Bank Liable for CIRP Costs & RP Fees under Regulation | Active Participation Key

The Appellant Bank, as the sole Financial Creditor in the reconstituted Committee of Creditors, was held liable to pay the Corporate Insolvency Resolution Process (CIRP) costs and Resolution Professional (RP) fees approved by the earlier Committee. The Tribunal found that the Bank's active participation in decision-making and resolution passing precluded it from disclaiming responsibility. As the costs were approved before the Bank joined the Committee, it was deemed liable under Regulation 12(3) of the CIRP Regulations. The appeal was dismissed, affirming the Adjudicating Authority's order allocating expenses between parties without awarding costs.

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Issues:
1. Liability of the Appellant Bank to pay the fees of the CIRP Cost and RP.

Analysis:
1. The main issue in this appeal was whether the Appellant Bank, as the sole 'Financial Creditor' of the reconstituted Committee of Creditors (CoC), should be held responsible for paying the fees of the Corporate Insolvency Resolution Process (CIRP) Cost and the Resolution Professional (RP) that were previously approved by the earlier CoC. The Appellant argued that it should not be liable as it did not ratify the expenses and the RP had not fulfilled his responsibilities adequately.

2. The Appellant Bank contended that the fees and expenses of the RP were approved by the 'Operational Creditor' who was part of the earlier CoC, and after the CoC was reconstituted with the Bank as the sole Financial Creditor, it did not ratify these expenses. However, the first Respondent argued that the costs were approved before the Bank joined the CoC, and as per the regulations, the Bank cannot avoid liability for these expenses.

Assessment:
1. The Tribunal examined the circumstances and found that the Appellant Bank, being the sole Financial Creditor in the reconstituted CoC, had actively participated in all meetings, including passing a resolution for the liquidation of the Corporate Debtor. The Tribunal held that the Appellant Bank could not disclaim liability for the CIRP costs and RP fees, especially since it had been part of the decision-making process and resolution passed by the CoC.

2. Referring to Regulation 12(3) of the CIRP Regulations, the Tribunal emphasized that the validity of decisions taken by the committee before the inclusion of a new member (in this case, the Appellant Bank) remains unaffected. As the costs were approved prior to the Bank joining the CoC, the Tribunal upheld that the Bank was liable to pay the expenses as per the regulations.

3. The Tribunal concluded that there were no substantial grounds to interfere with the Adjudicating Authority's order, which had fairly allocated the expenses between the Operational Creditor and the Appellant Bank. Consequently, the appeal was dismissed, and no costs were awarded in the matter.

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