R. Subramaniakumar Vs Committee of Creditors (NCLT)
The present Interlocutory application is filed by Mr. R. Subramaniakumar the Applicant, Administrator of Dewan Housing Finance Corporation Limited, for the Corporate Debtor by submitting a resolution plan under section 30(6) and section 31 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, read with Rule 11 of the National Company Law Tribunal Rules, 2016) which was duly approved by the requisite majority of the Committee of Creditors (CoC) seeking approval of this Adjudicating Authority under section 31 of the I&B Code. By this application the Administrator has sought for the following reliefs :-
a) To consider and approve the Resolution Plan (including the Scheme of Arrangement specified in Schedule VIII of the Resolution Plan) submitted by the Successful Resolution Applicant (i.e. Piramal Capital & Housing Finance Limited) which was placed before the CoC in its eighteenth meeting dated December 24, 2020 which was continued after recess December 25, 2020 and was approved by the requisite majority vote of the CoC during the voting window pursuant to the CoC which remained open from December 30, 2020 to January 15, 2021.
b) To declare that the Resolution Plan, upon its approval by this Hon’ble Tribunal, shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan;
c) Grant such reliefs as specifically sought by Respondent No. 2 (the Successful Resolution Applicant) under the Resolution Plan, including as set out in Part C of the Resolution Plan.
2. The brief facts of the present case those are relevant for disposal of the present IA 449 of 2021 in (CP No. 4258 of 2019) may be stated as under :-
i. The Applicant is the Administrator of Dewan Housing Finance Corporation Limited (“DHFL” or “Corporate Debtor” or the “Company”), a Non-Banking Financial Company (NBFC), registered under the Reserve Bank of India Act, 1934 (“RBI Act”), and having its registered address at Warden House, 2nd floor, Sir PM Road, Fort, Mumbai, Maharashtra 400001. The National Office of the Corporate Debtor is located at 6th Floor, HDIL Tower, Anant Kanekar Marg, Station Road, Bandra (E), Mumbai 400051.
ii. On 20.11.2019, the Reserve Bank of India (“RBI”) superseded the erstwhile Board of Directors of the Corporate Debtor in exercise of powers conferred under Section 45-IE(2) of the RBI Act owing to governance concerns and defaults by the Corporate Debtor in meeting various payment obligations and appointed the Applicant as the Administrator of the Corporate Debtor. A press release dated 20.11.2019 by the RBI in this regard was published. The press release further notes that the RBI also intended to shortly initiate the process of resolution of DHFL under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (“FSP Rules”) and would also apply to the Hon’ble NCLT for appointing the Administrator as the Insolvency Resolution Professional.
iii. Thereafter on 22.11.2019, the RBI, in exercise of powers conferred under Section 45-IE 5(a) of the RBI Act, constituted a three-member Advisory Committee comprising of Dr Rajiv Lall, erstwhile Non-Executive Chairman, IDFC First Bank Ltd, Mr. N S Kannan, Managing Director and CEO, ICICI Prudential Life Insurance Co. Ltd and Mr. NS Venkatesh, Chief Executive, Association of Mutual Funds in India (“Advisory Committee”) to advise the Administrator in the operations of DHFL during the corporate insolvency resolution process (“CIRP”). A press release dated 22.11.2019 by the RBI was published The press release further notes that the FSP Rules provide for the concerned Financial Sector Regulator to appoint a committee of advisors to advise the Administrator in the operations of DHFL during the CIRP.
iv. The Applicant submits that on 29.11.2019, the RBI filed the captioned company petition (being CP(IB) 4258/MB/2019) (“Company Petition”) before this Hon’ble Mumbai bench of the National Company Law Tribunal (“Hon’ble Tribunal” or “Hon’ble Adjudicating Authority”) for initiation of CIRP of the Corporate Debtor under the provisions of Insolvency and Bankruptcy Code, 2016 (“Code”)
v. This Hon’ble Adjudicating Authority/ Tribunal vide its Order dated 03.12.2019 (“Admission Order”) admitted the captioned Company Petition and confirmed appointment of the Applicant as the Administrator in accordance with Rule 5(a)(iii) of the FSP Rules under the Code, to perform all the functions of the Resolution Professional and complete the CIRP of the Corporate Debtor. Further, the RBI vide its press release dated 04.12.2019, advised that the three (3) member Advisory Committee shall continue as the Advisory Committee constituted under Rule 5(c) of FSP Rules and that the Advisory Committee shall advise the Administrator in the operations of the Corporate Debtor during the CIRP.
