GB Global Ltd. - Quarterly/Annual Result Disclosures and Notes dated 31 Dec 2021

1. The above unaudited financial results have been prepared on a going concern basis and in accordance with the recognition and measurement principles laid down in the Indian Accounting Standard 34 “Interim Financial Reporting” (Ind AS 34) prescribed under Section 133 of the Companies Act, 2013 read with the relevant rules issued thereunder and other accounting principles generally accepted in India and have been reviewed by the Audit Committee and approved by the Board of Directors at their meeting held on 14 February, 2022 and are subjected to limited review by the statutory auditors of the Company, in terms of Regulations 33 of the SEBI (listing obligations and disclosures requirements.) Regulation 2015 as amended.



2 a. A corporate insolvency resolution process (“CIRP”) was initiated against the Company under Section 7 of the Insolvency Bankruptcy Code, 2016 (“IBC”) vide order of the Hon’ble National Company Law Tribunal (“NCLT”) dated 29 September, 2017. Pursuant to the said order, Mrs. Charu Desai was confirmed as the Resolution Professional (“RP”) of the Company by the Committee of Creditors (“CoC”).



2 b. Vide order dated 30 November, 2018 (“Resolution Plan Approval Order”), the Hon’ble NCLT approved the Resolution Plan submitted for the Company by Formation Textiles LLC (“Resolution Applicant 1”). Subsequently, as per Board meeting held on 31 January, 2019, the Resolution Applicant took over the management / control of the affairs of the Company. Subsequently, the Resolution Application 1 submitted an application before the Hon’ble NCLT, inter alia, seeking leave for making certain revisions / modification in the approved Resolution Plan (“RA Application”). On 5 December, 2019, the Hon’ble NCLT noted that while a separate hearing was required to decide the merits of the application, as an interim measure, directed that the CIRP of the Corporate Debtor to be restored and thereafter, the possession of the Corporate Debtor be handed over to the Committee of Creditors and the erstwhile Resolution Professional.



2 c. Further, vide order dated 5 February, 2020, the Hon’ble NCLT allowed the Resolution Professional to invite fresh resolution plans from prospective resolution applicants by providing an additional period of 70 days to undertake the process. On 23 March, 2020, a nationwide lockdown was declared due to sudden outbreak of Covid-19 pandemic. On 30 March, 2020, the Hon’ble NCLAT ordered that the period of lockdown ordered by Central Government and State Governments shall be excluded from the period for completing the CIRP of a corporate debtor prescribed under Section 12 of the Code. Hence the period of 70 days to undertake the sale process was extended till the lockdown continued.



2 d. An amount of INR.5,000 lacs was received on 11 July, 2018 from the erstwhile RA 1, Formation Textiles LLC in lieu of performance bank guarantee as part of the CIRP in terms of the process memorandum and later on 6 November 2018 the funds were transferred to a fixed deposit with Bank of Baroda. Further on 24 December, 2019 the CoC, citing the RA’s failure to implement the Resolution Plan, invoked the Performance Guarantee and forfeited the amount and distributed the proceeds to all lenders. However, since the Company has received the fund as a conduit, the Company has presented the amount forfeited by the CoC as reduction from the INR.5,000 lacs received from the RA.



2 e. On 10 September, 2020, the Resolution Professional received one resolution plan for the Corporate Debtor from Resolution Applicant (“Resolution Applicant 2”), Dev Land & Housing Private Limited (“DLH”). Subsequently, after various rounds of negotiations and discussions, Resolution Applicant 2 submitted revised final resolution plan to the Resolution Professional on December 9, 2020 (with an addendum issued by the Resolution Applicant on 11 December 2020), which was put to vote by the CoC and thereafter approved. On 19 May, 2021, the NCLT has approved the terms of the Resolution Plan submitted by DLH.



2 f. However, INR 500 lacs of Earnest Money Deposit given by the Resolution Applicant as per terms of the process memorandum in the form of a Bank Guarantee was also enchased by Bank of Baroda upon its expiry in 2018 and is shown under current liabilities. Further the funds are parked in fixed deposits with Bank of Baroda. Further the infusion of INR 380 lacs by the erstwhile Resolution Applicant toward share application money has also been shown under current liabilities and these funds are kept in escrow account with Bank of Baroda.



