TaxTMI 
TaxTMI 
2025 (6) TMI 22
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....A. Mr. Anuj P. Agarwala, for CoC. Mr. Prakash Shinde, Ms. Ruchita Jain, Advocates for CoC. Mr. Gaurav Mitra, Mr. Ishan Roy Chowdhury, Advocates for RP. JUDGEMNT NARESH SALECHA, MEMBER (TECHNICAL) 1. The first two appeals have been filed under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 ('Code') by the Appellant i.e., Mr. Amit Sangal, Proprietor of M/s. Nitin Plastic (the Operational Creditor of the Corporate Debtor herein), against the Impugned Order dated 15.05.2023 passed by the National Company Law Tribunal, Mumbai Bench (II) ('Adjudicating Authority') in IA/3525/2022 and IA/2977/2022 in Company Petition No. (IB) 934(MB)/2020). 2. The first appeal has been filed U/S 61(1) of the Code by the Appellant i.e., Mr. Amit Sangal, Proprietor of M/s. Nitin Plastic, the Operational Creditor of the Corporate Debtor herein, under section 425 of the Companies Act, 2013 and Section 60(5) of the Code r/w Section 10 and Section 12 of the Contempt of Court Act, 1971, read with Rules 11 and 34 of the National Company Law Tribunal Rules, 2016, against the Impugned Order 28.03.2024 passed by the National Company Law Tribunal, Mumbai Bench (II) ('Adjudicating Authority')....
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....rately withheld correct facts and misrepresented the outcome to the Adjudicating Authority through false submissions and affidavits, thereby committing perjury for his personal gain and for providing unlawful benefits to the Suspended Board of Directors ('SBOD'). 6. The Appellant contended that Canara Bank, a member of the CoC, Respondent No. 2 in Company Appeal (AT) (Ins.) No. 916 of 2023 and Respondent No 3(a) in Company Appeal (AT) (Ins.) No. 792 of 2023 filed an application (I.A. No. 247/2022) on 02.02.2022, under Section 27 of the Code, seeking the replacement of Respondent No. 1 as the Interim Resolution Professional highlighting misconduct of Respondent No. 1. An additional affidavit by Respondent No. 2 in Company Appeal (AT) (Ins.) No. 916 of 2023 and Respondent No 3(a) in Company Appeal (AT) (Ins.) No. 792 of 2023, presented evidence of Respondent No. 1's false submissions, manipulation of voting results, and violations of the Code's provisions, rules, and regulations. The Appellant submitted that these actions reflect fraudulent intent of the Respondent No. 1 to mislead the CoC, the Adjudicating Authority, creditors, stakeholders, and the Insolvency and Bankruptcy Board ....
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....espondent No. 1 violated several provisions of the CIRP Regulations. The Appellant cited some of these violations as enumerated below: - (a) Violation of Regulation 19: The appellant submitted that the first CoC meeting was called with only a 2-day notice dated 08.11.2021, whereas the regulations mandate a minimum of 5 days' prior notice for convening a CoC meeting. (b) Violation of Regulation 26: The Respondent No. 1 as the Interim Resolution Professional failed to submit the record of the first CoC meeting and did not conduct the second CoC meeting for 50 days. Even during the second CoC meeting on 30.12.2021, the Interim Resolution Professional made false and misleading statements regarding the agenda. Specifically, item No. 7 in the minutes of the second CoC meeting was fraudulently included to mislead the CoC. The agenda mentioned the review of efforts made by the Respondent No. 1 for entering into a third-party MOU and the possibility of continuing plant operations at Haridwar during the CIRP where the said MoU mentioned was already executed on 10.11.2021 with retrospective effect dated 05.10.2021, without the consent of the CoC. (c) Violation of Regulation 35A: The....
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....dingly under criminal law. 13. The Appellant contended that the CoC filed an application IA 247 of 2022 for the replacement of the Resolution Professional under Section 27 of the Code. The Respondent No. 1 submitted that under the provisions of the Code, there is no requirement to make the Resolution Professional a party in the application for replacement, as it is within the commercial discretion of the CoC to replace the Resolution Professional without providing any reasons. However, in this case, Respondent No. 1, with malafide intention, interfered and objected to his replacement, arbitrarily attempting to retain and usurp the position of Resolution Professional for the Corporate Debtor. The Appellant highlighted that Respondent No. 1 had failed to specifically deny any of the allegations made by the CoC in their additional affidavit filed in I.A. No. 247 of 2022. 14. The Appellant submitted that, as per item No. 13 of the Minutes of the 6th CoC Meeting, the CoC informed Respondent No. 1 about the fraud committed by the SBOD during the management of the Corporate Debtor before the initiation of the CIRP. The Appellant stated that Canara Bank, member of the CoC holding 67.36% ....
