2022 (4) TMI 429 - Tri - Insolvency and Bankruptcy

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

Asset Reconstruction Company (India) Limited Versus Karuchola Koteswara Rao, RP of Viceroy Hotels Limited

The Tribunal directed the Resolution Professional (RP) to convene a Committee of Creditors (COC) meeting promptly, finalize the agenda in light of the ... Presentation of statement of accounts in relation to running of Corporate Debtor, CIRP costs, along with all material documents thereto before the COC and updating the status of the Corporate Debtor - seeking discussion on change of RP in the present matter and appoint another RP to run the corporate debtor as a going concern - Regulations 39B, 39C and 39D of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Whether the RP can be directed to convene a meeting of the Members of the COC, notwithstanding the order rejecting the resolution plan approved by the COC, which order is under appeal? - HELD THAT:- The CoC is entitled to call upon the Resolution Professional to convene the meeting of the members of the COC, in as much as the Resolution Professional is bound by the decisions of the COC and cannot act as per his whims and fancies or detrimental to the interest of the COC. That apart, the RP is also answerable to the COC for all his acts and actions under IBC, which he has so far performed and now supposedly performing by virtue of the interim order passed by the Hon'ble NCLAT. There are also fault with the Resolution Professional for not convening the meeting of the members of the COC for over a year without any valid reason. If permission of this Adjudicating Authority for convening the meeting of the COC is the requirement, then nothing prevented the RP from seeking permission from this Adjudicating Authority. In fact, at no stage, the RP has informed the members of COC that unless the permission of the Tribunal is obtained, he will not be able to convene the meetings of the members of the COC - the said plea is nothing but an afterthought. In fact, when this Adjudicating Authority has not accorded approval to the Resolution Plan, it was the bounden duty of the RP to call for the meeting of the COC in order to discuss further course of action, which the RP has failed. The RP is hereby directed to forthwith convene a meeting of the Members of the COC - COC shall finalise its Agenda for the proposed meeting having regard to the fact of pendency of Appeal No. 325 of 2021, before the Hon'ble NCLAT, Chennai. Application allowed in part. 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.