Pre-Packaged Insolvency Resolution For Shree Rajasthan Syntex

India’s bankruptcy court approved Shree Rajasthan Syntex Ltd.’s base resolution plan filed under the pre-packaged insolvency resolution process (PPIRP).

PPIRP is available for resolution of stress of corporate micro, small and medium enterprises (MSMEs). Under PPIRP restructuring model, the management of the corporate debtor formulates a resolution plan in agreement with its creditors while retaining control over the management and the company’s operations.

The agreed resolution plan is later submitted for the National Company Law Tribunal’s (NCLT) approval.

Shree Rajasthan Syntex had submitted a petition under Section 54C of Insolvency and Bankruptcy Code (IBC) for initiating PPIRP, according to the NCLT order.

The Jaipur bench of the NCLT admitted the textile raw materials producer’s petition on 19 April 2023 and appointed Lekhraj Bajaj as the resolution professional for the PPIRP of the company.

THE PROCESS

The Udaipur, Rajasthan-based company prepared a base resolution plan, which was later placed by Bajaj before the committee of creditors (CoC) comprising State Bank of India (SBI), IDBI Bank and Bank of Baroda.

The financial creditors sought clarifications on the plan from Shree Rajasthan Syntex and following deliberations, the resolution plan was put for electronic-voting.

The e-voting period regarding approval of the base resolution plan was extended a few times. The plan was later approved by vote of 73.91%, with SBI and IDBI Bank voting in favor.

KEY PLAN FEATURES

The approved resolution plan proposes to pay the company’s stakeholders -- financial creditors, running operational creditors and workmen/employees -- a total of 41.94 crore rupees ($5 million) against their principal outstanding amount of 111.67 crore rupees, the order showed.

The financial creditors will cumulatively receive 30.12 crore rupees against their total principal outstanding amount of 100.08 crore rupees.

The payment will be cleared through fund infusion by investors/promoter/sale of other assets (15 crore rupees), sale of obsolete plant and machinery (15.62 crore rupees) and future cash accruals (11.32 crore rupees).

The repayment to banks is likely to be completed by 16 February 2024.

Bajaj later filed an application before the NCLT seeking approval for Shree Rajasthan Syntex’s base resolution plan.

THE VERDICT

The NCLT, after hearing the counsels and examining the material available on record, remarked that the base resolution plan submitted by Shree Rajasthan Syntex meets the requirements of Section 30(2) of the IBC.

The plan also does not provide any impairment in the claims of operational creditors, it added.

“This Adjudicating Authority is of the considered view that the base resolution plan, approved by CoC u/s 54K(12) of the Code and submitted with the present application, in PPIRP of the corporate debtor by the corporate debtor deserves to be approved,” the tribunal said.

The NCLT bench, comprising Judicial Member Deep Chandra Joshi and Technical Member Atul Chaturvedi, approved Shree Rajasthan Syntex’s base resolution plan on 22 August.

Shree Rajasthan Syntex, founded in 1981, is engaged in the manufacturing of synthetic spun yarns, cotton yarns and polypropylene yarns, according to its website. The company, which employs more than 3,500 workmen at two different manufacturing facilities in Rajasthan, produces 2,500 metric tons of yarn every month.

Note: $1 = 82.6228 Indian rupees

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