TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 273
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....he 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 Finance Corporation seeking the following praye....
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.... 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 IRP challenged the order of the Disciplinary Committee before the Hon'ble High Court of Delhi vide W.P. (c) 12189 of 2019. The Hon'ble High Cour....
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....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 meetings of CoC conducted by him do not leave any manner of doubt that the process is fair and transparent". m. That the members of the CoC have taken decision at a belated stage of the CIRP, i.e., after three months, causing....
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....tor 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 First Meeting of the CoC itself. u. That the CoC should have rejected the services of PwC, as agency supporting the CIRP, as well if there was any fault with the IRP However, non-confirmation of IRP while continuing with the Agency appointed by the IRP is beyond understanding to a pru....
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....cts 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 application before the Ld. Adjudicating Authority for appointment of the proposed RP; and iv. The Ld. Adjudicating Authority shall forward the name of the proposed RP to Insolvency and Bankruptcy Board of India ("IBBI") for its confirmation and shall make such appointment after confirmation by the IBBI. d. That the first mandatory requirement is approval of ....
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....ing 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 fair or transparent bidding process was followed inviting Expression of Interest for the appointment of RP, is denied as there is no such requirement prescribed under the Code for inviting Expression of Interest at the time of appointing/confirming the RP as per Section 22 of the Code. In fact, the Hon'ble Appellate Tribunal has also rejected a similar argument in the matter of Friends Agencies v. BIW Fabricators Pvt. Lt....
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....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 about it, failed to bring this to the notice of the CoC so that steps for ratifying PFCL's authority to file Application on behalf of the CoC could have been taken, if required. This goes to show that the IRP consciously and maliciously elected to remain silent on it during the CoC meetings, to further serve his own interest. c. 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....
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.... 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 such a procedure would only delay the CIR Process. g. That the rationale behind not giving reasons for replacement of RP has been noted by the Hon'ble appellate Tribunal in State Bank of India vs. Ram Dev International Ltd, wherein the Hon'ble Appellate Tribunal held that: "14...though such submission seems to be attractive, we are of the view, it is not desirable for a Committee of Creditors to record its opinion in view of the following reasons: i) If the Committee of Creditors record any adverse opinion for replacement of ....
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....ed 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 in any other." c. Furthermore, the Hon'ble High Court of Hyderabad in M. SHANKAR REDDY V. AMARA RAMAKOTESWARA RAO, stated that "When a statute describes or requires a thing to be done in a particular manner; it should be done in that manner or not at all." d. That the IRP on 06.01.2019 had shared legal opinion by a former judge of the Hon'ble Supreme Court, to the CoC giving opinion that there are no legal impediment against IRP to be confirmed as RP. e. The Hon'ble Supreme Court has categorically held in the matter of Mohd Yunus Khan v. State of U.P., [ (2010) 10 SCC 539)]: "Arbi....
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....is 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 this juncture, it is utmost significant to reiterate the following decision passed in the matter of Ambica Quarry Works etc. Vs. State of Gujarat & Ors. (AIR 1987 SC 1073) wherein it was held that: "There may be something in the nature of thing empowered to be done, something in the object for which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do so." h. Thus, the CoC cannot exercise its power to make decisions which undermine and contradict the object....
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....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 only because the authorized officer under Section 132 and the Assessing Officer are the same person is, in our view, an incorrect approach." n. Resultantly, the CoC decision in relation to not to confirm the IRP as RP will set a precedent and diminish the opportunities of getting assignments with loan portfolios worth a few thousand cores as per the capability of the IRP/Applicant. o. Reiterating above, the counsel for the IRP prayed to allow the Application as prayed for. 12. Heard both sides and perused the records. 13. The brief list of factual events relating to instant matter are as under:- a. The Company Petition filed by PFC Limited U/s. 7 of IB Code, 2016 against the Corporate Debtor was admitted for CIRP on 03.10.2....
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....tment 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 89.6% votes of CoC and has passed the following resolution;- "RESOLVED THAT pursuant to section 22 of Insolvency and Bankruptcy Code, 2016 and other applicable provisions, if any, of the Insolvency and Bankruptcy Code, 2016 and in accordance with rules and regulations made thereunder, approval of the members of the Committee of Creditors is hereby accorded for appointment of Mr. Sumit Binani, an Insolvency Professional (Registration No. IBBI/IPA-001/IP-N00005/2016-17/10025) as the Resolution Professional in the matter of Corporate Insolvency Resolution Process of KSK Mahanadi Power Company Limited. 'RESOLVED FURTHER THAT approval is hereby accorded for payment of fees aggregating to INR 5,00,000/- per month (exclusive of out of pocket expenses up to the maximum limit of 7.5% of aggregated monthly remuneration and applicable taxes) to the R....
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....rt 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'ble Supreme Court and Hon'ble NCLAT in plethora of Judgments has held that the CoC is not bound to record any reasons under Section 22 of IB Code, for change of IRP with another Insolvency professional as RP. 21. On a plain reading of Section 22 of the Code, 2016, it is clear that the CoC is conferred with the power of replacing the IRP by another Resolution Professional and no reasons need to be recorded by the CoC for affecting such replacement. It is the prerogative of the CoC whether to continue the IRP as the RP or to replace the IRP with by another RP. 22. The power to replace an RP is solely and absolutely vested with the CoC and the only pre-requisites that are required to be met as per Section 22 are as under: i. The CoC in its first Meeting, shall pass the resolution with at least 66% voting shares; ii. Written consent shall be obtained from the proposed R....