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....onths vide its order dated 23.05.2023 (IBBI/DC/173/2023). 19. The Appellant submitted that the Corporate Debtor transferred its assets and inventories to M/s. SIPL, which was managed by the SBOD. This was done to defraud creditors and suppliers, as shown by the matching GST registration address. The Appellant stated that the Respondent No. 1 approved these asset transfers without the CoC's consent, violating the principles of the Code that aim to maximize value and protect stakeholders. The Appellant argued that allowing such actions of the Respondent No. 1 would set a harmful precedent, encouraging future insolvency professionals to bypass the Code for personal gain in collusion with ex-management. The Appellant further asserted that permitting these unlawful acts will set a dangerous precedent for future Corporate Insolvency Resolution Processes. It will encourage insolvency professionals to act in collusion with the ex-management of the Corporate Debtor for personal gain, undermining the integrity of the Code and enabling violations of the Code for selfish motives. 20. The Appellant urged this Appellate Tribunal to dismiss the Impugned Order dated 15.05.2023 and allow the Appe....
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....ribunal issued a notice in Appeal No. 792 of 2023, which challenges the approval of the Resolution Plan under Section 61(3) of the Code. 26. The Appellant submitted that on 11.01.2024, written submissions were filed in Contempt Petition No. 04 of 2023 before the Adjudicating Authority and obtained favorable order from the Adjudicating Authority by concealing material information and facts, thereby committing fraud to secure an order. The Appellant further contended that the order obtained by the Respondent should be declared void ab-initio. 27. The Appellant submitted that the Respondent is liable to be prosecuted for Contempt of Court under Section 425 of the Companies Act, 2013, read with Sections 10 and 12 of the Contempt of Court Act, 1971, as well as Rule 11 and 34 of the NCLT Rules, 2016. To buttress his point, he relied on the judgements of Hon'ble Supreme Court of India in case of Suo-Motu Contempt Petition (Civil) No. 3 of 2021 In Re: Perry Kansagra, A.V. Papayya Sastry and Ors. Vs. Government of A.P. and Ors. [(2007) 4 SCC 22l] and Dhananjay Sharma v. State of Haryana [(1995) 3 SCC 757], Chandra Shashi v. Anil Kumar Sharma [(1995) 1 SCC 421] and in ABCD v. Union of ....
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....h CoC approval, and IA 993 of 2023 had been filed with Adjudicating Authority. 33. The Respondent No. 1 contended that the legal implementation of the Resolution Plan remains unaffected by the CIRP followed in the First CoC meeting, and therefore, it cannot be grounds for rejecting the Resolution Plan under Section 30(2)(e) of the Code. The Respondent No. 1 asserted that the Appellant is misusing the CIRP as a recovery tool rather than aiming for the revival of the Corporate Debtor, filing multiple applications and complaints based on fraudulent documents. 34. The Respondent No. 1 submitted that filing an appeal is not an automatic right, but is only available to an aggrieved party on valid grounds of fact or law and the Appellant has no role in the CIRP, nor is he a member of the CoC. The Respondent No. 1 stated that the Appellant cannot be considered as an aggrieved person regarding the appointment or replacement of the Resolution Professional under Section 27 of the Code, and the Appellant has no entitlement to access confidential CoC documents, including the minutes of meetings or the MoU. Furthermore, the Appellants was not involved in the proceedings of IA 247 of 2022, whic....
