued the sale certificate on 31 May 2022 and thereafter proceeded to file the present application for taking note of the sale of the Corporate Debtor as a going concern to the Successful Bidder consortium
# 20. A copy of the final report has been annexed as (ANNEXURE A-35) in terms of the Liquidation Regulations containing inter-alia
(i) detailed compliance certificate in the manner set out in Form- H of the Liquidation Regulations which inter alia includes details pertaining to the distribution of the Distributable Amount by the Liquidator;
(ii) the details of the undistributed proceeds in the manner set out in Form-I of the Liquidation Regulations in terms of Regulation 46 (5) of the Liquidation Regulations; (iii)The details of the estimated Liquidation Cost in the Preliminary Report and the actual Liquidation Cost incurred;
(iv) Progress report from 01 April 2022 to 23 May 2022 successful bidders
# 21. We have perused the application, documents annexed to the application. On perusal, it is found that the balance 90% of the consideration i.e. Rs 44,95,50,000/- has been remitted by bidders to the bank account provided by the Liquidator in compliance of the order dated 11.05.2022 by this adjudicating authority. The Application is complete in all respects as per the provisions of the code. Further, the pending IAS 4128/2021, 5243/2021, 4432/2022 and CA 1090/2018 were listed for consideration on 19.09.2022 and are now to be taken up on 18.11.2022.
# 22. With this order, the present application stands ALLOWED and the liquidation process stands closed. All the remaining/pending applications shall be proceeded in accordance to law. Also, in terms of the Acquisition plan and the plan approval order, an amount of Rs. 1 crore has been set aside as corpus for any expenses that the liquidator may incur. Liquidator is directed to file the progress report (monthly) of the distribution of the abovementioned amount till the full realization.
# 23. Registry is directed to send a copy of this order to ROC as well as IBBI.
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