East India Drums & Barrels Mfg to take over Precision Containeurs

The Mumbai bench of the NCLT has the resolution plan submitted by East India Drums & Barrels Mfg Pvt Ltd with respect to the corporate insolvency resolution process of Precision Containeurs Ltd.

The company in an exchange filing said that this is to inform you that the Hon’ble NCLT has orally pronounced an order today — 2 May 2023 — approving the Resolution Plan submitted by East India Drums & Barrels Mfg Pvt Ltd with respect to the corporate insolvency resolution process of Precision Containeurs Ltd under section 31 of the Insolvency and Bankruptcy Code, 2016.

“We also bring to your notice that the approved resolution plan inter alia contains the reduction of share capital and other aspects. Detailed disclosure with regard to the same shall be submitted upon receipt of the written order,” said the exchange filing.

The insolvency application against Precision Containeurs was filed Stressed Assets Stabilization Fund (SASF) after the former defaulted on a payment of Rs 5.93 crore.

Precision Containeurs owes Rs 1,000 crore to financial creditors, all of which was due to Stressed Assets Stabilization Fund, the sole lender in the Committee of Creditors.

Precision Containeurs has committed the default on 01 January 2000. It approached the BIFR under section 15 of SICA Act and filed reference for declaration as sick unit. The reference was registered with BIFR in January, 2002 and on 19th August, 2004 BIFR admitted reference.

The reference remained pending with BIFR till SICA Act was repealed on 01 December 2016. No recovery proceedings could have been filed between January 2002 to December 2016 due to section 22 of SICA Act.

In June, 2008, SASF had approved OTS proposal for envisaging payment of Rs.4.00 crore in cash and issue of 7 lakh Equity Shares in furtherance thereof the Corporate Debtor allotted 2 lakh Equity Shares to SASF in June 2008 and transferred 5 lakh shares in May, 2009.

However, it defaulted on payments as per the approved OTS terms. The OTS was extended from time to time till 31 March 2011 with interest @13.25% from 01April 2008. The OTS was revoked in June 2011 due to non-payment of cash component. Subsequently, at the request of the Corporate Debtor, SASF agreed to extend time up to 15January 2012 for clearance of dues. The OTS was finally revoked in September, 2012.

Precision Containeurs admitted OTS proposal in terms of sanction letter dated 06 July 2016. The Corporate Debtor through a letter dated 05 April 2018 reiterated their earlier offer and hence the same was rejected by the Financial Creditor.

Precision Containeurs, which was as incorporated in the year 1981, manufactures variety of small, intermediate and small, large Plastic & Metal barrels.

Gist of the Resolution Plan

1.Total Resolution Plan amount is Rs. 5 Crores plus unpaid CIRP Cost at actual as on the NCLT Approval Date.

2.Source of funds: borrowings, quasi-equity or equity or a combination thereof.

3.The first tranche of consideration (Up-Front Amount) of Rs. 50 Lakhs plus amount equivalent to the Unpaid CIRP Cost on the NCLT approval date to be paid within 30 days of the Effective Date and the balance amount of Rs. 4.50 crores to the Secured Financial Creditor viz. SASF in 10 monthly instalments of Rs. 45 Lakhs each, payable by end of each calendar month, starting from the first calendar month
after the payment of the Up-front Amount.

4.One day prior to the Effective Date, the RA has proposed capital reduction in the following manner without any further application, acts, instrument or deeds:
a. Entire promoter shareholding to be extinguished.
b. Public Shareholding to be reduced by 96% resulting in post reduction capital of 7,74,221 equity shares of Rs. 10/- as against current subscribed and fully paid capital of 1,93,55,525 equity shares of Rs 10/- each.
c. Upon reduction and consolidation, in the event any shareholder of the Corporate Debtor becomes entitled to fractional equity shares, such fractional entitlements shall be consolidated by the Corporate Debtor and allotted to a trustee nominated by the Corporate Debtor/Resolution Applicant who shall hold such consolidated shares on behalf of the fractional shareholders for the purpose of sale in the open market or to any or person. Any fractional share arising in the hands of such trustee even after such consolidation shall be rounded off to the nearest whole integer.
d. The existing value of share capital of the Corporate Debtor being assessed as NIL by the ARA, no amount shall be payable to any shareholder whose shareholding has been cancelled on account of the said Capital Reduction.

5.Reverse Merger: on the effective date and without any further application, acts, instrument or deeds, the ARA with all its assets and liabilities to stand merged and amalgamated with the Corporate Debtor. Broad contours of the scheme of merger propounded along with the Resolution Plan are as follows:
(i) The Equity Shareholders of the ARA will be allotted 1,40,00,000 (One Crore Forty Lakhs) equity shares of Rs. 10/- each by the CD in proportion to their shareholding in the ARA as on the effective date. Post-merger, the new promoters will be holding not more than 95% shareholding of the CD.
(ii) Authorised Capital of the RA to be combined with the authorized capital of the CD.
(iii) Name of the Corporate Debtor to be changed to East India Drums and Barrels Manufacturing Ltd.
(iv) Incoming promoter shareholders of the RA to be classified as promoters of the merged entity and the existing promoters of the CD, whose shareholding is extinguished under the Plan, to be declassified from the promoter shareholding as reported with the Stock Exchange.

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