SL. No.
3
NATIONAL COMPANY LAW TRIBUNAL
HYDERABAD BENCH
COURT HALL NO: II
Hearing Through: VC and Physical (Hybrid) Mode
CORAM: SHRI.RAJEEV BHARDWAJ– HON’BLE MEMBER (J)
CORAM: SHRI.SANJAY PURI, - HON’BLE MEMBER (T)
ATTENDANCE-CUM-ORDER SHEET OF THE HEARING OF NATIONAL COMPANY LAW TRIBUNAL,
HYDERABAD BENCH, HELD ON 22.12.2023 AT 10:30 AM
TRANSFER PETITION NO.
IA (IBC)/1426/2023 IA (IBC)/1330/2023 in
COMPANY PETITION/APPLICATION NO. Company Petition IB/10/2022
NAME OF THE COMPANY Feno Plast Limited
NAME OF THE PETITIONER(S) The Canara Bank Ltd
NAME OF THE RESPONDENT(S) Feno Plast Limited
UNDER SECTION 7 of IBC
ORDER
IA (IBC)/1426/2023 and IA (IBC)/1330/2023
Orders pronounced, recorded vide separate sheets. In the result, these applications
are disposed of.
SD/- SD/-
MEMBER (T) MEMBER (J)
Apoorva
IN THE NATIONAL COMPANY LAW TRIBUNAL
HYDERABAD BENCH-II
IA. No. 1330 of 2023
IA. No. 1426 of 2023
In CP (IB) No.10/7/HDB/2022
[Under Rules 11, 13 & 32 of the NCLT Rules 2016]
In the matter of M/s. Canara Bank Limited vs. M/s. Feno Plast Limited
1. Mr. Haridas Krishna Kumar, S/o. H Narsaiah,
Erstwhile Promoter & Whole Time Director of
M/s Feno Plast Limited
# Villa No.112, First Leaf,
Journalist Colony, Gopannapally,
Serilingampally, K V Ranga Reddy – 500032.
2. Saparna Haridas, W/o. H Krishna Kumar,
Erstwhile Promoter Group of
M/s Feno Plast Limited
# Villa No.112, First Leaf,
Journalist Colony, Gopannapally,
Serilingampally, K V Ranga Reddy – 500032.
…Applicants
AND
Mrs. Kalpana G.
RP-Feno Plast Limited
Office at H.No. 16-11-19/4, G-1,
Sri Laxmi Nilayam Saleem Nagar Colony,
West Marredpally Telangana. PIN: 500036.
…Respondent
Date: 22.12.2023
CORAM:
Sri Rajeev Bhardwaj, Hon’ble Member (Judicial)
Sri Sanjay Puri, Hon’ble Member (Technical)
Counsel/Parties present:
For the Applicant : Mr. VK Sajith & Mr. V. Ravi Kumar, Advocate
For the Respondent : Mrs. Mummaneni Vazra Laxmi, Advocate
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
Per: Rajeev Bhardwaj, Member (Judicial)
ORDER
1. Both IA No.1426/2023 and IA No.1330/2023 are being taken together for
decision as they are interlinked and connected.
2. The brief facts necessary to dispose of both the applications, as stated, are
that:
2.1 M/s. Canara Bank Limited filed CP No.10/7/HDB/2022 under Section 7 of
the IBC against M/s. Feno Plast Limited (hereinafter referred as corporate
debtor) and the petition was admitted on 07.02.2023.
2.2 The Applicants are the erstwhile promoters of the corporate debtor.
2.3 The Respondent being the Resolution Professional of the corporate debtor
issued publication dated 09.04.2023 in Form-G of invitation for Expression
of Interest (EOI) from the prospective investors.
2.4 The Applicants in the capacity of erstwhile promoters of the corporate
debtor, being a registered Micro, Small and Medium Enterprises (MSME)
have also expressed their interest to file Resolution Professional, but the
same was rejected by the respondent.
2.5 Aggrieved with the decision of the respondent, the applicants filed an
IA No.805/2023 and vide order dated 17.07.2023, this Authority passed
directions to accept the EOI of the applicants as deemed MSME and relax
the eligibility criteria etc.
2
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
2.6 After passing of the order dated 17.07.2023, the respondent sent an e-mail
to the applicants that no timeline has been fixed by this Authority for
submitting the resolution plan and finally a month’s time was granted for
this purpose.
2.7 It is claimed that the respondent has not complied with the direction of this
Authority, despite the fact that the applicants as the erstwhile promoters of
the corporate debtor, being a registered MSME, were exempted from
complying with the mandatory threshold approved by the CoC.