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....without providing any supporting data, despite the Resolution Plan already filing a fraud application being heard in IA 993 of 2023. Finally, in the fourth instance, the Appellant filed Contempt Application 4 of 2023, once again seeking to stay the approval of the Resolution Plan. The Respondent No. 1 emphasized that these actions highlight the Appellant's ongoing attempts to derail the CIRP and undermine the Resolution Plan. 38. The Respondent No. 1 conceded that while the CoC filed an application for the replacement of the Interim Resolution Professional due to its internal policies, the Respondent No. 1 continued to perform his duties. The Respondent No. 1 stated that he successfully ensured the completion of the Resolution Plan, with all payments being received and distributed as per the plan approved by the Adjudicating Authority. 39. The Respondent No. 1 contended that the Resolution Plan has been approved by 100% of the CoC during its 10th meeting, conducted by the Respondent No. 1. This was followed by approval from the Adjudicating Authority 15.05.2023, in IA 2977 of 2022, after hearing and dismissing IA 3525/2022 of the Appellant as misconceived. 40. The Respondent No.....
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....p. (AT) (Ins.) No. 916 of 2023 & Comp. App. (AT) (Ins.) No. 792 of 2023 against the same Impugned Order dated 15.05.2023 passed by the Adjudicating Authority in CP(IB) 934/MB/2020. The Adjudicating Authority has disposed of two IA's and hence two appeals have been filed by the Appellant. IA No. 2977/2022 was filed by the Interim Resolution Professional for approval of the Resolution Plan which is subject matter in present appeal before us in Company Appeal (AT) (Ins.) No. 792 of 2023 and IA 3525/ 2022 was filed by the Appellant raising his objections to approval of the Resolution Plan, which was rejected by the Adjudicating Authority in the Impugned Order dated 15.05.2023 which is in appeal before us in Company Petition No. (IB) -934 (MB)/2020. 50. Since both the appeals have been filed against the same Impugned Order dated 15.05.2023 on the approval/ rejection of the Resolution Plan by the Adjudicating Authority and have been pleaded by the same counsels on the same issues, hence we shall deal both the appeals jointly in the following discussion. We have already noted the facts of the same, hence we shall not repeat the same for the purpose of brevity. 51. From the pleadings, th....
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....as Resolution Professional in the First CoC Meeting. Issue No. (I) (C) Whether conduct of Mr. Kairav Anil Trivedi the Interim Resolution Professional of Corporate Debtor has been fair, reasonable and in accordance with the provisions of the Code and Regulations or acted in arbitrary and pre-judicial manner as alleged by the Appellant. (a) It is noted that Mr. Kairav Anil Trivedi was appointed as Interim Resolution Professional by the Adjudicating Authority while passing the order of initiation of the CIRP of the Corporate Debtor vide order dated 05.10.2021 passed in application filed by the Appellant under Section 9 of the Code in CP(IB) 934/MB/2020 which reads as under :- (b) We note that the issue of confirmation and approval of the appointment of Mr. Kairav Anil Trivedi was taken up as Agenda Item no. 15 in the first CoC meeting held on 10.11.2021, as noted from the minutes of 1st CoC meeting which reads as under :- (c) We note that the voting on the proposed resolution for confirmation and approval of Mr. Kairav Anil Trivedi as Resolution Professional was conducted i.e., e-voting platform by M/s Right2vote Infotech Pvt Ltd (Online Voting Platform Provider)....
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....e additional affidavit dated 28.03.2022 of Canara Bank, we observe that the Canara Bank has raised several objection and highlighted misconduct of Mr. Kairav Anil Trivedi the Interim Resolution Professional. From the above additional affidavit, we also note that the grounds for replacement comprised of several violations of regulations by Respondent No. 1/ Mr. Kairav Anil Trivedi. The grounds have been specifically enumerated in para 9 above, where the CoC categorically stated that Mr. Kairav Anil Trivedi attempted to mislead the Adjudicating Authority by submitting that he is performing his duty in professional manner. The CoC further mentioned in para 9 that Mr. Kairav Anil Trivedi has been extremely unprofessional and CoC does not desire to continue him as the Resolution Professional. In para 17 of the additional affidavit dated 28.03.2022, the CoC highlighted that Respondent No. 1/ Mr. Kairav Anil Trivedi violated section 28 of the Code in executing MoU with third party in collusion with SBOD and handed over the possession of factory situated at Haridwar along with plant and machinery, mould, etc. The alleged illegal action of Respondent No. 1 regarding MoU were also elaborat....
