TaxTMI 
TaxTMI 
2025 (6) TMI 22
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.... Mohammed Zain Khan for Intervenor/SRA. 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, ....
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....orporate Debtor. Furthermore, the Respondent No.1 deliberately 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, credito....
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....judicating Authority. 9. The Appellant highlighted that the Respondent 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 05.1....
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.... constitute a serious violation of legal and procedural integrity, and should be dealt with accordingly 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....
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....of the Code during his tenure as Interim Resolution Professional and suspended the Respondent No. 1 for six months 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. ....
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....ed over to the SRA and acknowledged that the Resolution Plan was implemented on 30.06.2023, just days after the Appellate Tribunal 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....
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.... held, and the Resolution Plan was approved by 100% of the CoC, after multiple rounds of negotiations. A forensic audit was conducted with 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 doc....
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....involved the Appellant filing IA 726 of 2023 under Section 47 of the Code, where he again misrepresented the existence of undervalued transactions 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 Adj....
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....lectively submitted that the Appeal being frivolous is liable to be dismissed with cost. Findings 49. The first two appeals has been filed by the Appellant in Comp. App. (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 appea....
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....intment of Mr. Kairav Anil Trivedi working as Interim Resolution Professional of the Corporate Debtor being appointed as Resolution Professional of the Corporate Debtor or approved his appointment 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 t....
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....of the CoC on 28.03.2022. The additional affidavit is reproduced as under :- We note that Reply was filed by the Respondent No. 1/ Mr. Kairav Anil Trivedi to I.A No 247 of 2022 filed before the Adjudicating Authority. The relevant portion of the reply reads as under :- From above 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....
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....the plan under pretext of maximisation of value of the Corporate Debtor. We further note that in para 27 of the additional affidavit dated 28.03.2022 the CoC pointed out that although the Resolution Professional himself reported that inspite of huge loan borrowed by the Corporate Debtor, there was no balance in the bank accounts of the 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 De....
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....vedi although appointed as Interim Resolution Professional by the Adjudicating Authority in the CIRP order dated 05.10.2021, was never confirmed or appointed as Resolution Professional by the CoC. In fact, the CoC dissented the confirmation or appointment of Mr. Kairav Anil Trivedi as Resolution Professional as noted in the earlier discussions along with the relevant extract of the minutes of the CoC meetings, Right2Vote 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....
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....of Mr. Kairav Anil Trivedi as Resolution Professional of the Corporate Debtor by the CoC. We also find that CoC did not approve the Respondent No. 1/ Mr. Kairav Anil Trivedi as the Resolution Professional in 1st CoC meeting. On issue of contravention of Regulations by the Respondent No. 1/ Mr. Kairav Anil Trivedi, we take into consideration material made available before us especially additional affidavit dated 28.03.2022 filed by Canara Bank on behalf 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 ord....
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....tration number IBBI/IPA- 002/IP-N00728/2018-2019/12332 for a period of six months." (r) The Appellant conceded that the Respondent No. 1/ Mr. Kairav Anil Trivedi filed a Writ Petition bearing W.P (L) No. 16317 of 2023 before the Hon'ble High Court of Bombay, to which a reply affidavit was filed by IBBI, responding the said Writ Petition. The reply by IBBI clearly demonstrates that the Interim Resolution Professional was not confirmed as the Resolution Professional during the first CoC meeting. Furthermore, 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 ....
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.... no disciplinary action ought to have been against the Petitioner. It is submitted that the insolvency resolution process under the Code is in rem proceeding and therefore the COC approving the Petitioner as the RP or the approval of the Resolution Plan by the COC does not absolve the Petitioner from the serious lapses committed by the Petitioner while acting as an IRP during the course of CIRP. Para-14 The Petitioner did not provide any explanation for the false statement recorded by him in the minutes of the first COC that he has been confirmed as 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 Inv....
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....hatically requested to ignore the baseless allegations of the Appellant about his misconduct. (s) The Appellant also brought to our notice that earlier also this Appellate Tribunal has passed a judgment in the matter of Kairav Anil Trivedi vs. State Bank of India & Anr., (MANU/NL/0955/2023) vide its order dated 05.12.2023 in Company Appeal (AT) (Insolvency) Nos. 1439 and 1440 of 2023 wherein this Appellate Tribunal adjudicated an appeal filed by the Respondent No.1, Mr. Kairav Anil Trivedi, who was accused to mislead the Adjudicating Authority regarding the application of Sections 22 and 27 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 w....
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.... and on the same day, a contract manufacturing Memorandum of Understanding (MoU) between the CD and Virat Tradecorp Private Limited (Virat) was entered into in respect of pharmaceutical plant of the CD situated at Village -Panwa. District - Khargone, Madhya Pradesh. The first meeting of the Committee of Creditors (CoC) was conducted on 13.03.2023 which was adjourned to 18.04.2023. Hence, it is seen that the MoU with Virat was entered on 13.02.2023 without the knowledge and approval of the CoC. The CoC was informed of the MoU with Virat vide email dated 13.03.2023, the day on which first meeting of CoC was held partially. 2.1.2. Section 28(1)(k) provides that prior 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....