vi. The Applicant submits that Respondent No. 1 is the Committee of Creditors (“CoC”) of the Corporate Debtor, represented through Union Bank of India. Respondent No. 2, is Piramal Capital & Housing Finance Limited, is the Successful Resolution Applicant. The Applicant submits that Respondents No. 1 and 2 have been impleaded as proforma Respondents to the present application, and no reliefs have been sought against them.
vii. Pursuant to the Admission Order, the Applicant on 04.12.2019, issued a public announcement (“Public Announcement”) in terms of Regulation 6 (1) of the CIRP Regulations, which specified the insolvency commencement date as 03.12.2019(“ICD”), being the date of the appointment as Administrator of DHFL under the FSP Rules read with the provisions of the Code and the date of admission of the petition by this Hon’ble Tribunal. The Public Announcement invited creditors and public depositors of DHFL to submit their claims on or before 17.12.2019.
viii. The Applicant submits that the number of public depositors of the Corporate Debtor were more than 10, and the since the public depositors are financial creditors, the public depositors constitute a “class of creditors” within the meaning of Regulation 2 (aa) of the CIRP Regulations.
ix. As per regulation 8A (3) of the CIRP Regulations “A creditor in class may indicate its choice of an insolvency professional from amongst the three choices provided by the interim resolution professional in the public announcement, to act as its authorized representative.” The Applicant identified 3 professionals to act as Authorized Representatives of the public depositors viz (a) Mrs. Charu Sandeep Desai (IBBI/IPA-001/IP-P00434/2017-18/10757); (b) Deepak Kumar (IBBI/IPA-001/IP-P-01605/2018-2019/12431); and (c) Pravin Navandar (IBBI/IPA-001/IP-P00008/2016-17/10027). Pursuant to the Form CAs received by the Applicant, as on 24.12.2019, Mrs. Charu Sandeep Desai (IBBI/IPA-001/IP-P00434/2017-18/10757) received the votes of the highest number of public depositors to act as their authorised representative.
x. The Applicant states that pursuant to the Public Announcement, claims were received from various creditors (including public depositors) of the Corporate Debtor. These claims were collected and collated and a list of creditors was prepared in accordance with Section 18(b) of the Code read with Regulations 13(1) and 13(2) of the CIRP Regulations.
xi. The Applicant states that the CoC was constituted on 24.12.2019. The first meeting of the CoC was constituted on 30.12.2019, where various matters were discussed including appointment of Ernst & Young (“EY” or “Process Advisors”) as process advisors and AZB & Partners as legal advisors to assist the Applicant in carrying out functions during the CIRP.
xii. In the second CoC meeting dated 16.01.2020, the Administrator informed the CoC about the appointment of RBSA Valuation Advisors LLP(“RBSA”) and Kapil Maheshwari as Registered Valuers for the purpose of determining the fair value and the liquidation value of the Corporate Debtor. In the said meeting, eligibility criteria for submission of expression of interest (“EOI”) by prospective resolution applicants (“PRAs”) for submitting resolution plans for the Corporate Debtor, issuance of Invitation for EOI and Form G for submission of resolution plans for the Corporate Debtor were approved by the CoC.
xiii. The Applicant submits that the Invitation for EOI allowed PRAs to submit EOIs under two ‘Options’. Under Option I, PRAs were invited to submit EOIs for the entire business of DHFL as a going concern. Having regard to the complexity and scale of operations of DHFL, the Administrator in consultation with CoC, categorised the business of DHFL into three ‘Groups’ (collectively comprising all the assets of the Corporate Debtor) under Option II. Under this Option II, PRAs were invited to submit EOIs for one or more Groups as a going concern, as further detailed in the Invitation for EOI.
xiv. The Applicant published Form G on 28.01.2020 for invitation of EOIs in several leading national and regional newspapers as well as the website of the Corporate Debtor. The Applicant had also uploaded the detailed invitation for EOI on the website of the Corporate Debtor.
xv. Pursuant to the invitation for EOI, the Applicant received 24 (twenty- four) EOIs from PRAs by 17.02.2020 who were identified as the provisional PRAs. Pursuant to receipt of EOIs and evaluation of the documents submitted by the PRAs by the Applicant, CoC and the Process and legal advisors on the basis of the eligibility criteria, the final list of 23 (twenty-three) shortlisted PRAs was prepared in accordance with the Regulation 36 A (12) of the CIRP Regulations.
xvi. The Applicant submits that the Information Memorandum (IM) was shared with the members of CoC. Further, all material information in relation to the CIRP such as insolvency resolution process costs, material ligations and other relevant financial and operational updates were discussed with the CoC during their meetings and also uploaded on the VDR from time to time.
