Bharati Defence and Infrastructure Limited

Wholly deferred; no upfront cash from the resolution applicant. Financial creditors: Rs.93crores of debt converted into equity; sustainable term loan of Rs.400 crores at 10% interest with principal repayable at the end of three years and accrued interest converted into a fresh term loan payable in five equal instalments from the end of the fourth year; unsustainable term loan of Rs.600 crores at 0.01% repayable after ten years as bullet repayment; Rs.1000 crores at 0.01% convertible at the resolution applicant's option, any unconverted portion repaid at the end of 15 years, conversion leaving lenders 90% of fully diluted equity; priority loan principal issued by ECL Finance paid over and above; 'Balance debt to be written off.' (p.29-31). Operational creditors Rs.1 crore in FY 2019, Rs.2 crores in FY 2020, Rs.2 crores in FY 2021, Rs.2 crores in FY 2022 and Rs.3 crores in FY 2023 (p.31). Dissenting financial creditors to be paid from operating cash flow before any assenting lender, with an option to become assenting within six months: outstandings LIC INR 145 crs, APA INR 62 crs, UCO INR 180 crs, Sicom INR 75 crs, DBS INR 170 crs, Syndicate INR 45 crs (unsecured), South Indian INR 5 crs (unsecured); liquidation value due to them LIC INR 6.4 crs, APA Finance INR 2.7 crs, UCO INR 7.9 crs, Sicom INR 3.3 crs, DBS INR 7.5 crs, Syndicate NIL (unsecured), South Indian Bank NIL (unsecured) (p.12-13). Schedule 3 projected cash inflows AS PRINTED (Rs. Cr., FY2019 / FY2020 / FY2021): Refunds of SBI Margin Money 43 / - / -; MOD Receivables 18 / - / -; Sale of Kolkata Yard 17 / - / -; Sale of Andheri office 29 / - / -; Sale of Scrap 11 / 11 / -; The release of BG Margin Money for executed vessels - / 3 / 6; Sale of land at Alibaug - / 10 / -; Settlement of RGPPL - / 1 / -; Other inflows (A) 117 / 25 / 6; Inflow from Operations (B) 88 / 185 / 214; Total Inflows (A)+(B) 206 / 211 / 220 (p.33-34). The FY2019 components sum to 118 against a printed (A) of 117, and the FY2020 total of 211 exceeds 25+185=210 - see arithmetic_mismatch_in_order; the figures are reproduced as printed and not corrected.

The Bench rejected the CoC-approved plan u/s 31(2) on its own reasons, in substance: (a) the resolution applicant infuses nothing - 'no upfront money is brought in by the Resolution Applicant' and 'The entire cash inflow is by way of sale of assets of the company and by getting the refund of SBI margin money and release of Bank Guarantee Money' (p.34), only internal funds being identified for Regulation 38 (p.44); (b) the plan is a holding-and-resale scheme, not a resolution - the lenders would 'run the operations of the company with the help of professional management team and over a period endeavour to find a suitable investor/buyer for the same', which on Binani Industries 'can't be treated as Insolvency Resolution Plan' (p.37-38); (c) operational creditors get Rs.9 crores against admitted dues of Rs.187 crores, i.e. 4.81%, contrary to s.30(1)(b)/30(2)(b) and Binani (p.27, p.51); (d) statutory dues of about Rs.270 Crores proposed to be settled by 10% equity to the Government of India, which the CGST & Central Excise and Customs officials confirmed is not acceptable and for which there is 'No provision in the CGST/Central Excise Act', the proposal appearing 'in spirit to evade the liability of the corporate debtor towards the Government dues' (p.39-40); (e) nothing repaid against Rs.600 crores of customer advances of which Government Departments paid about Rs.148 Crores - 'Nil amount proposed to be paid to them in the resolution plan, is not a genuine proposal' (p.32); (f) 'right size' termination of employees/workmen/consultants without numbers, terms or compliance with labour laws, 'which contravenes the law, and which is prejudicial and causing injustice to the existing employees/workers/consultants' (p.40-41); (g) a 96.5% haircut with no fixed schedule - the plan 'does not provide for the exact term of the plan, and it's implementation schedule as prescribed in Regulations 38(2)(a)' and approvals timelines under Regulation 38(3)(d) (p.45-46); (h) EARC's own balance sheet shows it lacks 'adequate source/ current assets to pump in the money required' (p.49-50); (i) conflict of interest, EARC being the lead lender with approx. 82.5% vote share voting on its own plan, and the RP being a partner of E&Y which EARC had engaged pre-CIRP (p.44, p.46-47); (j) prayers for dissolution of the 100% subsidiaries, waiver of arbitration liability, and SEBI-ICDR lock-in exemption refused as beyond the CIRP or requiring the concerned authority's approval (p.46, p.48, p.53).

Upfront payment of Rs. 200 Crores offered under its previous plan, with an offer to raise the upfront component substantially (p.54).

An unsuccessful resolution applicant whose revived offer was never perfected. It had filed MA no. 489/2018 challenging 'the defects in the process of calling for resolution plans, lack of provisions of information provided for the preparation of resolution plan' (p.14-15). Given the opportunity to re-enter, it failed to deposit the Earnest Money Deposit of Rs.10 crores by 21.09.2018 and 'have not complied with the order dated 12.09.2018' (p.55); 'in spite of providing sufficient time/opportunities both the parties failed to bring in even a single rupee' (p.54). Cost of Rs.20 lakhs imposed u/s 235A (p.57).

Rs.2500 crores offered as an upfront payment; undertook to bring the Earnest Money Deposit of Rs.10 crores on or before 21.09.2018 and to file a resolution plan showing source of funds certified by his bankers in India by the same date (p.54).

Failed to bring in the Earnest Money Deposit of Rs.10 crores or the plan by 21.09.2018 despite the Bench's warning that no extension would be granted and that costs would be levied; 'the counsels who have vociferously argued for the above two unsuccessful bidders did not even turn up during the subsequent hearings which proved their malafide intention, to drag on the matter' (p.54-55). Cost of Rs.20 lakhs imposed u/s 235A (p.57).

Rs.3000 crores upfront in cash within 90 days of approval, plus Rs.130 crores to operational creditors including statutory dues and Rs.37 crores to workmen and employees; undertook an Earnest Money Deposit of Rs.10 crores by 3.10.2018 and a Bank Guarantee of 10% of the plan value, 'amounting to Rs.317 crores', by 10.10.2018 on pain of forfeiture of the deposit (p.55-56).

Came forward only at the hearing of 25.09.2018, after the CIRP period had expired. It sought time to 3.10.2018, then to 5th October 2018 citing 'continuous Bank Holidays in India as well as Hongkong', then on 08.10.2018 said its representative 'is in the Bank to obtain DD', and on 12.10.2018, given as the last and final opportunity, 'the Counsel for the Geotech simply raised his hands and conceded that Geotech failed to arrange the minimum Earnest Money Deposit amount of Rs.10 crores.' (p.55-56). Cost of Rs.20 lakhs imposed u/s 235A (p.57).

Named as one of the unsuccessful bidders who did not appear. 'Mr Joshi Ld. Senior Counsel informed the Tribunal that the RP received a letter dated September 27, 2018, from Perfect Industries claiming that it had deposited a bank draft of INR 10 crore as Earnest Money Deposit with the Tribunal. The Tribunal stated that it had not received the Earnest Money Deposit of INR 10 crore from Perfect Industries and as such questioned the authenticity of the letter dated September 27, 2018' (p.55). No cost was imposed on it.