2.8 However, the respondent insisted that the applicants were to meet the
eligibility criteria as has been approved in the 2nd CoC meeting held on
03.04.2023.
2.9 On the issue that the applicants’ non-compliance of the eligibility norms, the
applicants have relied upon the decision of the Hon’ble NCLAT in C. Raja
John versus Mr. R. Raghavendran & Ors., in Company Appeal (AT) (CH)
(INS) No.207 of 2021 and M/s. Sarvana Global Holdings Ltd. & Anr.
versus M/s. Bafna Pharmaceuticals Ltd. & Ors. Company Appeal (AT)
(Insolvency) No.203/2019.
2.10 Therefore, delay in submission of the resolution plan by the applicants
resulted in the applicants’ name not being included in the final list of
prospective resolution applicants as well as request for resolution plan
(RFRP). The applicants have also not been exempted from meeting the
eligibility criteria, i.e., requirement of the minimum worth of Rs.75 Crores
as approved by the CoC.
3
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
2.11 Even the respondent did not call the meeting of the CoC and placed the order
dated 17.07.2023 in IA No.805/2023 for compliance.
2.12 In these circumstances, the applicants have prayed in IA No.1426/2023 as
below:
i. Direct the respondent resolution professional to accept the resolution
plan proposed by the applicants without seeking the payment of
EMD;
ii. Direct the resolution professional respondent to place the resolution
plan proposed by the Applicants without verifying that the
prospective resolution plan crossed the eligibility threshold or not;
iii. In view of the Judgements referred to above supra, direct the
committee of creditors to verify the resolution plan proposed by the
applicants in terms of viability and feasibility in terms of the
applicants being the erstwhile promoters of CD are not competent
with the other resolution applicants.
2.13. In the I.A No. 1330/2023, the following relief has been prayed for:
i. By virtue of the powers vested under Rule 15 of NCLT Rules, 2016,
allow the present application by extending the time granted by the
respondent for submitting the proposed resolution plan from
16.08.2023 to 06.09.2023 by setting aside the decision of the
Respondent resolution professional;
ii. Direct the respondent herein to comply with the orders of the
Tribunal in its entirety i.e., to;
a) Place before the CoC the final list of prospective resolution
applicants which includes this applicant also as per the directions
of this Tribunal in IA No.805 of 2023;
4
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
b) To call for the CoC meeting immediately and place the directions
to amend the eligibility criteria by a resolution and so far,
Applicants to qualify to submit the resolution plans in accordance
with the law;
3. The respondent by filing counter has contested and contended the averments
made in the application.
3.1 It is submitted that in view of the complexity and scale of operation of the
business of the corporate debtor, the eligibility criteria of the PRAs was
approved in the 2nd CoC meeting of the CoC on 03.04.2023. Section 240A
of the IBC says that in case of MSME units, relaxation can be provided only
with respect to clause (c) and (h) of section 29A of the IBC.
3.2 When no other relaxation can be given to the MSME units, except as
provided under clause (c) and (h) of the section 29A, relief sought by the
applicant cannot be accepted.
3.3 The aim and objective of the IBC is to maximize the value of the corporate
debtor in a time bound manner and the applicants are misusing the provision
of law.
3.4 It is submitted that in view of the orders dated 17.07.2023 in IA No
805/2023, the respondent has accepted the EOI filed by the applicants and
allowed time of 30 days to submit the resolution plan. The said plan is
required to be compliant with the provisions of the IBC and regulations
thereunder and it is only then the said plan is to be placed before the CoC
for approval.
5
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
3.5 In response to the directions, three PRAs have already submitted their
resolution plan by submitting refundable advances of Rs.5 crores. However,
no such resolution plan has been submitted by the applicants and instead of
this they are filing the applications for the extension of time etc.
4. We have heard Ld. Counsel for both the parties and have also gone through
the entire records.
5. The crux of the matter is the compliance of the order dated 17.07.2023 in IA
No.805/2023 and the order is reproduced below:
i. Direct Respondent No.1 RP to accept the Expression of Interest of the
Applicant as Prospective Resolution Applicant under section 240A of
IBC since Corporate Debtor is a deemed MSME.
ii. Direct Respondent 1, 2 & 3 the RP and Committee of Creditors to
relax the eligibility criteria requirement of the minimum tangible net
worth of Rs.75 Crores for the applicant/promoter of Corporate
Debtor, and
iii. Declare that since the applicant is contesting the non-inclusion of his
name in the provisional list to issue RFRP and IM to this applicant
too, the Resolution Plan submitted by him shall be accepted and dealt
with in accordance with law.