RESOLUTION PLAN AND ITS APPROVAL
xvii. Pursuant to receipt of EOIs from the PRAs and evaluation thereof by the Applicant, CoC and the Process Advisors and Legal Advisors of the Applicant on the basis of the eligibility criteria approved by the CoC, the final list of PRAs was prepared.
xviii. The Applicant submits that in the third and fourth meeting of the CoC held on 20.02.2020, 11.03.2020, the CoC discussed, deliberated and considered the process to invite, review and approve resolution plans in accordance with a Request For Resolution Plan (RFRP). A request for resolution plans dated March 2, 2020 was issued, which invited resolutions plans for the Corporate Debtor by April 16, 2020. In consultation with the CoC, the request for resolution plans was subsequently revised on March 17, 2020 and August 15, 2020. The final request for resolution plan was issued on September 16, 2020, in accordance with the directions of the CoC and as per Regulation 36B of the CIRP Regulations (“CIRP”), which contained the evaluation matrix as approved in the fourth CoC meeting held on 11.03.2020 and specified the form and manner of submission of the resolution plans for the Corporate Debtor, which were to be submitted by 17.10.2020. Thereafter, the CoC from time to time extended the last date of submission of the resolution plans to enable the CoC to negotiate with the PRAs with the view to maximise the value for the stakeholders of the Corporate Debtor.
xix. As stated above, based on the extension granted by the CoC to extend the last date of submission of the final resolution plans (for the resolution applicants who duly submitted resolution plans as per the timeline approved by the CoC in accordance with the provisions RFRP) was 22.12.2020. The following resolution plans were received within the final deadline.
(i) Resolution plan submitted by India Opportunities Investments Singapore Pte. Ltd. in respect of Option I (as defined under the RFRP);
(ii) Resolution plan submitted by Piramal Capital & Housing Finance Limited in respect of Option I (as defined under the RFRP);
(iii) Resolution plan submitted by Adani Properties Private Limited along with its wholly owned subsidiary Nirjara Pedestal Private Limited in respect of Option I (as defined under the RFRP);
(iv) Resolution plan submitted by Piramal Capital & Housing Finance Limited in respect of Option IIA (as defined under the RFRP);
(v) Resolution plan submitted by Adani Properties Private Limited along with its wholly owned subsidiary Nirjara Pedestal Private Limited in respect of Option IIB (as defined under the RFRP);
(vi) Resolution plan submitted by Adani Properties Private Limited along with its wholly owned subsidiary Nirjara Pedestal Private Limited in respect of Option IIC (as defined under the RFRP);
(vii) Resolution plan submitted by SC Lowy Primary Investments in respect of Option IIB (as defined under the RFRP).
xx. During the ninth meeting of the CoC held on 26.10.2020, the CoC informed the Applicant about the appointment of an expert agency, Dun & Bradstreet (“D&B”) by the CoC for the purpose of assisting the CoC in conducting a feasibility and viability analysis of the Submitted Resolution Plans in terms of Section 30(4) of the Code. Subsequently, the CoC along with its advisors, including D&B, inter-alia discussed and deliberated the broad contours of the resolution plans in various CoC meetings.
xxi. At the seventeenth and eighteenth meetings of the CoC held on 17.12.2020 (which continued after recess on 18.12.2020) and 24.12.2020 (which continued after recess on 25.12.2020) :
i. D&B submitted its findings regarding the technical and commercial aspects of and feasibility and viability of the Submitted Resolution Plans; and
ii. the CoC discussed and deliberated upon the Submitted Resolution Plans in light of the findings presented by D&B.
