Real Property Owner Faces Suspension for Code Violations and Payment Reimbursement Order

The RP displayed negligence and misunderstanding of the Code, resulting in multiple contraventions. The RP's registration is suspended for six months, and he is directed to secure reimbursement of the amounts paid to SAM and Kroll, totaling Rs. 73,87,642 and Rs. 50,74,000, respectively. The order will be effective 30 days from issuance, and relevant parties will be informed.

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Issues Involved:
1. Inclusion of legal counsel fees in CIRP costs.
2. Appointment of Kroll for a second forensic audit.
3. Conflict of interest in the appointment of Duff & Phelps.
4. Revision of liquidation value by valuers on CoC's instructions.
5. Unreasonable CIRP costs incurred by IP.
6. Excessive involvement of SBI Caps in CIRP process.
7. Sharing of Information Memorandum (IM) with a resolution applicant.

Detailed Analysis:

1. Inclusion of Legal Counsel Fees in CIRP Costs:
Contravention: The fee of Shardul Amarchand Mangaldas (SAM) was included in CIRP costs, violating section 5(13) of the Code and regulation 31 of CIRP Regulations.

Submission: The IP argued that the CoC approved SAM's appointment before the relevant IBBI circular and that interim payments were made due to ongoing litigations. The IP later requested lenders to refund the amounts paid.

Analysis: The inclusion of SAM's fee in CIRP costs was incorrect as per section 5(13) and regulation 31. The term "directly relating to the corporate insolvency resolution process" excludes indirect costs like CoC's legal counsel fees.

Findings: The RP violated sections 5(13), 208(2)(a) & (e) of the Code, and related regulations by including SAM's fees in CIRP costs.

2. Appointment of Kroll for a Second Forensic Audit:
Contravention: Kroll was appointed for a second forensic audit based on CoC's decision, which should not have been included in CIRP costs.

Submission: The IP justified the second audit due to significant findings in the first audit and later requested lenders to refund the cost.

Analysis: The appointment was based on CoC's decision, and the cost should not have been included in IRPC as per the Code and IBBI circular.

Findings: The RP violated sections 5(13), 208(2)(a) & (e) of the Code, and related regulations by including the cost of the second forensic audit in CIRP costs.

3. Conflict of Interest in the Appointment of Duff & Phelps:
Contravention: The IP appointed Duff & Phelps, where he was a partner, creating a conflict of interest.

Submission: The IP claimed no conflict as Duff & Phelps India Private Limited and Kroll were separate entities, and his involvement was disclosed to CoC.

Analysis: The CoC was informed about the potential conflict and agreed on measures to maintain separation between the RP's team and Kroll's team.

Findings: No conflict of interest was established as the CoC addressed the issue, and the RP disclosed his involvement.

4. Revision of Liquidation Value by Valuers on CoC's Instructions:
Contravention: Valuers revised the liquidation value based on CoC's instructions, violating regulation 35(2) of CIRP Regulations.

Submission: The IP stated that the revisions were based on discussions about methodology and assumptions, not direct interference.

Analysis: No evidence showed that the RP or CoC interfered with the valuation exercise. The revisions were based on acceptable clarifications.

Findings: No contravention was found as the revisions were justified and no interference was proven.

5. Unreasonable CIRP Costs Incurred by IP:
Contravention: The IP incurred unreasonable costs by appointing multiple law firms and professionals.

Submission: The IP justified the appointments based on competitive bidding and CoC approval, stating that each appointment was necessary and cost-effective.

Analysis: The appointments were made transparently, with CoC approval, and justified based on the needs of the CIRP.

Findings: The IP provided satisfactory justification for the costs, and no contravention was found.

6. Excessive Involvement of SBI Caps in CIRP Process:
Contravention: SBI Caps was excessively involved in the CIRP process, including opening resolution plans, which should be managed by the IP.

Submission: The IP clarified that the involvement of SBI Caps was agreed upon by CoC and legal counsels to add credibility to the process.

Analysis: The involvement of SBI Caps was customary and agreed upon by CoC and legal counsels, with no explicit prohibition in the Code or Regulations.

Findings: No contravention was found as the involvement was justified and agreed upon by relevant parties.

7. Sharing of Information Memorandum (IM) with a Resolution Applicant:
Contravention: The IP shared the IM with DPS, Ghaziabad before other resolution applicants, violating regulation 36B of CIRP Regulations.

Submission: The IP shared the IM with DPS, Ghaziabad to gain industry insights and signed an NDA with them. DPS did not proceed as a resolution applicant.

Analysis: The IM was shared before the publication of Form G and before ensuring DPS's eligibility as a resolution applicant, violating section 29 of the Code.

Findings: The IP violated section 208(2)(a) of the Code and related regulations by sharing the IM prematurely.

Conclusion:
The RP displayed negligence and misunderstanding of the Code, resulting in multiple contraventions. The RP's registration is suspended for six months, and he is directed to secure reimbursement of the amounts paid to SAM and Kroll, totaling Rs. 73,87,642 and Rs. 50,74,000, respectively. The order will be effective 30 days from issuance, and relevant parties will be informed.

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