TaxTMI 
TaxTMI 
2020 (10) TMI 273
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....34/2020 for hearing in an urgent manner. The said Application bearing IA No. 300/2020 was listed for hearing on 30.04.2020, wherein this Adjudicated Authority after considering the urgency, directed the Registry to list IA No. 234/2020 along with IA No. 235/2020 for hearing on 08.05.2020 and accordingly both the Applications bearing IA No. 234/2020 and 235/2020 were taken up for hearing together. Therefore, Applications bearing IA No. 300/2020 in IA No. 234/2020, IA No. 234/2020 and IA No. 235/2020 are being disposed of by this common order. 2. The Application bearing IA No. 234/2020 is filed by Power Finance Corporation on behalf of CoC seeking to appoint Mr. Sumit Binani as the Resolution Professional, who has been voted to act as the Resolution Professional of the Corporate Debtor by Committee of Creditors under Section 22(3)(b) of the Code. 3. The Application bearing IA No. 235/2020 is filed by Mr. Mahender Kumar Khandelwal, IRP of the Corporate Debtor, inter-alia, seeking to pass directions to the CoC of the Corporate Debtor to reconsider the decision and continue with the Applicant as RP. 4. The Application bearing IA No. 300/2020 in IA No. 234/2020 is filed by Power....
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.... dated 22.01.2020, giving his written consent to act as the Resolution Professional of the Corporate Debtor. d. Reiterating above, the Applicant prayed to allow the Application as prayed for. 6. Counsel for IRP filed counter, inter-alia, stating as under:- a. That the IRP herein has filed an IA No. 235 of 2020 in the above Company Petition for continuing IRP as RP of the Corporate Debtor. b. That the instant Application is not supported by any resolution of CoC in favour of Applicant for filing the Application on behalf of CoC. Hence, the Application deserves to be dismissed on this ground alone. c. That a complaint came to be filed before the Insolvency and Bankruptcy Board of India (IBBI) alleging misconduct on the part of the IRP in conducting the CIRP of Bhushan Power and Steel Ltd. As a consequence of the order dated 14.11.2019 of the Disciplinary Committee of IBBI, the IRP was inter-alia barred from taking any fresh assignment. That the IRP duly disclosed the same to the CoC members promptly vide an email dated 15.11.2019, while voting on resolution to appoint IRP as RP was being conducted. d. That immediately thereafter, the IR....
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....was devoid of any reasoning and merit. j. That most of the members comprising the CoC of the Corporate Debtor herein also constitute the CoC of Bhushan Power and Steel Limited (BPSL). The said CoC of BPSL has also challenged the IBBI order dated 14.11.2019 vide WP(C) No. 692/2020 before Hon'ble Delhi High Court. The said conduct depicts the apprehensions of the CoC members against the IBBI order dated 14.11.2020, which surprisingly has been used as a reason to remove the IRP herein from the CIRP proceedings of the Corporate Debtor. k. That the non-recommendation of IRP as RP despite being eligible and qualified to conduct the CIRP of the Corporate Debtor is bad in view of orders passed by the Hon'ble High Court of Delhi in WP No. 12189/2019. l. That vide order dated 05.09.2019 at page 104 in para 91 the Hon'ble Principal Bench of the National Company Law Tribunal, Delhi had clearly appreciated and observed that the IRP had conducted the CIRP of Bhushan Power & Steel Limited in a completely transparent and fair process. The Relevant part of the same is being reproduced herein below: "... The process undertaken by the RP and minutes of ....
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....he Corporate Debtor was conducted, the same is void and has no standing in the eyes of law, q. That it is reliably understood that, in one of such core lender's meetings, a few lenders expressed their concern in appointing IRP as RP of Corporate Debtor alleging that the matter was sub-judice which may cause delay in the Resolution process. This is contrary to order of Hon'ble High Court allowing CoC of Corporate Debtor to appoint IRP as RP as per law. r. That a few lenders said they had received some complaints against the IRP and PwC in some other cases. However, upon asking no such complaint or evidence could be produced for consideration. s. That vide the IA No. 235/2020 the IRP has prayed that the minutes of the said Consortium Meetings be directed to be placed on record in order to bring the correct facts into light before this Adjudicating Authority. t. That the IRP herein has appointed PwC as a professional agency in order to assist the IRP in discharging his duties and responsibilities in accordance with the provisions of IBC, 2016 to effectively conduct the CIRP process for the Corporate Debtor. The same was confirmed in the Firs....
