TaxTMI 
TaxTMI 
2025 (6) TMI 23
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....e For Respondent : Mr. Rishabh Parikh, Ms. Niyati Kohli, Advocates Mr. Raunak Dhillon, Ms. Isha Malik, Mr. Nihaad Dewan, Mr. Anchit Jasuja, Mr. Vikash Kumar Jha, Advocates for R - 4 ( ITNL ) JUDGMENT ( Hybrid Mode ) Per : Barun Mitra, Member ( Technical ) The present set of two appeals filed under Section 61 of Insolvency and Bankruptcy Code 2016 ('IBC' in short) by the Appellants arises out of a common Order dated 20.04.2023 (hereinafter referred to as 'Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Jaipur Bench) in IA No. 100/JPR/2020 in CP No. (IB)- 44/9/JPR/2019. By the impugned order, the Adjudicating Authority has terminated the Corporate Insolvency Resolution Process ("CIRP" in short) of the Corporate Debtor and reduced the fees and remuneration payable to the erstwhile Resolution Professional ("RP" in short). Aggrieved by the impugned order, Company Appeal No. 853 of 2023 has been preferred by the Operational Creditor and Company Appeal No. 785 of 2023 has been filed by the RP. 2. Coming to the factual matrix of both the cases at hand, the sequence of events and facts which are relevant for deciding the two appeals are as outlin....
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....ing restoration of IA No. 100 of 2020. On 26.07.2021, RP filed IA No. 197 of 2021 under Section 66 and 67 of the IBC with regard to fraudulent transaction by the ITNL. On 11.11.2021, the Adjudicating Authority capped the fees of RP to Rs 1,00,000/- per month and sought justification for enhanced fees of Rs 2,00,000/- per month. On 29.08.2022, IA 100 of 2020 of the ITNL was restored by the Adjudicating Authority. On 08.12.2022, the Adjudicating Authority directed the parties to explore the possibility of amicable settlement and on 16.01.2023 directed the RP to convene a meeting of the CoC along with the ITNL for this purpose. RCPL did not attend the meeting of the CoC convened for this purpose. In compliance of the order of 16.01.2023, the RP had convened a meeting of CoC on 23.01.2023 which had to be deferred due to absence of quorum. The Adjudicating Authority on 24.01.2023 again directed CoC meeting to be held on 25.01.2023. The meeting on 25.01.2023 also could not be convened because Appellant had requested for rescheduling of the meeting on the grounds of personal exigency. The seventh CoC meeting was eventually convened on 01.02.2023. During the seventh CoC meeting hel....
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....itted a claim of Rs 181.34 Cr. before the RP on 20.12.2019 towards the loan given by it to the Corporate Debtor. The RP acting fairly and transparently had admitted the claim of ITNL as Financial Creditor but did not admit them into the CoC by holding them to be a "related-party", which fact was also communicated to ITNL on 06.02.2020. ITNL however filed IA No. 100 of 2020 disputing their 'related-party' status thus stalling resolution efforts of the Corporate Debtor for over three years. It is thus asserted that though the Corporate Debtor was admitted into CIRP on 24.09.2019, the CIRP proceedings dragged on for many long years not on their insistence but because of ITNL which was trying to position itself on the CoC by filing a claim of Rs 181.34 Cr. It was emphatically asserted that at the stage when the claim of ITNL was admitted, the cash balance lying with the Corporate Debtor was insufficient to meet the ITNLs claim of Rs 181.61 Cr. coupled with the claims of the three Operational Creditors. It was contended by RCPL that as a member of CoC it was responsible for overseeing the interest of all creditors as well as the interest of the Corporate Debtor. Hence, it could not have....