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.... the various facts regarding stand of the CoC w.r.t. non confirmation and non appointment of the Respondent No. 1 as Resolution Professional. We have already noted the details of IA 247 of 2022 filed by the CoC for replacement of Respondent No. 1 and appointment of Mr. Pradeep Kabra as new Resolution Professional. (b) We have further examined in detail the additional affidavit dated 28.03.2022 filed by the Canara Bank on behalf of the CoC in which several allegations of malicious and fraudulent act by Respondent No. 1 were elaborated along with violation of Code & CIRP regulations as contained therein. (c) In the additional affidavit dated 28.03.2022, the CoC has used the word malicious and fraudulent 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....
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....ctions for making the submissions in this regard, therefore, he prays for an adjournment. Adjourned to 29.05.2024. 11. The Respondent No. 1 shall state on an affidavit about the date on which voting took place on the resolution dated 10.11.2021 and also the detail of the voting and it has to be in consonance with the Regulation 26 of the IBBI (CIRP) Regulation, 2016 if it was the case of electronic voting." 2. Pursuant to the aforesaid order, Respondent No. 1 has filed his Affidavit dated 21.05.2024. 3. Counsel for Respondent No. 3 submits that the CoC passed the resolution in its first meeting dated 10.11.2021 regarding appointment of Respondent No. 1. But according to Appellant the CoC, at the time of confirming the appointment of Respondent No. 1/ Resolution Professional, dissented. 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 10.1....
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....olution Plan for Corporate Debtor being in place, CoC withdrew the allegations including non-appointment of RP and found no justifiable reason to pursue the Application. The unanimous decision to withdraw the application was taken during the 11th CoC Meeting dated 5th November 2022. (e) From above, we observe that the CoC is trying to justify that the Right2Vote document was erroneously created which caused confusion. We find that the additional affidavit dated 28.03.2022 filed by Canara Bank in support of IA 247 of 2022 before the Adjudicating Authority, where the CoC made several allegations against the Respondent No.1 are quite contrary to new affidavit dated 29.07.2024 before us. (f) The CoC has now tried to justify their action in their affidavit dated 29.07.2024 before us merely on the ground that the right to vote document was erroneously created and is the cause of 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 en....
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....e Debtor, which we have seen in preceding discussions that the Respondent No. 1 was never appointed as Resolution Professional of the Corporate Debtor and apparently statement made by the Respondent No. 1 in the said MoU was not correct. During the Second CoC meeting held on 30.12.2021, the Respondent No. 1 had proposed agenda no. 7 with draft copy of MoU for contract manufacturing dated 10.11.2021 for vetting of CoC and the agenda reads as under :- (d) In this case, we recall that CoC in their additional affidavit dated 08.03.2022 filed before the Adjudicating Authority has recorded as under:- (e) We have already noted that the MoU was signed by Respondent No. 1 on 10.11.2021, however, the same was put up to the CoC in 2nd CoC meeting held on 30.12.2021 as draft MoU which again clearly shows mis- representation by the Respondent No. 1. (f) In this connection, we note that the CoC had filed IA No. 247 of 2022 before 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 releva....
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....oted that even prior to commencement of CIRP on 05.10.2021, the SIPL has given the registration effective date as 07.03.2021 and it indicates that the principal places of business for SIPL is the same as the address of the Haridwar plant of the Corporate Debtor. We have perused that on effective date of GST document of SIPL i.e., 07.03.2021 the principal office of SIPL was shown at address- Sarvashree Industries Private Limited, C/O- M/S Prince MFG Industries Pvt. Ltd., Cabin No-02, Ground Floor Plot No-5B, Sector 03, IIE,, Sidcul, Haridwar, Haridwar, Uttarakhand, 249403. This prima-facie indicate that there was a co-relation between the SIPL and the Corporate Debtor/ SBOD. The relevant documents are reproduced as under :- (b) Thus, we find that the Respondent No. 1 signed MoU with SIPL violating provision of the Code and Regulations as discussed earlier. (c) We also hold that the SIPL was related party of the Corporate Debtor and Respondent No. 1 gave misleading facts to the CoC in 2nd CoC meeting. 56. Issue No. (III) Whether, material irregularities, if any, by Interim Resolution Professional /Resolution Professional while taking approval from the Ad....
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....ssets of the Corporate Debtor and ensuring the equitable treatment of stakeholders. The CIRP is a critical mechanism under the Code, and it is imperative that the process is conducted fairly, transparently, and in strict compliance with the provisions of the law. Thus, we may derive an interference that a material irregularity in the conduct of the CIRP is one that significantly impacts the fairness, legality, and integrity of the process. Such irregularities can lead to delays, financial losses, and litigation, thereby defeating the objectives of the Code. Material irregularities may arise from non-compliance with the statutory provisions, rules, and regulations governing the CIRP. Any deviation from these prescribed legal provisions, both procedural or substantive, may amount to a material irregularity and affect the legitimacy of the resolution process, of-course, depending upon the facts and context of each case and no strict guidelines can be laid down. In this connection, we note that Section 61(3)(ii) of the Code provides that an appeal against an order passed by the Adjudicating Authority approving the Resolution Plan may be filed if there has been materia....
