2023 (8) TMI 662 - AT - Insolvency and Bankruptcy

Adjudicating Authority modifies IRP expenses, criticizes conduct on CIRP withdrawal application

Alok Kaushik, Erstwhile Resolution Professional of Cheema Spintex Ltd. Versus Cheema Spintex Ltd., Kotak Commodity Services Pvt. Ltd., IDBI Bank Limited, State Bank of India, Punjab National Bank

The Adjudicating Authority allowed the withdrawal application and discharged the Interim Resolution Professional (IRP) but modified the reimbursement of ... CIRP - conduct of Resolution Professional (RP/IRP) - Seeking revisitation of certain portions of order (Impugned Order) passed by the National Company Law Tribunal, Chandigarh Bench - withdrawal of application allowed while discharging the IRP from his duties after modifying the reimbursement of expenses claimed by the IRP besides making certain remarks deprecating the conduct of IRP - HELD THAT:- While examining the factors behind disallowing of non-essential expenses by the Adjudicating Authority, it is found that the reasons assigned by the Adjudicating Authority has been the absence of records and the non-handing over of the assets by the suspended management to the IRP. The reasons ascribed by the Adjudicating Authority are cogent and weighty because in the absence of the requisite documents/details/records, it could not have been expected for such an exercise to have been undertaken in the right earnest - the exclusion of these expenses by the Adjudicating Authority was done after due and proper application of mind which was only fair and reasonable. The applicability of the judgment of this Tribunal in MADHUSUDAN SHARMA VERSUS J.D. ANEJA EDIBLES PVT. LTD. [2019 (8) TMI 1871 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] has to be tested against the facts of the present case. That the withdrawal and stay application were heard several times is an admitted fact. However, there is nothing on record in the interim orders to show that the Appellant had been successful in demonstrating before the court the conundrum confronting him in the conduct of CIRP. The Appellant has taken the pretext that the Adjudicating Authority had made an oral observation during the hearings that it would not pass any interim order on the stay as may be seen at page 5 of Appeal Paper Book - the Madhusudan decision cannot come to aid of the Appellant. Instead, the Adjudicating Authority has rightly noted that the Appellant took advantage of the situation and mechanically pulled on with the CIRP process and kept on getting his expenses ratified from time to time by trumping up of the need to adhere to CIRP timelines. Conduct of the IRP has been strongly disapproved for not having actively pursued the matter before the Adjudicating Authority and for unnecessarily adding to the costs by carrying out non-essential activities - HELD THAT:- The Appellant has submitted that he is academically highly qualified and possesses rich experience having handled several CIRP/liquidation related assignments and unless these adverse remarks get expunged, it would jeopardize his professional career - there are no observations on the academic qualification or experience claimed by the Appellant. In the same breath, the academic qualifications and past experience cannot absolve the Resolution Professional of his conduct which has been found to be unprofessional by the Adjudicating Authority for reasons well-articulated in the impugned order. The application is devoid of merit and is dismissed. Issues Involved:1. Reimbursement of expenses incurred by the Interim Resolution Professional (IRP).2. Classification of expenses as essential and non-essential by the Adjudicating Authority.3. Conduct of the IRP in pursuing the CIRP withdrawal application.4. Deprecatory remarks on the conduct of the IRP and their impact on his professional career.Summary:1. Reimbursement of Expenses:The IRP sought approval for reimbursement of expenses incurred during the CIRP of the Corporate Debtor. The Adjudicating Authority allowed the withdrawal application and discharged the IRP but modified the reimbursement of expenses claimed by the IRP.2. Classification of Expenses:The Adjudicating Authority categorized the expenses into 'essential' and 'non-essential.' It allowed expenses amounting to Rs. 1,48,237/- for essential activities and Rs. 2 lakhs as fees to the IRP. The non-essential expenses, including valuation exercises and payments to advocates for PUFE transactions, were disallowed due to the lack of records and incomplete tasks.3. Conduct of the IRP:The IRP was criticized for not actively pursuing the CIRP withdrawal application, which was not in sync with the spirit of the IBC. The IRP's contention that he pursued the applications diligently was not substantiated by records. The Tribunal found that the IRP mechanically continued the CIRP process, thereby unnecessarily adding to the costs.4. Deprecatory Remarks on the IRP's Conduct:The IRP sought to expunge adverse remarks on his conduct, arguing that they would jeopardize his professional career. The Tribunal upheld the Adjudicating Authority's remarks, stating that academic qualifications and past experience do not absolve the IRP of unprofessional conduct.Conclusion:The application was dismissed as devoid of merit, and the Tribunal found no reason to interfere with the findings of the Adjudicating Authority. No order as to costs was made.