2019 (5) TMI 1815 - Tri - Insolvency and Bankruptcy

Tribunal rejects applications for CIRP restart, forensic audit, and promoter misconduct allegations

Peepul Capital Fund III LLC Versus Ashish Kanodia and Ors.

The Tribunal rejected the applications seeking the removal and replacement of the Resolution Professional, initiation of Corporate Insolvency Resolution ... Removal of Shri Ashish Kanodia as the Resolution Professional of the Corporate Debtor - appointment of fresh Resolution Professional in his place; to initiate CIR Process of the Corporate Debtor afresh, etc. - HELD THAT:- It is a settled position of law that proceedings are under provisions of Code are summary in nature, and those proceedings would not dwell upon/enter into serious disputed questions of fact of the case. It is not in dispute that the Adjudicating Authority, after considering various parameters as prescribed under the Code, has admitted the main Company petition by initiating CIRP, appointing IRP, imposing moratorium etc., and the same is admittedly not in dispute as it was not questioned before the Hon'ble NCLAT. Therefore, CIRP of Corporate Debtor was conducted in accordance with law. As per law, CIRP of Corporate Debtor would be conducted by IRP/RP appointed by the Adjudicating Authority, however, subject to consideration of all issues by the Committee of Creditors and final supervising power conferred on the Adjudicating Authority. It is also settled position of law that Court/Tribunal, in the normal circumstances, would not interfere over the decision taken by the concerned authority, basing on their commercial wisdom. The Resolution Plan submitted by the Akashika Foods Private Limited is eligible to be approved, and thus the Resolution Plan was approved - The Applicant cannot seek any special treatment in comparison with other Resolution Applicants and the Applicant was admittedly given all the information uniformly to all those participating Resolution Applicants. The Applicant has not offered higher bid than the successful Resolution Applicant except raising un-tenable grounds. And the facts and circumstances as mentioned above shows that the applicant was afforded reasonable opportunity. Application disposed off. Issues Involved:1. Removal and replacement of the Resolution Professional.2. Initiation of Corporate Insolvency Resolution Process (CIRP) afresh.3. Allegations of undervalued transactions and forensic audit.4. Allegations of mismanagement and fraudulent activities by the Promoters.5. Confidentiality breaches by the Resolution Professional.6. Maintainability and locus standi of the applications.7. Objections from the Resolution Professional, Committee of Creditors, and Promoters.Issue-wise Detailed Analysis:1. Removal and Replacement of the Resolution Professional:The Applicant sought the removal of Shri Ashish Kanodia as the Resolution Professional (RP) and the appointment of a new RP. The Tribunal noted that the CIRP was conducted in accordance with the law, and the Committee of Creditors (CoC) had considered and found the allegations against the RP to be baseless. The Tribunal emphasized that it would not interfere with decisions taken by the concerned authority based on their commercial wisdom. Therefore, the request for removing and replacing the RP was rejected.2. Initiation of Corporate Insolvency Resolution Process (CIRP) Afresh:The Applicant sought to initiate the CIRP of the Corporate Debtor afresh. The Tribunal found that the CIRP had been conducted lawfully, and the Resolution Plan submitted by Akashika Foods Private Limited was approved after due consideration. The Applicant, despite participating in the CIRP, did not offer a higher bid than the successful Resolution Applicant. Therefore, the Tribunal rejected the request to initiate the CIRP afresh.3. Allegations of Undervalued Transactions and Forensic Audit:The Applicant alleged undervalued transactions involving the Corporate Debtor and sought a forensic audit. The Tribunal noted that the CoC had considered these allegations and found them baseless. The Tribunal also mentioned that the Resolution Professional had provided all material information as per the Code and Regulations. Therefore, the request for a forensic audit was rejected.4. Allegations of Mismanagement and Fraudulent Activities by the Promoters:The Applicant alleged mismanagement and fraudulent activities by the Promoters, including divesting the subsidiary business and the 'Maiyas' Brand at a meager amount. The Tribunal noted that these allegations were considered by the CoC and found to be unsubstantiated. The Tribunal emphasized that it would not dwell upon serious disputed questions of fact in summary proceedings under the Code. Therefore, the allegations of mismanagement and fraud were not upheld.5. Confidentiality Breaches by the Resolution Professional:The Applicant alleged that the RP had breached confidentiality by disclosing the Fair Value and Liquidation Value of the Corporate Debtor in the Information Memorandum. The Tribunal acknowledged the duty of the RP to maintain confidentiality as per the Code and Regulations. However, it found that the RP had provided all information uniformly to all participating Resolution Applicants, and the Applicant had not offered a higher bid. Therefore, the allegations of confidentiality breaches were not upheld.6. Maintainability and Locus Standi of the Applications:The Resolution Professional and Karnataka Bank Limited contended that the applications were not maintainable and that the Applicant had no locus standi. The Tribunal referred to the Supreme Court judgment in Arcelor Mittal India (P) Ltd. v. Satish Kumar Gupta, which clarified that the NCLT does not have jurisdiction to interfere at an applicant's behest before the resolution plan is approved by the CoC and placed before the Tribunal for confirmation. Therefore, the applications were found to be not maintainable.7. Objections from the Resolution Professional, Committee of Creditors, and Promoters:The Resolution Professional, Karnataka Bank Limited, and the Promoters opposed the applications, contending that the allegations were frivolous and intended to stall the CIRP. They argued that the CoC had duly considered the issues raised by the Applicant and found them baseless. The Tribunal agreed with these contentions and rejected the applications.Conclusion:The Tribunal rejected both I.A. No. 125 of 2019 and I.A. No. 221 of 2019, finding that the CIRP was conducted lawfully, the allegations were unsubstantiated, and the applications were not maintainable. No order as to costs was made.