NCLT approves Rs 47-crore resolution plan for HBS Auto & ANC SEZ

The National Company Law Tribunal (NCLT), Mumbai Bench-I, has approved the Rs 47.08 crore resolution plan for HBS Auto & ANC SEZ Pvt. Ltd, a Mumbai-based real estate development company specializing in Special Economic Zones (SEZ) and infrastructure projects. The resolution plan, submitted by a consortium of Mahansaria Tyres Pvt. Ltd. (MTPL) and Lotus Ornaments Pvt. Ltd. (LOPL), was approved by the Committee of Creditors (CoC) with a 100% voting share, marking a crucial step towards the financial revival of the debt-ridden company.

Background: Financial Distress and CIRP Initiation

HBS Auto & ANC SEZ Pvt. Ltd., incorporated on 8th October 2007, had been facing severe financial distress, leading to the initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. The application was filed by SREI Equipment Finance Ltd., the financial creditor, and was admitted by the NCLT on 2nd January 2024. Mr. Avinash Ambikaprasad Shukla was appointed as the Interim Resolution Professional (IRP), later confirmed as the Resolution Professional (RP).

The company, with its registered office in Mumbai, was primarily engaged in real estate development, including the development of SEZs and other infrastructure projects. However, mounting debts and operational challenges led to its insolvency, necessitating a resolution process to revive the company and maximize value for its creditors and stakeholders.

CIRP Timeline: A Prolonged Process

The CIRP for HBS Auto & ANC SEZ Pvt. Ltd. witnessed several extensions and procedural delays, reflecting the complexities involved in resolving the company’s financial troubles. Key milestones in the CIRP timeline include:

• Initiation of CIRP: 2nd January 2024
• Form A (Invitation of Claims): Published on 9th January 2024
• Form G (Expression of Interest): Published on 21st March 2024, with the last date for submission on 5th April 2024.
• Resolution Plan Submission: The last date for submission was extended multiple times, with the final submission on 22nd January 2025.
• CIRP Extensions: The initial 180-day period expired on 4th July 2024, and the CIRP was extended multiple times, with the final extension granted until 1st February 2025.

The prolonged process highlighted the challenges faced by the RP in finding a viable resolution plan that could address the company’s debts while ensuring operational continuity.

The Resolution Plan: Key Features

The resolution plan submitted by the consortium of Mahansaria Tyres Pvt. Ltd. (MTPL) and Lotus Ornaments Pvt. Ltd. (LOPL) was approved by the CoC with a 100% voting share on 24th January 2025. The plan, valued at ₹47.08 crore, outlines a comprehensive strategy for the revival of HBS Auto & ANC SEZ Pvt. Ltd.

Key Highlights of the Resolution Plan:

1. Payment to Creditors:
   • Secured Financial Creditors: ₹46,00,00,000 (42.22% of admitted claims).
   • Operational Creditors (Workmen & Employees): ₹91,37,654 (100% of admitted claims).
   • Operational Creditors (Government Dues): ₹6,84,459 (100% of admitted claims).
   • Unsecured Financial Creditors and Other Creditors: NIL (0% of admitted claims).
2. Source of Funds:
   • Equity Contribution: ₹100 lakhs (73% by MTPL and 27% by LOPL).
   • Debt Instruments: ₹4,658 lakhs (73% by MTPL and 27% by LOPL).
3. Implementation & Monitoring:
   • A Monitoring Agent, comprising the RP, one representative of the CoC, and one representative of the lead member of the Resolution Applicants, will oversee the implementation.
   • All payments to creditors will be made within 90 days from the Effective Date (the date of approval of the Resolution Plan by NCLT).
4. Operational Restructuring:
   • The plan focuses on enhancing productivity through cost efficiencies and automation.
   • Leveraging unutilized assets to generate additional revenue streams.
   • Addressing working capital needs through existing assets, bank financing, and parent company support.
5. Statutory Compliance:
   • The plan ensures compliance with Section 30(2) of the IBC, safeguarding the interests of all stakeholders.
   • Government dues and penalties will be settled as per admitted claims, and future compliance requirements will be assessed post-implementation.

Reliefs and Concessions Sought by Resolution Applicants

To ensure the effective implementation of the resolution plan, the Resolution Applicants sought several reliefs and concessions, including:

• Protection of Leasehold Rights: No lapse of leasehold rights due to change in shareholding.
• Right to Assign/De-Notify Land: GIDC to permit assignment/de-notification of land parcels.
• Extinguishment of Lease-Related Financial Liabilities: All financial liabilities under lease deeds to be extinguished.
• Income Tax Assessment Finalization: All expenses and deductions claimed by the Corporate Debtor in the preceding eight years to be deemed assessed.
• Waiver of Stamp Duty and Registration Charges: All stamp duty and registration charges related to lease deeds or contracts before the Effective Date to be waived.
• Final Settlement of Claims and Liabilities: All payments under the Resolution Plan to be treated as full and final settlement of all claims, debts, and liabilities of the Corporate Debtor.

NCLT’s Approval and Directions

The NCLT, after careful consideration, approved the resolution plan, noting that it complied with the requirements of Section 30(2) of the IBC and Regulations 37, 38, 38(1A), and 39(4) of the CIRP Regulations. The tribunal found the plan to be feasible, viable, and in the interest of all stakeholders.

In its order, the NCLT issued the following directions:

1. The resolution plan shall be binding on the Corporate Debtor, its employees, members, creditors, guarantors, and other stakeholders.
2. The approval of the Resolution Plan shall not be construed as a waiver of any statutory obligations/liabilities of the Corporate Debtor.
3. The Memorandum of Association (MoA) and Articles of Association (AoA) shall be amended and filed with the Registrar of Companies (RoC).
4. The moratorium under Section 14 of the IBC shall cease to have effect from the date of the order.
5. The RP shall supervise the implementation of the Resolution Plan and file status reports with the NCLT.

Also See: Universal Buildwell resolution plan approved by NCLT: Key highlights and creditor payouts