The erstwhile RA has filed additional application praying the NCLT to refund INR 9,300 lacs deposited in the Company towards the resolution plan along with interest. The NCLT is still to hear on this additional application moved by the RA. Till the NCLT gives its verdict, the treatment given in the books of accounts for the performance bank guarantee and EMD is subject to settlement by erstwhile RA and the CoC.





2 g. The erstwhile Resolution Applicant had filed an application in the Hon’ble NCLT seeking directions for setting aside the NCLT order approving the resolution plan.



3. Pursuant to approval of the Resolution Plan by the Hon’ble NCLT, Equity Share Capital of the Company stands reduced by INR 328.11 lacs on 05 June, 2021 and the number of equity shares is reduced from 33,14,295 equity shares to 33,143 equity shares of INR 10 each. As per Resolution Plan, DLH has infused INR 5,000 lacs towards subscription and allotment of 500 lacs Equity Shares of INR. 10 each. Accordingly, the Equity Share Capital of the Company has stands increased to INR. 5,003.31 lacs on 05 June, 2021.



4. Reference is invited to NCLT Order w.r.t. undecided claims. The abstract of the order is reproduced below:

We have heard the counsel appearing for various parties and have gone through the Resolution Plan and relevant records. It is beneficial to refer to the observation of the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.:(2019) SCC Online SC 1478 as under :

“67………

A successful resolution Applicant cannot suddenly be forced with “undecided” claims after the Resolution Plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution Applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution Applicant does on a fresh slate, as has been pointed out by us hereinabove”



By relying on the above, the management has not provided for any contingent liabilities as disclosed in the financial statement for the F.Y. 2020-21 and same remains undecided on the date of approval of these financial results.



5. Indian Bank (one of the CoC and the Appellant) has raised concern over liquidation value by filing an appeal in the National Company Law Appellate Tribunal ("NCLAT") against the approved Resolution plan dated 19 May 2021, as a dissenting creditor, since the liquidation value attributable to the Appellant was reduced from Rs. 87.6 crore to Rs.50.51 crore.

Bank of Baroda (BOB), largest financial creditor in Committee of Creditors (COC) with voting percentage of 23.41% has sought to implead as a Respondent to the Appeal and has desired that no order be passed without hearing the Applicant.

The learned counsel for the respondent has vehemently opposed the impleading application of the BOB. They have raised the issue that BOB is not authorized by CoC to file such application, further BOB was permitted to intervene / implead.

The NCLAT, Principal Bench New delhi, has heard the parties at length and considered their submissions and observing that the applicant – Indian bank consideration has erroneously been reduced by 17% resulting from the revaluation of the assets is in violation of the provisions of section 30(2)(b) of the code it looks apparently so status quo is granted till the next date of hearing. The Management is unable to ascertain the impact of the matter as on the date of the financial results.



6. A Factory Building located at Sewri –Mumbai, for an amount INR 1475.45 lacs was capitalized in the Financial Year 2007-2008, the WDV of the said property as on 31 December, 2021 is INR. 835.75 lacs. For the said property, no title deeds or documents are available in the Company records. However, the property remains in the physical possession of the Company.



7. For various statutory demands towards Income Tax, Sales Tax, Value Added Tax etc. no amount was admitted vide NCLT order. However, considering principles of equity, management has allotted and paid INR 100 lacs towards payable against statutory dues on 30 July, 2021.

The company has approached various statutory authorities to squash the demands as per their records citing the resolution plan and NCLT order. The company is following up in the same and expects the order for squashing demand will be received in due course.



8. As per the NCLT order, 13% pay out is allotted to Financial Creditors and 7% to Operational Creditors. The balance unpaid amount of Rs. 1,15,575.36 lacs are written back and disclosed under Exceptional Items for the period ended December 30, 2021.



9. The company is currently reviewing the balance impact of the resolution plan, if any and its further effect will be given in the subsequent period based on the available facts.



10. Impact of the COVID-19 Pandemic on the Business:

The Company has considered internal and external information while finalizing various estimates and recoverability of assets in relation to its financial statement captions up to the date of approval of the financial results by the Board of Directors. The impact of Covid-19 may be different from what is estimated as at such date of approval of the financial results and the Company will continue to monitor any material changes to future economic conditions.



The Second wave of the pandemic has also posed a downside risk to the industry and economy as well and impact the profitability of FY 21-22, In view of the prevailing uncertainty in the future, the full extent of the impact of COVID -19 pandemic on the Company cannot be accurately ascertained at this juncture.



11. Previous period figures have been regrouped/rearranged, whenever necessary.