Application under Section 7 of the ‘I&B Code’ was filed by the State Bank of India- (‘Financial Creditor’) for initiation of ‘Corporate Insolvency Resolution Process’ against ‘Bhushan Steel Ltd.’- (‘Corporate Debtor’). By the impugned order dated 15th May, 2018, the Adjudicating Authority held that ‘Tata Steel Limited’ is eligible as ‘Resolution Applicant’ and not barred by Section 29A (d) of the ‘I&B Code’ and approved the ‘Resolution Plan’ submitted by ‘Tata Steel Limited’.

Resolution Plan filed under section 30(6) & 31 of IBC 2016, R/W with 39 of insolvency and bankruptcy board of India (insolvency resolution process for corporate person regulations, 2016)

The Resolution Plan has been filed by TATA STEEL ltd in corporate insolvency resolution against bhushan energy Ltd ( the corporate debtor).

The SBI filed Company Petition against Bhushan energy ltd under section 7 of the code.

In pursuance of section 15 of the code of interim Resolution Plan invited claim on 10.01.2018 stating that he had received and collated the claims amounting to INR 2779,94,79,058/- (rupees two thousand seven hundred seventy nine crores ninety four lakhs seventy nine thousand fifty eight) from twelve (12) financial creditors and further claimed of Rs. 98,20,03,794 from 19noperation creditors as on 13.09.2018.

In the 9^th CoC meeting restated the Resolution Plan submitted by TSL is a highest evaluated compliant resolution plan. it was informed by RP that the average of the liquidation values provided by the two Registered Valuers was approximately INR 721 Crores.

In the 10^th CoC meeting amended and restated Resolution Plan and subsequently was put for e-voting process where it the resolution plan was approved with an affirmative voting share percentage of 100% which is more than the minimum threshold of 66% as required by section 30(4) of the code.

The ex promoter of the corporate debtor of SBI filed objections stating that he is not opposing the resolution of the corporate debtor, but raised 3 issues-

1. Biased conduct of the Resolution Professional towards the Resolution applicant
2. Lower valuation at which the debts of the company have ban resolved
3. Tata steel ltd. Ineligible under section 29A of the code.

The principal bench of the National Company Law Tribunal (NCLT) on Thursday approved Tata Steel’s nearly Rs 800-crore bids to acquire Bhushan Energy. The NCLT, while approving this bid, also rejected Bhushan Energy’s former promoter Neeraj Singhal’s objections to Tata Steel’s bid for the debt-laden company.

As part of the plan, Tata Steel will offer an upfront payment of Rs 730 crore, while it will pay an additional Rs 50 crore to operational creditors of the company. A further sum of Rs 367 crore will be infused by Tata Steel in the company as a part of equity infusion, depending on the prevalent market conditions. Till the time Tata Steel takes over the company and starts running it, the Committee of Creditors and the resolution professional of the company will act as monitoring agency to oversee the day to day functioning of the company, the NCLT said. A detailed copy of the order is awaited.

Bhushan Energy was taken to the NCLT by State Bank of India (SBI) for not paying its dues worth Rs 500 crore. On June 6, the NCLT allowed an extension of 90 days for the company to find a resolution plan when it failed to find any within the 180-day moratorium. Incorporated in 2005, Bhushan Energy is based in Dhenkanal, Odisha. It is an arm of Bhushan Steel. Bhushan Energy had reported a gross debt of Rs 2,336 crore in 2015-16 (April-March).

The NCLT had in June last year extended the insolvency resolution period for Bhushan Energy by 90 days beyond the initial period of 180 days after the lenders to the company had failed to zero in on one bidder for the company.

On the basis of prima facie facts, the petition has been admitted for initiating corporate resolution process. The Resolution process is an attempt to rescue a fund starving body corporate from the financial challenging conditions and to restore it back to a sustainable financial ease. It may involve financial restructuring, any other arrangement by insolvency another fund infusing company or even by compromise with its creditors. An ‘un-discharged insolvent’ cannot be a one who is in the resolution process as is obtaining in facts and circumstances in the present case.

It may be possible to record a finding on the basis of admissible evidence to reach a conclusion about a status of a body corporate that is an un-discharged insolvent’ but not at a stage wherein a petition has merely been admitted in a summary proceeding to provide a pedestal for resolving an insolvency . It would be wholly premature to jump to any such conclusion. Moreover, to record a finding about the status of body Corporate that it is ‘un-discharged insolvent’, the court should lean towards principles of strict interpretation for the reasons that the resulting effect is likely to cause serious prejudice to the rights of a body corporate such a finding would attract disqualification and numerous disabilities. Secondly, there are a number of exit passages provided by the Code to put an end to the Corporate Insolvency Resolution Process. The proceeding under section 7, 9 and 10 of the Code could be brought to an end by an amicable settlement between the parties before admission and Rule 8 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rule, 2016 can be invoked. The issues can be resolved even by submitting a proposal by the Ex-promoters of the Tayo Rolls Limited under section 12A of the Code and the same can be accepted by the CoC.

Resolution Plan was accepted and all objections are over-ruled. However, the acceptance and approval of the Resolution Plan shall be subject to the following;

• The amount due to the operational creditors under the Resolution Plan must be accorded priority in payment over the financial creditor as is laid down in Regulation 38(1) of the Insolvency Resolution Regulations, 2016.
• No.384 (PB)/2019 which has been disposed of today involves the claim of the Operational Creditors which is submitted on 22.11.2018 by the applicant namely M/s. Redeem Engineering while deciding the aforesaid application, the Resolution Professional has been asked to consider the claim and if it is found meritorious and in order then the name of the applicant is be included in the list of creditors and is to be paid according to the Resolution Plan.
• Resolution Plan would be binding on the corporate debtor, its creditors, guarantors, employees and other stakeholders. The reduction of share capital of the corporate debtors as contemplated by the Resolution Plan (A-5) would take effect without any further deed or act on the part of the corporate debtor and/ or its constitutes.
• We also approve the appointment of the Monitoring Agency from the date of this order until the closing date. Accordingly, the CoC and the RP would continue as Monitoring Agency.
• The power of the Board of Directors of the Corporate Debtor shall remain suspended until the closing date.
• The reliefs sought under section 10.2 of the Resolution Plan cannot be regarded as condition precedent for approval of the Resolution Plan. Various reliefs are sought from the statutory authorities under the Income Tax Act, 1961, Ministry of Corporate Affairs, Department of Registration and stamps, Reserve Bank of India and others have been sought. We do not feel persuaded to accept the prayers made in the Resolution plan yet the Resolution Plan applicant may file appropriate applications before the competent authorities which would be considered in accordance with the law because it would not be competent for the Adjudicating Authority-NCLT to enter into any such area and granting relaxation, concession or waiver which is wholly within the domain of the competent authorities.
• In respect of the relief claimed under the capital ‘Request’ we are again not in a position to grant those request which pertains to criminal proceedings/ penalties. It may only be observed that the Resolution Plan applicant may file appropriate application before the competent authorities sized of the criminal proceedings/ penalties which shall be considered in accordance with the applicable law.
• It is needless to clarify that section 30 (2) (f) of the Code mandates that the Resolution Plan should not be against any provisions of the existing law. The Resolution applicant, therefore, shall adhere to all the applicable laws for the time being in force.

Click here to read full Judgement: State Bank of India Vs. Bhushan Energy Limited_17