2021 (5) TMI 82 - AT - Insolvency and Bankruptcy

Tribunal Upholds Order on Committee of Creditors Composition

The Tribunal upheld the Adjudicating Authority's order directing the Resolution Professional to convene a meeting of the original Committee of Creditors ... Holding of meeting of CoC - validity of direction Resolution Professional to call for a meeting of the ‘Committee of Creditors of Corporate Debtor’ - the members of the meeting were, who originally constituted the ‘CoC’ during the year 2017 - validity of calling of meeting of those CoC soon after the order of admission of CIRP of the Corporate Debtor, without taking into account the present status of the Financial and Operational Creditors and claims filed to that extent - HELD THAT:- This Tribunal is of the considered view that the ‘Resolution Professional’ has no ‘Adjudicatory Power’ under the I & B Code, 2016 and further that when once the ‘Committee of Creditors’ is/was formed, the ‘Resolution Professional’ cannot change the ‘Committee of Creditors’. Suffice it for this Tribunal to make a pertinent mention that the Resolution Professional/1st Respondent cannot constitute a ‘Committee of Creditors’ afresh, in negation of the earlier constituted ‘Committee of Creditors’. This Tribunal on going through the Impugned Order passed by the Adjudicating Authority comes to a consequent conclusion that the observation made inter-alia to the affair that ‘CoC’ constituted presently by the IRP/RP in derogation of the order passed by it shall stands suspended and shall not exercise any of the powers as provided under the Provisions of IBC, 2016 and the directions issued to the IRP/RP to comply with the directions therein within a period of 10 days from the date of the order. Appeal dismissed. Issues Involved:1. Validity of the Adjudicating Authority's order directing the Resolution Professional to convene a meeting of the original Committee of Creditors (CoC) from 2017.2. Consideration of the present status of Financial and Operational Creditors.3. Applicability of Regulations 12(A) and 13 of the Insolvency and Bankruptcy Board of India (Insolvency Process for Corporate Persons) Regulations, 2016.4. Inclusion of the 3rd Respondent/Bank as a Financial Creditor.5. Authority of the Resolution Professional to alter the CoC.Issue-Wise Detailed Analysis:1. Validity of the Adjudicating Authority's Order:The Appellant challenged the Impugned Order dated 22.04.2021, which directed the Resolution Professional to convene a meeting of the original CoC members from 2017. The Appellant argued that the Adjudicating Authority should not have directed this without considering the current status of Financial and Operational Creditors. The Tribunal found no legal infirmity in the Adjudicating Authority's order, emphasizing that the Resolution Professional cannot alter the CoC once formed.2. Consideration of the Present Status of Creditors:The Appellant contended that most members who constituted the CoC in 2017 were no longer creditors of the Corporate Debtor. The Tribunal noted that the Resolution Professional should update claims based on submissions and withdrawals as per the I&B Code, 2016. However, the Tribunal upheld that the Resolution Professional cannot change the CoC's composition once formed.3. Applicability of Regulations 12(A) and 13:The Appellant argued that under Regulations 12(A) and 13, both the Creditor and Resolution Professional should update the status of claims. The Tribunal acknowledged these regulations but maintained that the Resolution Professional lacks adjudicatory power to alter the CoC once constituted.4. Inclusion of the 3rd Respondent/Bank as a Financial Creditor:The Appellant argued that the Adjudicating Authority should have considered the claim of the 3rd Respondent/Bank, which is the present Financial Creditor. The Tribunal noted that the 3rd Respondent/Bank had funded the Corporate Debtor and should be included as a Financial Creditor. The Tribunal emphasized the importance of updating the list of creditors based on new claims and withdrawals.5. Authority of the Resolution Professional:The Tribunal reiterated that the Resolution Professional has no adjudicatory power under the I&B Code, 2016, and cannot alter the CoC once formed. The Tribunal referenced its previous judgment, which clarified that the Resolution Professional could update claims but not change the status of creditors once categorized.Conclusion:The Tribunal concluded that the Resolution Professional cannot constitute a new CoC in negation of the earlier constituted CoC. The Tribunal found the Adjudicating Authority's directions to be legally sound and dismissed the appeal, affirming that the Resolution Professional must comply with the directions within ten days and report the outcome of the CoC meeting.Final Judgment:The Company Appeal AT INS 48 of 2021 is dismissed with no costs. The Stay Application I.A.106/2021 is also dismissed.