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....nancial debt of more than Rs 181 Cr. claimed by ITNL. On the issue of their fees and remuneration, it was submitted that remuneration of Rs 1,00,000/- per month had been confirmed by the CoC in their first meeting held on 24.10.2020. However, as the claim amount of the creditors touched a figure of more than Rs 181 Cr., the CoC in its fourth meeting held on 20.03.2020 agreed to enhance the remuneration of the RP from Rs 1,00,000/- to Rs 2,00,000/- per month. It was further contended that Regulation 34-B of the CIRP Regulations prescribed minimum fees of Rs 2,00,000/- per month for RP under Schedule-II and hence their claim for the same fees was justifiable. Though the RP was performing his duties diligently throughout the CIRP process including keeping the Corporate Debtor as a going concern even when CIRP was put on hold, the reduction in fees to Rs 50,000/- per month by the Adjudicating Authority is reflective of punitive action on the RP which has caused prejudice to the reputation of the RP. It was vehemently contended that certain unwarranted and unsubstantiated observations have been made against the RP by the Adjudicating Authority which deserved to be expunged. 6. Refuting....
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....he process incurred an exorbitant expenditure of Rs 73.31 lakhs towards CIRP cost. 7. We have duly considered the arguments advanced by the Learned Counsel for all the parties and perused the records carefully. 8. The short question which is required to be answered is whether the decision of the CoC to decline the proposal for acceptance of their admitted dues and close the CIRP proceedings is justified and whether the purported role of the RP in dragging on with the CIRP proceedings and in the process incurring an exorbitant expenditure towards CIRP cost was arbitrary and unsustainable. 9. It is the case of the CoC and RP that on the recusal of Justice (Retd) D.K. Jain from conducting the insolvency of the Corporate Debtor, it was the ITNL which had once again sought revival of IA 100 of 2020 which led to prolongation of the CIRP proceedings. The IA No. 100 of 2020 was revived on 29.08.2022 and the matter was heard on several occasions. Thus, the conduct of insolvency resolution proceedings of the Corporate Debtor was delayed by almost three to four years because of ITNL unabatedly litigating for their inclusion in the CoC. Thus, when the delay was neither on account of the RP ....
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....Adjudicating Authority with regard to IA No. 100/2020, the ITNL had submitted a proposal that if the entire claims of the Operational Creditors was settled and the Operational Creditors filed an application for withdrawal of CIRP, in that eventuality, ITNL would also not claim any amount against the Corporate Debtor. While the proceedings in respect of IA No. 100 of 2020 had commenced, it was noticed by the Adjudicating Authority that a substantial amount of approximately Rs 7 Cr. was lying in the account of the Corporate Debtor which was far in excess of the aggregate claim of Rs 26.76 lakhs of the three Operational Creditors who constituted the CoC. The Adjudicating Authority, therefore, directed the RP twice on 16.01.2023 and 24.01.2023 to convene a meeting of the CoC in which all members of CoC as well as ITNL would remain present wherein if the claim of the three Operational Creditors could be settled, an appropriate application for withdrawal of IA No. 100 of 2024 would be filed by ITNL. The order of the Adjudicating Authority on 16.01.2023 also recorded the submission made by ITNL that if the claim of the Operational Creditors was settled and the application for withdrawal o....
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....held that ultimate purpose of IBC is to facilitate insolvency resolution so as to put the Corporate Debtor back on its feet so as to ensure revival and continuance of the Corporate Debtor. The relevant excerpts of the impugned order are as reproduced hereunder : "21. It has been time and again held in various judgments that the primary focus of IBC is to ensure revival and continuance of the Corporate Debtor. The Code is a beneficial legislation which aims to put the Corporate Debtor back on its feet and not a mere recovery legislation. The Hon'ble Supreme Court in the matter of E.S. Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd., (2022) 3 SCC 161 has held the following: "35. Undoubtedly, settlements have to be encouraged because the ultimate purpose of IBC is to facilitate the continuance and rehabilitation of a corporate debtor, as distinct from allowing it to go into liquidation. As the Statement of Objects and Reasons accompanying the introduction of the Bill indicates, the objective of IBC is to facilitate insolvency resolution "in a time-bound manner" for maximisation of the value of assets, promotion of entrepreneurship, ensuring the availability of credit and balanc....