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....e Hon'ble Supreme Court in K. Sashidhar v. Indian Overseas Bank, committee of Creditors of Essar Steel India Limited V. Satish Kumar Gupta & Ors., Civil Appeal No. 8766-67 of 2019, it is the commercial wisdom of the CoC reflected by the decisions taken by the requisite majority of the CoC, that must prevail on the facts of any given case, subject to certain minimum guidelines to be observed This is one of the basic tenets of the Code and any transgression of the same is violative to the spirit of the Code. b. That the power to appoint an RP in place of an IRP vests solely and absolutely with the CoC and any decision taken in this regard is non-justiciable and not liable to be challenged or set aside as long as the prerequisites of the relevant provisions have been duly complied with. c. The power to replace an RP is solely and absolutely the prerogative of the CoC and the only pre-requisites that are required to be met as per Section 22 are as under: i. The CoC shall pass the resolution with at least 66% voting shares; ii. Written consent shall be obtained from the proposed RP in the specified form; iii. The CoC shall file an applica....
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....nd other stakeholders of the Corporate Debtor. Hence, the appointed RP should be the one in active confidence of the CoC... " f. That during the Third CoC meeting held on 26.12.2019, the Applicant had proposed a resolution for his appointment as the RP of the Corporate Debtor and it had been put to vote before the CoC. However, the CoC by a majority vote of 71%, had rejected the resolution for confirming the appointment of the Applicant as the RP of the Corporate Debtor. Thereafter, at the fourth meeting of the CoC convened on 22.01.2020, one of the agendas for the meeting was to appoint the RP. The CoC unanimously decided to put the matter to vote. Thereafter, e-voting was conducted through which the COC resolved by a vote 89.6% to appoint Mr. Sumit Binani, an insolvency professional having registration number IBBI/IPA-001/IP-N00005/2016-2017/10025 as the Resolution Professional, replacing the IRP in accordance with section 22 of the Code. g. Therefore, the CoC's Resolution passed by 89.6% majority approving the appointment of Mr. Sumit Binani as the RP, being unequivocal in nature, cannot be interfered with. h. The Applicant's averment that no f....
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.... dated 25.11.2019 passed by the Hon'ble Delhi High court wherein the CoC has been given the power to act in accordance with law. Accordingly, the COC has taken a decision in its commercial wisdom to firstly, reject the resolution of appointment of the Applicant as the RP, and secondly, to approve the appointment of Mr. Sumit Binani as the RP of the Corporate Debtor. 9. Applicant in IA No. 235/2020 filed rejoinder reiterating the averments made in the Application and further prayed to allow the Application as prayed for. 10. Counsel for the Applicant in IA No. 234/2020, filed its written submissions inter-alia stating as under:- a. That PFCL was the lender which had initiated the CIR Process of the Corporate Debtor and coupled with the fact that it has a substantial voting share in the CoC, it is empowered to file applications on behalf of the CoC. In any event, CoC has subsequently by way of ratification duly, unanimously authorized PFC to file any pleadings, applications on behalf of CoC. Therefore, a technicality, capable of being rectified, should not prejudice the adjudication of the present Application. b. That the IRP, despite having knowledge abou....
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....bmissions made by the Senior Counsels of all the sides this Bench is of the view that the power of COG to replace IRP with RP in the first COC meeting as prescribed under section 22 of the I&B Code or the power to replace the RP at any time during the CIRP proceedings as prescribed under section 27 of the I&B Code, cannot be interfered with. In light of the decision of Hon'ble NCLAT in the above said order (supra), the CoC even need not give the reasons for the replacement of IRP/RP. " 11. In the insolvency resolution mechanism, the RP acts as a bridge between the CoC and the prospective investors and other stakeholders of the Corporate Debtor. Hence, the appointed RP should be the one in active confidence of the CoC. " f. That the settled position of Law is that there is no requirement mandating the CoC to assign any reasons while appointing or replacing an RP. The Hon'ble Appellate Tribunal in the matter of Axis Bank Ltd vs. Sixth Dimension Project Solution Ltd., categorically held that Section 22 of the Code does not require giving reasons for replacement of IRP and the Ld. Adjudicating Authority is not required to decide to such reasons and imposing su....
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....dismissed on this ground alone. b. That the IA No. 234/2020 is not maintainable in view of the settled law as has been reiterated by the Hon'ble Supreme Court in AMCHANDRA KESHAV ADKE V. GOVIND JOTI CHAVARE. (1975) 1 SCC 559 that: "A century ago, in Taylor v. Taylor [(1876) 1 ch D 426] Jassel, M.R. adopted the rule that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden. This rule has stood the test of time. It was applied by the Privy Council, in Nazir Ahmed v. Emperor [AIR 1936 PC 253 : LR 63 IA 372] and later by this Court in several cases [Shiv Bahadur Singh v. State of U.P., AIR 1954 SC 322 : AIR 1954 SC 1908 : 1954 SCR 1098 : 1954 Cri LJ 910; Deep Chand v. State of Rajasthan, AIR 1961 SC 1527 : (1962) 1 SCR 662 : (1961) 2 Cri LI 705] to a Magistrate making a record under Sections 164 and 364 of the Code of Criminal Procedure, 1898. This rule squarely applies "where, indeed, the whole aim and object of the legislature would be plainly defeated if the command to do the thing in a particular manner did not imply a prohibition to do it....