6. It is admitted by the respondent that condition No.1 has already been
complied with and expression of interest of the applicants as per the
provisions of the section 204A of the IBC has been accepted. The dispute is
only regarding compliance of direction Nos.2 and 3 of the order dated
17.07.2023 in IA No.805/2023.
6
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
7. In this context, the eligibility criteria approved by the CoC on 03.04.2023
for the prospective resolution applicants is material to determine whether the
respondent has complied with the direction No.2 and 3 of this Authority or
not.
8. The relevant portion of this criteria is reproduced as below:
i. Category A – In case of a private/ public limited company, LLP, AOP,
body corporate, Partnership firms, Individuals whether incorporated
in India or outside India.
The prospective RA shall have a minimum tangible net worth of Rs.75
Crores as on 31st March 2022 based on audited financial statements
of the RA and as certified by statutory auditor.
9. The second condition is relating to the aforesaid clause and the third
condition is relating to the approval of the resolution plan submitted by the
applicants.
10. It is admitted by the respondent that the order dated 17.07.2023 was not
placed before the CoC and the criteria on the basis on which the applicants
were asked to submit the resolution plan was approved on 03.04.2023 which
was prior to the passing of the order dated 17.07.2023 in IA No. 805/2023.
11. In para 17 of the counter filed in IA No.1330/2023, the respondent has taken
the plea that the proposed resolution plan, if it is compliant with the
provisions of the IBC and regulations made thereunder has to be placed
before the CoC for their approval. Therefore, the direction issued by this
Authority in order dated 17.07.2023 was not put up before the CoC for its
consideration.
7
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
12. The applicants have relied upon the decisions of Hon'ble NCLAT in Mr. C.
Raja John and M/s. Sarvana Global Holdings Ltd, & Anr. cases (Supra)
to submit that the MSME unit is exempted from meeting the eligibility
criteria, especially the requirement of holding minimum net worth is not
applicable.
13. Both the judgments relied upon by the applicants were in issue before the
Hon’ble Supreme Court in appeal filed in Mr. C. Raja John case supra,
titled as Mr. R. Raghavendran versus Mr. C. Raja John & Ors. (2023)
ibclaw.in 107 SC. However, the Hon’ble Supreme Court has set aside the
Para 32 & 34 of Mr. C. Raja John case supra. The observations made in
paragraph Nos.32 & 34 of the said Judgment read as under:
“32) In any event, it is unequivocal that the Corporate Debtor is an MSME and as
held by this Tribunal that it is not necessary for the Promoters to compete with other
Resolution Applicants to regain the control of the Corporate Debtor.
34) Further, this Tribunal, keeping in view of the object of the Code that the
Maximization of the Value of the Assets of Corporate Debtor is to be kept in mind in
achieving its object. To give an opportunity to regain the control of the Corporate
Debtor, the Management/Promoters/Erstwhile Directors of the Corporate Debtor
being an MSME, not necessary to compete with other Resolution Applicants.”
14. On the question of judgment of Hon’ble NCLAT in M/s. Sarvana Global
Holdings Ltd. & Anr. versus M/s. Bafna Pharmaceuticals Ltd. & Ors, it
was held by the Apex Court that there should be exceptional circumstances
like (a) before the constitution of COC (b) in terms of S. 12 A of the code on
basis of an offer given by the promoter to claim such exemption and finally
it was held in para No.14:
“We are, thus, clearly of the view that the appellant cannot be faulted for
calling for other proposals in which the proposal given by respondent No.1
was also to be examined, put them to voting before the CoCs and declare the
results.”
8
National Company Law Tribunal, Hyderabad Bench- II
IA. No. 1330 of 2023
IA. No. 1426 of 2023 in
CP (IB) No.10/7/HDB/2022
Date: 22.12.2023
15. Hence, the others can also give resolution plan in pursuance of the EoI and
these are to be considered along with the plan of MSME.
16. In view of aforesaid discussion:
1. The RP is directed to put up the order dated 17.07.2023 in IA No. 805/2023
for consideration of the CoC.
2. The CoC shall decide about the eligibility criteria in view of the Judgement
of the Hon’ble Supreme Court Mr. R. Raghavendran versus Mr. C. Raja
John & Ors. (2023) ibclaw.in 107 SC.
17. Consequently, both the applications are disposed of.
Sd/- Sd/-
(SANJAY PURI) (RAJEEV BHARDWAJ)
MEMBER (TECHNICAL) MEMBER (JUDICIAL
Apoorva
