2018 (11) TMI 802 - Tri - Insolvency and Bankruptcy

Tribunal Upholds IRP Actions, Directs Swift Creditor Processing

In Re : Earth Infrastructures Limited

In Re : Earth Infrastructures Limited - TMI Issues Involved:1. Whether prior to constituting the CoC the IRP is obliged to verify every claim as on insolvency commencement date within 7 days from the last date of receipt of the claims in terms of Regulation 13Rs.2. Whether the first meeting of the CoC held on 27.07.2018 was bad in law in light of the averments made by the ApplicantsRs.Issue-wise Detailed Analysis:1. Verification of Claims by IRP:- Legal Framework: The interim resolution professional (IRP) must make a public announcement within three days of appointment, stating the last date for submitting claims and offering names of three insolvency professionals to act as authorized representatives. Creditors must submit claims with proof by the last date mentioned in the public announcement or within ninety days of the insolvency commencement date. The IRP must verify every claim within seven days from the last date of receipt and maintain an updated list of creditors.- Continuous Process: The verification of claims is a continuous and staggered process. The IRP constitutes the CoC with financial creditors whose claims have been admitted and updates the CoC as new claims are verified. The validity of decisions taken by the CoC is not affected by subsequent inclusions of financial creditors.- Regulation 13: The seven-day period for verification of claims is directory, not mandatory. The IRP can continue verifying claims beyond seven days and include new financial creditors in the CoC as their claims are admitted.- Case Specifics: The IRP in this case faced challenges due to the high number of creditors and the general unawareness of the correct process among creditors. The IRP made a public announcement six days after appointment and filed the list of creditors and the report confirming the constitution of CoC four days later than required. The IRP has been gradually verifying claims and updating the list of creditors.2. First CoC Meeting:- Applicants' Averments: The Applicants argued that the IRP failed to verify all claims before constituting the CoC, included only 207 financial creditors out of 1000 claims, and did not provide a plausible justification. They also claimed that the authorized representative (AR) failed to circulate the agenda and obtain voting instructions before the first CoC meeting, which lacked the required quorum.- IRP's Response: The IRP explained the challenges faced, including abandoned projects, lack of cooperation from the corporate debtor's employees, and defects in the claims submitted by creditors. The IRP has been processing claims and updating the list of creditors.- AR's Response: The AR received the notice and agenda for the first CoC meeting on 21.07.2018 and the updated list of creditors on 24.07.2018, leading to the adjournment of the meeting. The AR did not receive any voting instructions from creditors for the first meeting.- Tribunal's Findings: The Tribunal found no evidence that the first CoC meeting affected the interests of financial creditors. The IRP and AR acted within their roles, and the actions taken during the meeting (engaging an advocate and security guards) did not require voting. The Tribunal highlighted the need for the AR to act diligently and independently and avoid any appearance of collusion with the IRP.Directions Issued by the Tribunal:1. The IRP must process all claims and admit or reject them within two weeks, updating the list of creditors.2. The updated list of creditors must be published to enable participation in the CoC voting process.3. The IRP must convene a CoC meeting within four weeks, circulating the agenda and proposed resolutions to the AR for distribution to creditors.4. The stay granted on 09.08.2018 is vacated.5. The period from 09.08.2018 to the date of this order is excluded from the CIRP period.Conclusion:The Tribunal concluded that the IRP and AR acted within their roles and found no mala fides in their actions. The application was ordered and closed without costs, with directions to ensure proper processing and participation of creditors in the CIRP.