xxii. The Applicant, together with his Process Advisors and legal advisors, analysed the Submitted Resolution Plans for compliance with the provisions of the Code and rules and regulations thereunder and confirmed to the CoC that the Submitted Resolution Plans are legally compliant as per the requirements of the Code (including under Section 30 of the Code, requirements under the FSP Rules and Regulations 38 and 39 of the CIRP Regulations) and can be placed before the CoC for voting in accordance with Section 30(3) of the Code. The legal compliance certificates in respect of each of the Submitted Resolution Plans were also prepared, which affirmed that the Submitted Resolution Plans were in compliance with the Code and the rules and regulations thereunder. Further, the CoC was informed through the VDR of the various deviations that the Submitted Resolution Plans had from the provisions of the RFRP dated 16.09.2020, including inter alia in relation to conditions to the implementation of the resolution plans, deviations from the formats prescribed in the RFRP and annexures to the RFRP, for the CoC’s consideration and approval. The CoC and their advisors discussed and deliberated the aforesaid deviations in the eighteenth meeting of the CoC held on 24.12.2020 (and continued after recess on 25.12.2020)
xxiii. Additionally, in accordance with the provisions of the Code and allied regulations made thereunder, the Applicant has the duty to (a) issue certifications under Form H to the CIRP Regulations that the relevant resolution applicants have submitted affidavits pursuant to Section30(1) of the Code confirming their eligibility under Section 29A of the Code to submit resolution plans and that the contents of the said affidavits are in order; and (b) conduct due diligence based on the material on record in order to satisfy that the prospective resolution applicants comply with inter alia the applicable provisions of Section 29A of the Code. After due consultation with the CoC, the Applicant appointed GT to verify the eligibility of resolution applicants under Section 29A of the Code and to confirm the veracity of the accompanying affidavits.GT submitted a report under which none of the resolution applicants have been found to be ineligible under Section 29A of the Code, which was duly reviewed by the legal advisors to the Administrator. The Applicant has accordingly conducted adequate due diligence based on the material available on record and formed a prima facie opinion that the resolution applicants are eligible under Section 29A of the Code, and accordingly informed the CoC of this view in its seventeenth meeting on December 18, 2020 (continued after recess on December 19, 2020)
xxiv. During the seventeenth meeting of CoC, the CoC in line with the requirements of the recently amended Regulation 39 of the CIRP Regulations discussed the tie-breaker formula which was considered for voting by the CoC in the said meeting and was voted in favour by 89.84% majority.
xxv. Subsequently, in accordance with Regulation 39 of the CIRP Regulations, the legally compliant Submitted Resolution Plans (along with the necessary deviations from the terms of the RFRP and waivers from the formats prescribed in the RFRP) were duly presented by the Administrator to the CoC at the eighteenth meeting of the CoC held on December 24, 2020 (which continued after recess on December 25, 2020) for the CoC’s consideration in accordance with the provisions of the Code, the CIRP Regulations and the terms of the RFRP.The Submitted Resolution Plans were voted upon by the CoC during the ensuing voting window which remained open from December 30, 2020 to January 15, 2021.
xxvi. Additonally, in the eigtheeenth CoC meeting, the CoC also after discussion amongst themselves proposed a Resolution (being ‘Voting Item #1’) for “Manner of Distribution of proceeds of the Resolution” which was voted in favour by 86.95% majority.
xxvii. The voting result as regards the Submitted Resolution Plans was as follows:
a) Resolution plan submitted by India Opportunities Investments Singapore Pte. Ltd. in respect of Option I (as defined under the RFRP) received 45.62 % votes;
b) Resolution plan submitted by Piramal Capital & Housing Finance Limited in respect of Option I (as defined under the RFRP) received 93.65 % votes;
c) Resolution plan submitted by Adani Properties Private Limited along with its wholly owned subsidiary Nirjara Pedestal Private Limited in respect of Option I (as defined under the RFRP) received 18.65 % votes;
d) Combination of resolution plan submitted by Piramal Capital & Housing Finance Limited in respect of Option IIA (as defined under the RFRP), resolution plan submitted by Adani Properties Private Limited along with its wholly owned subsidiary Nirjara Pedestal Private Limited in respect of Option IIB (as defined under the RFRP), and resolution plan submitted by Adani Properties Private Limited along with its wholly owned subsidiary Nirjara Pedestal Private Limited in respect of Option IIC (as defined under the RFRP) received 15.12 % votes;
xxviii. Combination of resolution plan submitted by Piramal Capital & Housing Finance Limited in respect of Option IIA (as defined under the RFRP), resolution plan submitted by SC Lowy Primary Investments in respect of Option IIB (as defined under the RFRP), and resolution plan submitted by Adani Properties Private Limited along with its wholly owned subsidiary Nirjara Pedestal Private Limited in respect of Option IIC (as defined under the RFRP) received 15.12 % votes;
xxix. The CoC during their eighteenth meeting considered the resolution plan submitted by Respondent No. 2 (i.e. Piramal Capital & Housing Finance Limited) dated December 22, 2020 in respect of Option I (as defined under the RFRP) for voting. The voting window remained open from December 30, 2020 to January 15, 2021. The CoC during this voting window voted in favour of the resolution plan submitted by Respondent No. 2 by a majority of 93.65 % votes by voting in favour of the resolution titled ‘Voting Item #5’. The said Voting Item #5, amongst other things, provided that the CoC shall approve the resolution plan subject to certain amendments / modifications made to the satisfaction of the CoC, and so as to give effect to the requirements of the CoC.