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.... of the process of the Tribunal." 28. Section 60(5) gives power to this forum to exercise residuary jurisdiction in matters pertaining to the CIRP of the Corporate Debtor. Moreover, the Hon'ble Supreme Court in the matter of Vallal RCK v. Siva Industries & Holdings Ltd., (2022) 9 SCC 803 has while relying on the judgment of Swiss Ribbons (P) Ltd. Vs. Union of India; (2019) 4 SCC 17 observed the following: "20. It could thus be seen that this Court has found that if the CoC arbitrarily rejects a just settlement and/or withdrawal claim, the learned NCLT and thereafter the learned NCLAT can always set aside such decision under the provisions of IBC. 24. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and dehors the provisions of the statute or the Rules.....
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.... repay the operational debt qua the three Operational Creditors who are the only members of the CoC and full liability was proposed to be discharged, there seems to have been no rational basis for the Operational Creditors to decline from accepting their outstanding dues. What comes to notice is stubborn reluctance on the part of CoC members to accept the repayment of the operational debt, making it clear that the three Operational Creditors who constituted the CoC were trying to scuttle the resolution of the Corporate Debtor and more interested in pushing the Corporate Debtor into insolvency rather than salvaging the Corporate Debtor from the perils of corporate death. The RCPL with majority stake in the CoC has been trying to take undue advantage of the situation and was being actuated by some other ulterior and dubious motives which had nothing to do with insolvency resolution. This amounts to misuse and abuse of the provisions of IBC. Based on the totality of circumstances, we are convinced that the intent behind continuing of the CIRP proceedings by the Operational Creditor was clearly for reasons other than insolvency resolution. 17. This now brings us to the second related ....
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....ority had correctly arrived at their categorical finding on the malicious conduct of the RP and failure on her part to have performed the duties in a diligent manner. The RP did not inform the Adjudicating Authority that Corporate Debtor has sufficient funds to discharge the admitted claims of the CoC. There was no reason for continuation of CIRP of the Corporate Debtor by the RP when there was sufficient cash balance. It was contended that during the entire three and half years of CIRP proceedings from 24.09.2019 till 20.04.2023, only seven CoC meetings were held. Further listing out the non-compliance and failure to discharge duties by the RP, it was stated that the RP had failed to file annual returns of the Corporate Debtor with RoC for FY 2018-19 to FY 2022-23. It had also failed to prepare and approve the financial statements of the Corporate Debtor for FY 2018-23 which all amounted to violation of Sections 92, 134 and 137 of the Companies Act, 2013. The RP had also failed to hold AGM of the Corporate Debtor during the CIRP; failed to file income tax returns since 2018-19 and to undertake routine compliances such as filing Form DPT-3 and MSME Forms. The RP had also failed to ....
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....ebtor just to ensure higher billing inspite of sufficient capital/liquidity being available with the Corporate Debtor to meet its debts. While reducing the remuneration payable to the RP to Rs 50,000/- per month from 24.01.2019 to 19.04.2023, the Adjudicating Authority had done so after noting that there was no need for CIRP of the Corporate Debtor to continue since the Corporate Debtor had sufficient funds to discharge the admitted claim of the CoC. We are of the considered view that the impugned order had not committed any infirmity in directing that RP was to receive only remuneration of Rs 50,000/- per month totalling Rs 21.45 lakhs besides directing the refund of the excess amount of remuneration paid to the RP. 21. Besides the fact that CIRP cost have far exceeded the admitted debt of CoC, in the present case, the entire CIRP expenses was being met by utilising the funds of Corporate Debtor without reimbursement by the CoC which was not in conformity with the terms of Regulation 33 and 34 of IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016. It is anomalous and paradoxical that while the CoC was paying the CIRP cost from the resources of the Corpora....