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.... "The Wednesbury principles is often misunderstood to mean that any administrative decision which is regarded by the Court to be unreasonable must be struck down. The correct understanding of the Wednesbury principle is that a decision will be said to be unreasonable in the Wednesbury sense if (i) it is based on wholly irrelevant material or wholly irrelevant consideration, (ii) it has ignored a very relevant material which it should have taken into consideration, or (iii) it is so absurd that no sensible person could ever have reached it." e. Thus, it is humbly submitted that by not approving the appointment of the Applicant as the RP solely on the basis of a complaint, which was clearly stayed by the Hon'ble Delhi High Court as shown above, the CoC acted in contrast to the settled position of law. f. That the members of the CoC have taken this decision at a terrible belated stage of the CIRP, i.e., after three whole months, causing not only undue losses of reputation to the Applicant but also detrimental to the Corporate Debtor as appointment of a new individual will require further time to get well acquainted with the Corporate Debtor and its processes. At....
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.... teams have been able to run the plant at 100% capacity. The IRP has made provisions for about Rs. 500 crores as exigencies in case if there is shortage of funds during these times. The IRP has made some extraordinary efforts to keep the operations at maximum. The Employees are being paid on time. m. That the CoC had complete knowledge of the professional credibility and experience of the Applicant, but ignored it straightaway, thereby passing a biased decision in favor of Mr. Sumit Binani without considering the ramifications of the same on the Corporate Debtor and not considering that the interest of the Corporate Debtor is at stake. It has been opined in the matter of Union of India vs. Vipan Kumar Jain (2005) 9 SCC 579) that: "Ultimately, the question of bias will have to be decided on the facts of each case. If the assesse is able to establish that the Assessing Officer was in fact biased in the sense that he was involved or interested in his personal capacity in the outcome of the assessment or the procedure for assessment, no doubt, it would be a good ground for setting aside the assessment order. But to hold, as the High Court has that bias is established ....
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....stry will invest the same in an interest bearing fixed deposit" ... ... ... ... ... ... "...70. In view of the order passed today, the petitioner is given liberty to place this order before the CoC concerned with M/s. K.S.K. Mahanadi Power Company Limited (KSK). The CoC concerned with KSK will be free to act in accordance with the Law." e. Further, on 25.11.2019, the Hon'ble High Court of Delhi in W.P.(C) 12189/2019 has passed the following order:- "....7. Under these circumstances, for the moment the operation of the impugned order, insofar as it prevents the Petitioner from accepting any new assignment as an Interim Resolution Professional (IRP) or Resolution Professional, is stayed... " f. That at the 2nd CoC Meeting of the Corporate Debtor, held on 29.11.2019 the matter for appointment of RP was deferred by CoC and subsequently, the 3rd CoC Meeting was held on 26.12.2019, wherein the resolution to appoint Mr. Mukesh Khandelwal as RP was put to vote and the same was rejected with 71% Votes of CoC. g. That in the 4th CoC meeting held on 22,01.2020, the resolution to appoint Mr. Sumit Binani as RP was approved with 89....
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.... handled various complicated CIRP's such as BSPL etc., in a fair and transparent manner, the CoC has not considered his appointment as RP and such non appointment is based on the Order of IBBI, without considering the Order passed by Hon'ble High Court of Delhi dated 19.11.2019 & 25,11.2019 and that the CoC has also not deliberated or recorded any specific reasoning for non-consideration of the IRP as RP. 19. It is a fact not in dispute that the IRP herein has carried out various complicated CIRP's such as of BSPL in a fair manner, and the same is evident from the order of NCLT Principal Bench, Delhi in the matter of BSPL. It is also observed that the CoC in the instant manner has also not levelled any allegations against the conduct of the IRP herein. Further, this Adjudicating Authority observes that pursuant to stay on IBBI Order by Hon'ble High Court of Delhi, there is no bar on the CoC to continue IRP herein as the RP and the IRP herein cannot be excluded from the zone of consideration on the same ground. 20. In relation to the recording of reasons by CoC in its meeting for removal of the IRP as RP, this Adjudicating Authority observes that the Hon'bl....