Tribunal Upholds CoC Decisions on CIRP Costs, RP Fees, and Operational Creditors' Obligations

The Tribunal upheld the decisions taken in the 7th Committee of Creditors (CoC) meeting, finding no illegality in the absence of certain parties. It ruled in favor of the proportionality and reasonableness of the Corporate Insolvency Resolution Process (CIRP) costs and Resolution Professional (RP) fees. The Tribunal emphasized the obligation of operational creditors to pay their share of CIRP costs. Despite non-participation of major operational creditors causing a stalemate, the Tribunal dismissed the appeals, affirming the legality of the CoC decisions and directing operational creditors to deposit their respective shares of CIRP costs promptly.

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Issues Involved:
1. Legality of the decisions taken in the 7th CoC meeting held on 6.12.2019.
2. Proportionality and reasonableness of the CIRP costs and RP fees.
3. Obligation of operational creditors to pay their share of CIRP costs.
4. Compliance with section 21(8) of the IBC regarding voting share for decisions in CoC meetings.
5. Impact of non-participation of major operational creditors in CoC meetings.

Issue-wise Detailed Analysis:

1. Legality of the decisions taken in the 7th CoC meeting held on 6.12.2019:
The Appellant Income Tax Department argued that the decisions taken in the 7th CoC meeting are not legally correct as they were taken in their absence. They cited section 21(8) of the IBC, which requires all decisions of the CoC to be taken by a vote of not less than 51% of the voting share. The Tribunal noted that the notice for the 7th CoC meeting was sent and delivered to both the Appellants, who chose not to attend. The meeting was adjourned and reconvened, but the Appellants again did not attend. The Tribunal found no illegality in holding the 7th CoC meeting and the decisions taken therein, as the RP had exercised necessary care to ensure the presence of the major operational creditors.

2. Proportionality and reasonableness of the CIRP costs and RP fees:
The Appellant Income Tax Department claimed that the expenses of Rs. 31,10,796 were disproportionately large compared to the assets of the corporate debtor valued at Rs. 1,50,00,000/-. The Tribunal referred to Regulations 31, 33, and 34 of the CIRP Regulations, which stipulate the components of insolvency resolution process costs and the fees of the RP. The Tribunal found that the CoC had fixed the expenses in accordance with the regulations and that the Appellants did not challenge the decision in a timely manner. The Tribunal upheld the proportionality and reasonableness of the CIRP costs and RP fees as decided by the CoC.

3. Obligation of operational creditors to pay their share of CIRP costs:
The Appellant Excise and Taxation Department argued that Regulation 34 authorizes the CoC to fix expenses but does not authorize the RP to recover the same from creditors. The Tribunal noted that other operational creditors had deposited their share of the CIRP costs without objection. The Tribunal emphasized the necessity for the liquidation process to proceed and ruled that the operational creditors, including the Appellants, are obligated to pay their share of the CIRP costs to enable the liquidation process to be completed.

4. Compliance with section 21(8) of the IBC regarding voting share for decisions in CoC meetings:
The Appellants argued that the decision taken in the 7th CoC meeting did not comply with the requirement of a 51% voting share as stipulated in section 21(8) of the IBC. The Tribunal observed that the Appellants, who controlled 96.756% of the voting share, chose not to participate in the CoC meeting, leading to a situation where compliance with section 21(8) was impossible. The Tribunal concluded that the RP had taken necessary care and caution in holding the CoC meeting and that the decisions taken were valid.

5. Impact of non-participation of major operational creditors in CoC meetings:
The Tribunal noted that the non-participation of the major operational creditors (Income Tax Department and Excise and Taxation Department) in the CoC meeting caused a stalemate. The RP was correct in approaching the Adjudicating Authority for directions to the Appellants to pay their share of the CIRP costs. The Tribunal emphasized that the liquidation process could not progress without the necessary funds and that the operational creditors' participation and payment were crucial for completing the liquidation process.

Conclusion:
The Tribunal dismissed both appeals, ruling that the RP and CoC acted within the law in fixing the shares of the operational creditors in the CIRP costs and RP fees. The decisions taken in the 7th CoC meeting were upheld, and the operational creditors were directed to deposit their respective shares of the CIRP costs with the liquidator immediately. The Tribunal found no merit in the appeals and upheld the Impugned Order.

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