Tribunal Orders RP to Convene COC Meeting Promptly & Comply with Code

The Tribunal directed the Resolution Professional (RP) to convene a Committee of Creditors (COC) meeting promptly, finalize the agenda in light of the pending appeal, and submit the resolutions by a specified date. The application was partially allowed, emphasizing the RP's responsibility to the COC and the importance of complying with the Insolvency and Bankruptcy Code provisions and Tribunal orders.

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Issues Involved:

1. Convening a Committee of Creditors (COC) meeting.
2. Presentation of financial information by the Resolution Professional (RP).
3. Conducting a forensic audit.
4. Replacement of the RP.
5. Adherence to IBBI regulations and Tribunal orders.

Detailed Analysis:

1. Convening a Committee of Creditors (COC) Meeting:

The application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking a directive for the RP to convene a COC meeting. The applicant argued that despite multiple requests, the RP failed to convene such a meeting. The RP countered that the COC became functus officio after the CIRP period expired and the resolution plan was rejected by the Tribunal. The Tribunal held that the COC is entitled to call upon the RP to convene a meeting and that the RP is bound by the decisions of the COC. The Tribunal directed the RP to convene a meeting of the COC forthwith.

2. Presentation of Financial Information by the RP:

The applicant claimed that the RP failed to provide essential financial information, including monthly cash flow statements and CIRP expenses, despite requests. The RP argued that the information was available on the company's website and that repeated requests were unnecessary. The Tribunal found fault with the RP for not presenting the details of the CIRP cost to the COC and emphasized that the RP is answerable to the COC for all his actions under the IBC.

3. Conducting a Forensic Audit:

The applicant contended that the RP did not implement the COC's decision to conduct a forensic audit, despite a Tribunal order approving the resolution for such an audit. The RP argued that conducting a forensic audit for a period of about ten years prior to the commencement of CIRP is outside the purview of the IBC. The Tribunal noted that the COC had resolved to appoint a forensic auditor and that the RP's failure to conduct the audit was a significant issue. The Tribunal emphasized that the RP should have sought permission from the Adjudicating Authority if there were any concerns about the audit.

4. Replacement of the RP:

The applicant sought the replacement of the RP, citing non-cooperation and defiance in implementing COC decisions. The RP countered that the application to replace him was outside the purview of the Tribunal, especially since the resolution plan was under appeal. The Tribunal acknowledged the applicant's concerns but did not make a definitive ruling on replacing the RP. Instead, it focused on ensuring that the RP convenes a COC meeting to discuss the way forward.

5. Adherence to IBBI Regulations and Tribunal Orders:

The applicant argued that the RP violated IBBI regulations and Tribunal orders by not providing financial information and failing to conduct a forensic audit. The RP contended that he had been furnishing information and that the IBBI order imposing a penalty on him was not related to his conduct during the CIRP. The Tribunal found that the RP had not adhered to the COC's decisions and Tribunal orders, leading to the directive for the RP to convene a COC meeting.

Conclusion:

The Tribunal directed the RP to convene a COC meeting immediately, finalize the agenda considering the pending appeal before the NCLAT, and submit the resolutions passed in the meeting to the Tribunal before 31.03.2022. The application was partly allowed, emphasizing the RP's accountability to the COC and the necessity of adhering to IBC provisions and Tribunal directives.

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