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.... Corporate Debtor nor any stock/inventory was available in the factory at Haridwar. The Respondent No. 1/ Mr. Kairav Anil Trivedi failed to take any action to investigate regarding syphoning of funds and preferring the preferential or fraudulent transaction applications before the Adjudicating Authority. The CoC also accused the Respondent No. 1 of violation of Regulation 36 regarding delay to furnish Information of Memorandum to CoC till date of filing of additional affidavit of CoC (94 days). The CoC also accused Respondent No. 1 regarding violation of 36A i.e., delay "not later than 74 days from the commencement of CIRP. The RP has delayed it after 148 days, therefore, there is a delay of 74 days. Due the acts of the RP the CoC has lost opportunities of having better Resolution Plans for the resolution of the Corporate Debtor. The RP has thereafter surpassed all the timelines and frustrated the entire CIRP of the Corporate Debtor." We note that in Para 32 of the additional affidavit dated 28.03.2022 the CoC has recorded that "....the RP in violation of Section 29A of IBC has considered, the suspended Directors Mr. Piyush Chheda and Prince Pipes and Fittings Limited a repla....
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....e email and the additional affidavit dated 28.03.2022 filed by Canara Bank on behalf of the CoC before the Adjudicating Authority in IA No 247 of 2022. From additional affidavit of the CoC dated 28.03.2022, we have already noted that CoC castigated the conduct of Respondent No. 1 on several grounds and used harsh words about the Respondent No. 1 to be "malicious and fraudulent". (m) At this stage, it would be desirable to note the developments which happened between the first event i.e., denial of confirmation and approval of Respondent No. 1/ Mr. Kairav Anil Trivedi as Resolution Professional in 1st CoC meeting held on 10.11.2021 till the CoC withdrew the I.A. No. 247/2022 and filed new IA No. 3346 of 2022 on 10.11.2022 before the Adjudicating Authority i.e., exactly one full year from 10.11.2021 to 10.11.2022. We note that the Resolution Plan by SRA was approved by the CoC in 10th meeting held on 18.09.2022. An IA No. 2977/2022 was filed by the Respondent No. 1 on 27.09.2022 before the Adjudicating Authority for approval of the Resolution Plan. As both these events i.e., approval of the Resolution Plan by CoC as submitted by SRA and filing of IA No. 2977/2022 for approval of Re....
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.... of CoC before the Adjudicating Authority. We find prima-facie Respondent No. 1/ Mr. Kairav Anil Trivedi conducted CIRP proceeding in violation of several regulations. (q) We will now take up another issue raised in the appeal i.e., misconduct of Respondent No. 1/ Mr. Kairav Anil Trivedi as alleged by the Appellant. It is the case of the Appellant that the misconduct of the Interim Resolution Professional Mr. Kairav Anil Trivedi has been seen in various cases and has been held so in many other courts as well as this court and the Respondent No. 1 is found to be guilty. The Appellant alleged that based on Appellant's complaint against the Respondent No. 1, IBBI conducted investigation. As per the order of Disciplinary Committee of Insolvency and Bankruptcy Board of India bearing No. IBBI/DC/173/2023 dated 23rd May, 2023, the committee thoroughly examined the conduct of Interim Resolution Professional, Mr. Kairav Anil Trivedi and upon their findings, has suspended him for a period of six months. The Appellant submitted that the IBBI, exercising its powers under Section 218 of the Code, along with Regulation 7(2) and 7(3) of the Insolvency and Bankruptcy Board of India (Inspec....
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....it highlighted that the Respondent No. 1 deliberately concealed crucial facts and documents, thereby misleading the court through fraudulent means. The Appellant submitted that Paras 3, 5, 6, 9,10,14, 29, and other sections of the reply affidavit clearly establish misconduct of Appellant which reads as under: - "Para 3- I say that Petitioner has approached this Hon'ble High Court by suppressing material facts and therefore not entitled to invoke the extra ordinary jurisdiction of this Hon'ble Court. The Petitioner, it appears, has intentionally did not produce the email dated 19.11.2021 from online voting platform Right2Vote InfoTech Private Limited and the affidavit of Committee of Creditors (hereinafter referred as COC) dated 28.03.2022, both clearly stating that COC in its first meeting held on 10.11.202 l had voted against the appointment of the Petitioner as the Resolution Professional, contrary to what the Petitioner is contending now, Annexed herewith and marked as Exhibit 1 is the copy of the email dated 19.11.2021 from online voting platform Right 2 Vote InfoTech Private Limited and the affidavit of Committee of Creditors dated 28.03.2022 filed before the NCLT. ....
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....s Resolution Professional by the COC and secondly for executing the MOU with Sarvashree Industries Private Limited for contract manufacturing activity from 10.11.2021 with effect front 05.10.2021 while COC was only considering the said draft of MOL. The investigating authority subsequently after complying with procedure, submitted the report to the Board. The Report is annexed as Exhibit L to the Writ Petition. The Board after considering the report on coming to a prima facie opinion that sufficient cause exists 10 take action u/s 220 of the Code, issued a Show Cause Notice in accordance to Regulation 12 of the Inspection and Investigation Regulations, The copy of which is annexed at Exhibit Pto the Writ Petition. In reply thereof the Petitioner submitted his, Reply, which is annexed a Exhibit T to the Writ Petition. - Para 24- The notes to clauses appended with the Bill, The Insolvency and Bankruptcy Code, 2015 as introduced before Parliament observed as follows: "Clause 194 provides that no act or proceeding of the Board shall be invalid merely by reason of a) any vacancy in, or any defect in the constitution of the Board, or b) any defect in the appointment of a person actin....
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....7 of the Code. Para 10 of our earlier judgment states: "10. From the facts which have been brought on the record, it is clear that the appointment of the Appellant as IRP was never confirmed by the CoC nor any material has been brought on record to indicate that the appointment of IRP was confirmed by the CoC by majority of not less than 66% of the vote. When Appellant's appointment as IRP has not been confirmed, the Appellant could have been replaced by the CoC under Section 22. The mere fact that in the Resolution which was placed before e-voting as extracted above, there was alternate resolution both under Sections 22 and 27 cannot be read to mean that there is any infirmity in the resolution passed for replacement with 100% vote." (Emphasis Supplied) (t) The above judgment of this Appellate Tribunal was challenged by Kairav Anil Trivedi before the Hon'ble Supreme Court of India in Civil Appeal Diary Nos. 3150/2024 who dismissed the appeal vide order dated 19.04.2024 in the matter of Kairav Anil Trivedi Vs. State Bank of India & Anr. (MANU/SCOR/55999/2024), which reads as under: "We do not find any reason to interfere with the impugned judgement and other. The Specia....
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....rior approval of COC is required for certain actions such as for transferring rights, delegation of authority etc. It was observed from Mr. Kairav Anil Trivedi's reply to IA that Panwa Plant of the CD had closed its operation one year prior to initiation of CIRP of the CD. It is mentioned in the SCN that starting manufacturing operation in a closed plant after commencement of CIRP was an important decision and not a decision in ordinary course of business. 3.1. In view of the foregoing, the DC in exercise of the powers conferred under Section 220 of the Code read with Regulation 13 of the Inspection and Investigation Regulations and Regulation 11 of the IP Regulations hereby suspends the registration of Mr. Kairav Anil Trivedi (Registration No. IBBI/IPA-002/IP- N00728/2018-2019/12332) for a period of two years which shall run consecutive to period of suspension of registration of Mr. Kairav Anil Trivedi by any other DC order whenever the same takes effect." (x) Based on above detailed submissions, we find that IBBI who is the regulator for Resolution Professionals as per the Code, has categorically held Respondent No. 1 as gui....
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.... act of the Respondent No. 1, whereas the CoC filed a fresh IA 3346 of 2022 on 10.11.2022 withdrawing earlier IA 247 2022. During pleadings we asked the reasons for change of such drastic stand from complete castigation and alleging the Respondent No. 1 involving fraudulent activities to clean chit to the Respondent No 1 vide our earlier order dated 30.05.2024 advising CoC to submit facts explaining same in affidavit which reads as under:-. "On 13.05.2024 the following order was passed :- "This appeal is directed against the order dated 15.05.2023 passed by National Company Law Tribunal, Mumbai Bench, Court-II by which IA 3525 of 2022 filed by the present appellant (Amit Sangal) under Section 65 (2) of Insolvency & Bankruptcy Code, 2016 (in short 'Code') seeking various reliefs, has been dismissed. 2. The CIRP proceedings was triggered by Amit Sangal (Appellant) as an Operational Creditor by filing an application against 'Prince MFG Industries Pvt. Ltd.' which was admitted on 05.10.2021. By virtue of that order, Respondent No. 1 was appointed as IRP. 3. The first meeting of the CoC was held on 10.11.2021. In the said meeting, Item No. 15 was in regar....
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....5. Counsel for CoC submits that the voting took place in the first CoC Meeting held on 10.11.2021 regarding appointment of Respondent No. 1. However, nothing is available on record about the voting. 6. Counsel for Respondent No. 3 is therefore directed to file an Affidavit of all the Members of the CoC, who have allegedly voted on the resolution dated 10.11.2021 on 10.11.2021 regarding appointment of Respondent No. 1 and also state as to why they dissented about his appointment on 17.11.2021. 7. The CoC shall also explain in its Affidavit about the contents of the Additional Affidavit of the application bearing I.A. No. 247 of 2022. In which working of Respondent No. 1 has been labelled as malicious and fraudulent and showed state about the sudden change of heart for filing the application I.A. 3346 of 2022. 8. Let the Affidavit be filed by the responsible person of the CoC before the next date of hearing with an advance copy to Counsel for the Appellant. 9. Adjourned to 22nd July, 2024. (d) In pursuant to above, the CoC filed affidavit before this Appellate Tribunal dated 29.07.2024. We have gone through the affidavit and will take into consideration para no. 10, 11 and ....
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.... all fall outs. (g) When we compare this affidavit of the CoC dated 29.07.2024 filed before us with the additional affidavit of the CoC dated 28.03.2022 filed before the Adjudicating Authority in connection with the IA 247 of 2022 (which we have already noted in detail reproducing the entire additional affidavit in the preceding discussion), we find it rather strange that the affidavit filed before the Adjudicating Authority was backed up by exact details of several violation of regulations including Regulation 19, 26, 35A, 36 A, etc., by the Respondent No. 1 which have completely been ignored by the CoC in the new affidavit dated 29.07.2024 before us. (h) We do not find the new affidavit dated 29.07.2024 filed by the CoC before us as convincing and we rather find it in complete contrast with the factual position presented before the Adjudicating Authority, in additional affidavit dated 28.03.2022 in IA No. 247 of 2022, hence we are unable to accept the reasoning given by the CoC in the present affidavit dated 29.07.2024. The bank management may like to review whole process involved to safeguard public money of hundreds of crores of rupees. We rest at this only. 54. Issue No. ....
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....fore the Adjudicating Authority labelling the Respondent No 1 involved in fraudulent, malicious intents without any authority. We have already noted the details of additional affidavit filed by the CoC and also reproduced the relevant extract in the previous discussion, which are self explanatory and speak volumes. (g) We observe that IBBI has taken cognizance of a complaint of the Appellant on the same issue of signing MoU by the Respondent No. 1 without authority of the CoC and found the Respondent No. 1 guilty of violation of Section 28(1) (h), 208(2)(a) and (e) of the Code and regulation 7(2) (a) and 7(2)(h) read with clauses 1,2,3,5 and 14 of the Code of Conduct of the IP Regulations of the Code and the relevant findings of IBBI reads as under :- (h) We observe that the CoC is vested with the authority to oversee the work of Interim Resolution Professional / Resolution Professional and need to specifically approve actions that could impact the Corporate Debtor's financial health requiring the CoC's prior approval like the transfer of rights or financial or operational debts under material contracts, except when carried out in the ordinary course of business. This p....
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....o. (III) Whether, material irregularities, if any, by Interim Resolution Professional /Resolution Professional while taking approval from the Adjudicating Authority will affect the fate of approved Resolution Plan. (a) At the first instance, we would mention that there is no specific definition of Material Irregularity in the Code :- (b) We observe that the Black's law dictionary defines the terms "Material" & "Irregularity" separately. These reads as under :- Material: 'Important; more or less necessary; having influence or effect; going to the merits; having to do with matter, as distinguished from form. Representation relating to matter which is so substantial and important as to influence party to whom made is "material." See Material fact; Relevant.' and irregularity as- Irregularity: 'The doing or not doing that, in the conduct of a suit at law, which, conformably with the practice of the court, ought or ought not to be done. Violation or non- observance of established rules and practices. The want of adherence to some prescribed rule or mode of proceeding; consisting either in omitting to do something that is necessary for the due and orderly conducting of a suit, or....
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....udicating Authority approving the Resolution Plan may be filed if there has been material irregularities in exercise of the powers of Resolution Professional during CIRP. Section 61(3)(ii) of the Code reads as under :- "61(3) An appeal against an approving a resolution plan under Section 31 may be filed on the following grounds, namely, ....- (ii) There has been material irregularities in exercise of the powers by the Resolution Professional during the corporate insolvency resolution period." (Emphasis Supplied) Fraud or collusion by the resolution professional with the corporate debtor, or any other stakeholder involved in the CIRP concealment of material facts, non-adherence to significant CIRP Regulations etc. also constitutes a material irregularities. Any act of misrepresentation, concealment, or fraudulent conduct undermines the transparency and fairness of the process. Similarly, mismanagement of the corporate debtor during the CIRP can give rise to material irregularity. The resolution professional is entrusted with the responsibility of managing the affairs of the corporate debtor in a manner that preserves its value. Any instance of mismanagement, including diversi....
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....tion Professional has been investigated by IBBI subsequent to which the Disciplinary Committee of IBBI found the Respondent No. 1 guilty of misconduct and therefore suspended the Respondent No. 1, for 6 months. Thus, we find that there have been material irregularities in CIRP Process, which we have discussed earlier and will not repeat once again here. (c) In this connection, we note that the Respondent No. 1 has brought out that the Resolution Plan as proposed by Ashish Shah has already been approved by the CoC and confirmed by the Adjudicating Authority vide the Impugned Order dated 15.05.2023 passed in I.A. No. 2977 of 2022 for approval of the Resolution Plan. It has also been brought out by the Respondent no. 1 that the Resolution Plan has been implemented and the money has been distributed to the Creditors. The same fact has been confirmed by the CoC. We also note that there has been intervention application filed by Mr. Ashish Shah which also confirms the same fact. (d) We further note that in both the appeals, i.e. Company Appeal (AT)(Ins.) No. 916 of 2023 and Company Appeal (AT)(Ins.) No 792 of 2023, two IAs have been filed, namely IA No. 1662 of 2024 and IA No. 2203 o....
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....as of 30.06.2023, rendering the present appeal infructuous. (i) In this connection, we note that the total claims of the creditors were of Rs. 286,95,18,291/- out of which Rs.278,62,79,988/- pertain to Financial Creditors. The total admitted claim of Rs. 179,45,41,528/-. The claimed amount of Canara Bank was Rs. 115,26,84,497/-, Axis Bank was Rs. 32,03,6/8,777/- and ICICI Bank was Rs. 23,82,49,950/-. We also note that the liquidation value of the Corporate Debtor was assessed at Rs. 39.20 Crores and fair value of the Corporate Rs. 53.16 Crores. (j) The Resolution Plan has been approved by the CoC and the Adjudicating Authority which is incidentally lower than the fair value Rs. 53.16 Crores and liquidation value of Rs. 39.20 Crores. However, we will not go into aspect, as this lies within the domain of commercial wisdom of the CoC. We note that Rs. 34.95 Crores has been paid by SRA to CoC. (k) However, we have to deal with the issue raised by the Appellant in both the appeals that if the approval of Plan was accorded based on concealment of facts or misrepresentation of fact which affect the interest of the stakeholders of the Corporate Debtor, then whether such Resolution Pl....
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....of a just legal order must be given its due weight, especially as procedural requirements are not mere formalities to be circumvented for expediency but substantive protections designed to ensure fairness and transparency. In that light, the procedural lapses with respect to objections to the proposed combination and the consequent divestiture modification proposed within the framework of the Competition Act, 2002, seriously vitiated the integrity of the process. It is therefore reiterated and reinforced that adherence to procedural propriety is non- negotiable and that the ends cannot justify the means. 153. By upholding the mandatory nature of the statutory provision and emphasising upon the critical importance of procedural safeguards, the principle of rule of law is upheld in alignment with global best practices which underscore fairness, predictability and transparency. Such an approach not only reinforces the integrity and credibility of the legal framework but also highlights India's commitment to fostering a regulatory environment, which is conducive to both business and innovation. Additionally, it also ensures the protection and enforcement of rights in an equitable....