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STATEMENT OF FACT

STATEMENTS OF FACT

Background
ISPL, a brother sister steel manufacturing company, was incorporated in the year 1994 under
companies’ act 1956 with its registered office at Delhi. Their astute ability helped them turn
their entity into profit and quarter generous creditors on account of which they managed to
setup manufacturing facilities in Odisha and Chhattisgarh.
Company’s Expansion
The company incorporated a thermal plant under the name IEL to overcome the issue of
unreliable and costly power supply. Its ability to generate power throughout the year attracted
many establishments including VSCL. VSCL entered into a mid-term PPA with IEL, endorsed
and guaranteed by ISPL containing arbitration clause. Upon the success of the company each
integral member of the company were handsomely rewarded. It notably got listed on all major
stock exchanges of India. In 2014, ISPL entered into a joint venture with an industrial
manufacturing company in Netherland and acquired 60% stake in ASL. To meet the finance
and working capital, ASL took $15M loan from African Bank in Uganda at the rate of 9%
interest per annum. In 2015, ISPL and DAC entered into a joint venture under the name, IDN
where 60% share was held by ISPL. To meet the finance and working capital, IDN took a loan
of $25M from Deutsche Bank at the rate of 7% interest per annum. In 2016, ISPL transferred
10% shareholding in ASL to RA Inc. whose market value was Rs. 25 crores in lieu of services
and consultancy. It was registered in Mauritius with 95% of its share with Mr. Rajiv Kumar
and Miss. Anjali Kumar.
Chronological Events
Over the years when all the immovable properties were mortgaged, the bank demanded
personal guarantee from the promoters to secure the loan granted. A shining record of ISPL
made them execute the personal guarantee in favor of the consortium lender without any
hesitation. In 2017, a geo-political reason triggered trade war which ISPL could not withstand.
Thus in 2018, ISPL for the first time was defaulted in securing it debts to its consortium lenders.
Apart from this it defaulted on salary payment to the workers in Odisha for 6 straight months
who were guaranteed employment at this unit based on a Rehabilitation and Resettlement
Scheme under the Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013.
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STATEMENT OF FACT
Declaring Insolvent
ISPL moved an application under s.10 of the IBC, declaring itself insolvent. On account of
which RP was appointed against whom all creditors submitted their claims. Upon verification
it found that claim of VSCL is arising out of unliquidated damages and thus directed it to appeal
arbitral tribunal. Aggrieved by this, VSCL moved an application before the Adjudicating
Authority for admission of their claims in entirety. On the other hand IDN too was hit hard by
trade war and consequently defaulted in 2018. To satisfy the loan obligation, a cross border
insolvency claim was executed by the court appointed administrator, Mr. Heinrich Dexter, of
IDN.
Meanwhile for the purpose of Resolution Plan, RP wanted control over the ISL in Uganda but
since ISL had already defaulted to African Bank in Uganda. The Bank sought administration
over the estate of ISL. Thus, despite the AA in India had passed suitable order, Uganda
authorities refused to recognize it.
Resolution Process
Total Due Amount as at 15.04.2018, inclusive of interest stood at 1620 Crores. Upon invitation
for resolution plan, several company approached upon which two companies were shortlisted
for final negotiations i.e. FDL, US based company and DIPL, an Indian Company. The CoC
approved the resolution plan submitted by the DIPL to which FDL objected before the
Adjudicating Authority of India stating that their plan is far more superior to the plan submitted
by the DIPL and the sought direction to the CoC to re-examine the plan. Apart from them
certain operational creditors also approached the AA alleging the approval of resolution plan
to be discriminatory in nature. To which the Adjudicating authority passed an order directing
some changes to the approved resolution plan which was not welcomed by the CoC and DIPL
as according to them it does not have the power to negotiate the terms of the resolution plan.
Issue Before Adjudicating Authority
While on other hand financial creditors of ISPL served notice and moved application before
the AA on Mr. Rajeev Kumar and Miss. Anjali Kumar. They challenged the validity of clause
15 stating that once the resolution plan is approved all the liabilities of the corporate debtor is
deemed to be extinguished and subsequently filed separate individual application under section
94 of the IBC, 2016 to initiate insolvency resolution process for themselves.