xxx. Subsequently, legal advisors to the CoC on behalf of and for the benefit of the CoC sought an undertaking from the Successful Resolution Applicant, on behalf of the CoC, seeking relevant clarifications to the resolution plan pursuant to the above resolution passed by the CoC. Accordingly, the Successful Resolution Applicant submitted an additional undertaking dated January 21, 2021, which forms an integral part of the resolution plan (together, the “Resolution Plan”). Copies of the Resolution Plan dated December 22, 2020 submitted by the Successful Resolution Applicant for Option I and the undertaking dated January 21, 2021 submitted in relation thereto are annexed.
xxxi. Voting Item #5 of the CoC resolution further provided that the Administrator (on behalf of the CoC) was authorised to issue a Letter of Intent to the Successful Resolution Applicant as per the terms of the RFRP subject: (a) to the fulfilment of the conditions mentioned in paragraph 5.13 above to the satisfaction of the CoC, or a waiver of such condition (in each case, as notified to the Administrator by (or on behalf of) the CoC in writing); and deviations to the RFRP in the Resolution Plan submitted by the Successful Resolution Applicant, if any and as disclosed to the CoC being: (i) waived by the CoC or (ii) being remedied, in each case, prior to the issuance of the Letter of Intent. Pursuant to the receipt of the additional undertaking dated January 21, 2021 the Administrator received written confirmation on behalf of CoC (dated January 22, 2021) to the effect that the conditions mentioned in paragraph one of Voting Item #5 have been complied with, to the satisfaction of the CoC and that the deviations to the RFRP if any and as disclosed to the CoC have been waived by the CoC or have been remedied, as applicable. Thereafter, on January 22, 2021the Successful Resolution Applicant submitted a Performance Bank Guarantee (“PBG”) in accordance with the terms of the Resolution Plan in a manner and form satisfactory to the CoC. The Administrator issued the Letter of Intent to the Successful Resolution Applicant on January 22, 2021 in accordance with the terms of the RFRP and on the instructions of the CoC which was accepted and returned by the Successful Resolution Applicant on the same day. Subsequently, at the request of the CoC, one clarificatory amendment was made to the PBG on January 27, 2021.
xxxii. In accordance with the terms of the RFRP, on January 29, 2021, and after receipt of confirmation from Union Bank of India on behalf of the CoC (as the beneficiary of the earnest money deposit), the earnest money deposit submitted by the Successful Resolution Applicant was returned to the Successful Resolution Applicant.
xxxiii. It is submitted that the Applicant has been updating the list of creditors from time to time and had uploaded the same on the website of the Corporate Debtor. The latest list of creditors as on December 14, 2020.
xxxiv. The CoC, at the time of approval of the Resolution Plan i.e. during the eighteenth CoC meeting on December 24, 2020(which was continued after recess December 25, 2020), comprised the members exercising the voting share defined under Section 5(28) of the Code.
xxxv. On January 25, 2021, the Applicant, in accordance with Rule 5 of the FSP Rules, submitted an application to the RBI seeking its ‘no objection’ to the Resolution Plan submitted by the Successful Resolution Applicant. Pursuant to the FSP Rules, the RBI communicated its ‘no objection’ on February 16, 2021 for change in control ! ownership ! management in the Corporate Debtor in terms of Rule 5(d)(iii) of the FSP Rules and also in terms of para 3 of NHB Circular – Housing Finance Companies – Approval of acquisition or transfer of control (NHB) Directions, 2016, subject to (inter alia) the condition that the deposit taking status of the Corporate Debtor will be revoked and the Corporate Debtor and! or merged entity of the Corporate Debtor and Respondent No. 2 shall function as a non-deposit taking housing finance company.
xxxvi. On January 27, 2021, the Applicant sent a letter of intimation to the Insurance Regulatory and Development Authority of India (“IRDAI”) in relation to the CIRP of the Corporate Debtor, updating the IRDAI for its information and records about the proposed transactions under the Resolution Plan.
3. The Applicant submitted that the Compliance Certificate in Form- H under Regulation 39(4) of the Regulations showing the compliances of the Plan as mandatorily required under the Code and Regulations and that the Plan had been approved by the CoC which is produced as hereunder :-
FORM H
COMPLIANCE CERTIFICATE
Under Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
1. I, R. Subramaniakumar, the Administrator (“Administrator”) for the corporate insolvency resolution process (“CIRP”) of Dewan Housing Finance Corporation Limited (“Corporate Debtor” or “CD” or “DHFL”).
2. The details of the CIRP are as under:
