2019 (11) TMI 1279 - HC - Insolvency and Bankruptcy

Challenge to Order on Monetary Penalty Stayed Pending Deposit

The writ petition challenged an order by respondent no.1/IRBI, specifically restrictions on Mr. Mahender Kumar Khandelwal until depositing a monetary ... Stay of administrative restraint - deposit in court as conditional compliance - authority of Committee of Creditors to approve and arrange reimbursement of payments - effect of compliance with regulatory direction on ability to accept IRP/RP assignmentsDeposit in court as conditional compliance - effect of compliance with regulatory direction on ability to accept IRP/RP assignments - Whether the petitioner's deposit of the monetary penalty with the Registry satisfies the condition in the impugned order so as to lift the restraint on accepting new IRP/RP assignments. - HELD THAT: - The petitioner placed on record that, pursuant to the interim directions recorded on 19.11.2019, he deposited the penalty amount with the Registry of this Court and the statement was taken on record. Given that one limb of the operative directions in the impugned order required deposit of the monetary penalty, the Court treated the petitioner's compliance as relevant to the operative restraint. In consequence, and having regard to the deposit made, the Court stayed, for the moment, the operation of the impugned order insofar as it prevented the petitioner from accepting a new assignment as IRP or RP. [Paras 6, 7]Petitioner's deposit of the penalty was recorded and, for the moment, the restraint in the impugned order preventing acceptance of new IRP/RP assignments is stayed.Authority of Committee of Creditors to approve and arrange reimbursement of payments - deposit in court as conditional compliance - Whether the Committee of Creditors (COC) must deposit the stipulated sum in court in respect of the Corporate Debtor as directed by the Court. - HELD THAT: - The Court noted the Resolution passed by the COC on 10.10.2018, authorising verification, confirmation and payment arrangements for professional fees and providing for reimbursement by COC members in specified circumstances, which had the approval of 96.53% of voting creditors. Having regard to those circumstances and the terms of the impugned direction, the Court directed respondent no.2/COC to deposit the specified sum with the Registry without prejudice to its rights and contentions, and fixed a date for deposit. [Paras 4, 5]Respondent no.2/COC was directed to deposit the specified sum with the Registry of the Court on or before the date fixed, without prejudice to its rights and contentions.Stay of administrative restraint - effect of compliance with regulatory direction on ability to accept IRP/RP assignments - Whether the Court should grant interim relief by staying the operation of the impugned regulatory order pending further proceedings. - HELD THAT: - The Court observed that although the impugned order conditioned the restraint on payment of specified amounts, the regulatory authority (respondent no.1/IRBI) had declined to relent. In light of the petitioner's deposit of the penalty and the Court's direction for the COC to deposit the larger sum, the Court found it necessary to pass an interim direction staying the operation of the impugned order insofar as it prevented the petitioner from accepting new IRP/RP assignments until further orders. [Paras 7, 8]Operation of the impugned order preventing the petitioner from accepting new IRP/RP assignments is stayed, pending further orders.Final Conclusion: The Court recorded the petitioner's deposit of the monetary penalty, directed the Committee of Creditors to deposit the specified sum in Court by the date fixed, and granted an interim stay on the impugned order insofar as it barred the petitioner from accepting new IRP/RP assignments, while permitting further contestation of the impugned order and related circulars. Issues:Challenge to order passed by respondent no.1/IRBI, Deposit of monetary penalty and evidence of deposit in CD's Account, Challenge to circular dated 12.6.2018, Resolution passed by respondent no.2/COC, Authorization for payment of fees to Cyril Amarchand Mangaldas, Modification of resolution, Deposit of specific amount by respondent no.2/COC, Stay on operation of impugned order, Filing of counter-affidavit(s).Analysis:The writ petition challenges the order passed by respondent no.1/IRBI, specifically the directions in paragraph 5.2.3 which restrict Mr. Mahender Kumar Khandelwal from accepting new assignments until depositing a monetary penalty and producing evidence of a substantial deposit in CD's Account. The petitioner agreed to deposit the penalty amount with the Court's Registry. Respondent no.2/COC, represented by advocates, expressed alignment with the petitioner on IRP costs but indicated plans to challenge the circular forming the basis of the impugned order.The resolution passed by respondent no.2/COC on 10.10.2018 regarding the verification and approval of pending bills of Cyril Amarchand Mangaldas was detailed. Modifications were suggested by representatives of Punjab National Bank and State Bank of India, leading to an amended resolution for payment authorization and reimbursement procedures. The resolution had significant creditor approval.In light of the circumstances, respondent no.2/COC was directed to deposit a specific amount with the Court's Registry by a set deadline. The petitioner had already deposited the penalty amount. Consequently, the operation of the impugned order, restricting the petitioner from taking new assignments, was stayed due to respondent no.1/IRBI's refusal to comply despite the deposit made. Counter-affidavit(s) were to be filed by the respondents before the next hearing scheduled for 28.2.2020.