TaxTMI 
TaxTMI 
2021 (3) TMI 117
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the Impugned Order has directed the Committee of Creditors of the Corporate Debtor Company, namely EMCO Limited, to provide interim funds to the Resolution Professional to run during the CIRP period; to provide funds to meet the expenditure already incurred to the tune of Rs. 2.21/- Crores till December 2019 and further directed the CoC to submit the compliance report at the time of next hearing. 2. The Learned Adjudicating Authority while issuing the aforenoted directions has observed as follows; "4. MA 4002/2019 - This application has been preferred by the employees/ex-employees of the Corporate Debtor. The application inter-alia seeks payment due to the employees during the CIRP period. The learned Counsel appearing for the RP in an affidavit has mentioned that the total amount available in the Debtor company is about Rs. 1.27 Crore whereas the total out go on account of payment towards CIRP cost is about Rs. 1.74 Crore per month. It was also brought through an affidavit before this Bench that total unpaid CIRP costs is now about Rs. 2.21 Crore till December, 2019. Out of which the payment towards wages and salaries to the employees during the CIRP period is about ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the CoC has voted for liquidation and an Application seeking liquidation has already been filed before the Adjudicating Authority which is pending. It is submitted that as the Corporate Debtor is non-operational only salaries of those employees which the Resolution Professional has retained to keep the CIRP going, at reduced salaries, was paid and hence the directions of the Learned Adjudicating Authority to the Appellant to raise Interim Finance and pay the amounts is erroneous. 7. Per contra, the Learned Counsel appearing for the 1st Respondent/ the Applicant in MA 4002/2019 contended that as on the date of CIRP i.e. 16.08.2019, the Corporate Debtor had work orders amounting to Rs. 307/- Crores; that the said work orders could not be completed owing to the failure of the CoC to raise Interim Finance despite requests made by the Resolution Professional; that the services of the Respondent employees were not terminated; that even though approval of CoC is required for raising any Interim Finance, however, the approval of CoC is not required for payment of salaries to the workmen of the Corporate Debtor for the period of CIRP. 8. It is further submitted that the Appellant h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....due to the lack of funding; when these business Plans were presented to CoC, the first Respondent, Mrs. Mary Mody, head of the Engineering Department and Mr. Yogesh Sonje, were invited for the meetings and were personally present and hence were given sufficient opportunity to present their case before the CoC. It is also submitted by the Counsel appearing for the RP that all efforts were made to allocate some funds to the employees and workman towards their monthly salaries but the draft of the Settlement Agreement was rejected by them and the dues of only those employees whose dues during the CIRP period were approved by the CoC as CIRP cost have been cleared. The CoC has not approved the dues of the first Respondent as CIRP cost and therefore the RP could not get these dues cleared. Hence it is prayed that the Impugned Order be set aside as it is in violation of the provisions of the I&B Code. 12. Heard both the Parties at length. The main point which falls for consideration here is whether the Corporate Debtor was a going concern and whether the Learned Adjudicating Authority was justified in directing the CoC to raise interim funds and provide to the RP to run the CIRP perio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eet the critical CIRP expenses and the proposal given by the RP to sell the various unencumbered assets was not approved by the CoC Members and the RP has no funds available for running the CD as a going concern. The salaries of only certain critical employees were approved by the CoC to form part of the CIRP cost during various CoC meetings and this decision was taken by the CoC to ensure smooth CIRP process towards the employees who were required to support the RP in discharging his duties. 17. As regarding the contribution to be made by the Suspended Board of Directors towards the gratuity funds, it is stated by the RP in his Affidavit that the CD has not been contributing the sufficient amounts to meet the gratuity, liabilities for its employees and workmen which cannot be attributed to the RP. At this juncture, Learned Counsel for the Appellant placed reliance on the recent Judgement of this Tribunal in 'Savan Godiawala, Liquidator of Lanco Infratech Ltd.' V/s. 'Apalla Siva Kumar', in Company Appeal (AT) (Insolvency) No. 1229 of 2019 in which this Tribunal has held that 'the Provident Fund, the Pension Fund and the Gratuity Fund, do not come within the purview of 'liquidati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a detailed Affidavit that the Corporate Debtor is not a 'going concern and is non-operational', this Tribunal is of the considered opinion that the Learned Adjudicating Authority ought to have taken this aspect into consideration and heard the CoC before issuing the directions. 20. Section 5(13) of the Code defines Insolvency Resolution Professional process cost as follows; "5(13). Insolvency Resolution Process cost means- (a) the amount of any Interim Finance and the costs incurred in raising such finance; (b) the fees payable to any person acting as a resolution professional; (c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern; (d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board." 21. Section 5 (15) of the Code defines Interim Finance; "5 (15). Interim Finance means any financial debt raised by the resolution professional during the insolvency resolution process period." 22. Section 28 (1) refers to approval of Committee of Creditor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imited grounds referred to in Section 30(2) read with Section 31(1) of the I&B Code. It cannot make any other inquiry nor is competent to issue any direction in relation to the exercise of commercial wisdom of the financial creditors-be it for approving, rejecting or abstaining, as the case may be. Even the inquiry before the Appellate Authority (NCLAT) is limited to the grounds Under Section 61(3) of the I&B Code. It does not postulate jurisdiction to undertake scrutiny of the justness of the opinion expressed by financial creditors at the time of voting. To take any other view would enable even the minority dissenting financial creditors to question the logic or justness of the commercial opinion expressed by the majority of the financial creditors albeit by requisite percent of voting share to approve the resolution plan; and in the process authorize the adjudicating authority to reject the approved resolution plan upon accepting such a challenge. That is not the scope of jurisdiction vested in the adjudicating authority Under Section 31 of the I&B Code dealing with approval of the resolution plan..." "48. Suffice it to observe that the amended provision merely restates....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the second Meeting of the CoC proves that the Company was a going concern is unsustainable as it only refers to the RP's visit to the Plant and cannot be construed to be of any documentary evidence to substantiate the plea of the Respondent that the Corporate Debtor was a going concern. 26. CIRP Costs have to be approved by the CoC in terms of Regulation 31 of the CIRP Regulations which reads as hereunder; "31. Insolvency Resolution Process Cost:- "Insolvency resolution process costs" under Section5(13)(e) shall mean- (a) amounts due to suppliers of essential goods and services under regulation 32; 1[(aa) fee payable to authorized representative under 2[sub-regulation (8)] of regulation 16-A; (ab) out of pocket expenses of authorized representative for discharged of his functions under 2[Section 25-A];] (b) amounts due to a person whose rights are prejudicially affected on account of the moratorium imposed under Section 14(1)(d); (c) expenses incurred on or by the interim resolution professional to the extent ratified under regulation 33; (d) expenses incurred on or by the resolution professional fixed under regula....