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.... & Ors. [(2019) 12 SCC 15] and Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta [(2020) 8 SCC 531]. While the Adjudicating Authority cannot interfere with the CoC's commercial decisions, it needs to ensure that the procedure followed by the CoC and/or Resolution Professional is in accordance with the Code and Regulations. Any significant procedural lapses may be a ground for rejection. The evolving jurisprudence in this area will continue to define the scope and implications of material irregularities, but the fundamental principles of fairness, transparency, and compliance with the law must be upheld at all times. All parties involved in the CIRP, including resolution professionals, creditors, and corporate debtors, must adhere to the highest standards of integrity and diligence to ensure that the insolvency resolution process is conducted in a manner that upholds the objectives of the Code and protects the interests of all stakeholders. In the present matter before us, the material irregularities have been observed in various instances. The conduct of Mr. Kairav Anil Trivedi, as an Interim Resolution Professional has been investigated by I....
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....plicants were granted the opportunity to interact with CoC members. After reviewing the submitted plans, the CoC, exercising its commercial wisdom, unanimously approved the Applicant's Resolution Plan through a 100% e-voting process. The said plan was deemed to be most feasible and viable in terms of compliance with the provisions of the Code and asset maximization. The Adjudicating Authority, vide order dated 15.05.2023, also acknowledged the merits of the Applicant's plan, approving it as the most suitable resolution plan in consonance with the objectives of the Code. Furthermore, the Resolution Plan remained unchallenged under Sections 43, 45, 49, 50, and 66 of the Code. The Adjudicating Authority directed the Resolution Professional to hand over all relevant records and documents to the Intervenor/Applicant for further implementation. (h) The Intervenor/SRA asserts that its role in the CIRP has been crucial, from presenting the Resolution Plan before the CoC to obtaining Adjudicating Authority's approval, thereby ensuring the successful resolution of the Corporate Debtor. The Applicant has since taken over control of Corporate Debtor from the Resolution Professional as....
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....ter of Independent Sugar Corporation Ltd. v/s Girish Sriram Juneja and others, [(2025) SCC OnLine SC 181] bearing Civil Appeal No. 6071 of 2023. Although, the said judgement primarily focuses interplay between Competition Commission of India Act, 2002 and IBC Code, 2016 and the mandatory nature of the proviso to Section 31 (4) of the Code, it is much relevant to the subject matter of our present case. The relevant portion of the above mentioned case is reproduced as under: "150. In the present case, for reasons discussed above, the statutory provision and legislative intent unequivocally affirm the mandatory nature of the proviso to Section 31(4) of the IBC. For a Resolution Plan containing a combination, the CCI's approval to the Resolution Plan, in our opinion, must be obtained before and consequently, the CoC's examination and approval should be only after the CCI's decision. This interpretation respects the original legislative intent, and deviation from the same would not only undermine the statute but would also erode the faith posed by the stakeholders in the integrity of our legal and regulatory framework. 152. Further, the indispensability of ....
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.... of rule of law is upheld in alignment with global best practices which underscore fairness, predictability and transparency. We note that the Hon'ble Supreme Court of India in the above quoted case has declared that any action taken pursuant to the Resolution Plan shall stand nullified, and the rights of all stakeholders shall be restored as per status quo ante, prior to the approval of the Resolution Plan by the CoC. (p) We find that the position is similar in the present case. 57. We are duty bound to follow ratio as stipulated by the Hon'ble Supreme Court of India in above case of Independent Sugar (Supra). As such, we hold that even the approved Resolution Plan will get affected. 58. In view of the above detailed examination, we find merit in both the appeals bearing Company Appeal (AT)(Ins.) No. 916 of 2023 and Company Appeal (AT)(Ins.) No 792 of 2023. Both appeals are allowed. Impugned Order dated 15.05.2023 is set aside. IA, if any, are closed. No costs. 59. Parties are directed to appear before the Adjudicating Authority on 28.02.2025. 60. As regards, the Appellant's Contempt Petition bearing no. 1034 of 2024, we understand that the Appellant was aggri....
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....astructure for holding COC meetings at his office along with the trained staff including lawyers. FCS and post graduates to assist complète JBC process. The IRP Is also a Certified ADR Professional of ICAI having institutional empanelment and also Independent Director in 2 Listed Companies. The IRP expressed his willingness to continue as an RP, if approved by the COC, and also disclosed the fact that he is not disqualified from being appointed as an RP, under IBBI guidelines. The COC accordingly passed the following resolutions RESOLVED THAT the COC appoints Mr. Kairav Anil Trivedi, (Registration No. IBBI/[PA-002/IP-NO0728/2018-2019/12332) as the Resolution Professional (RP-) of the Corporate Debtor and thus his services would continue as an RP; RESOLVED FURTHER THAT the COC approved the RP fees of Rs 1,60,000/- per month and this be treated as CIRP expenses. . RESOLVED FURTHER THAT these CIRP expenses would be shared by the entire COC in the proportion of Voting strength of the COC and these, CIRP Expenses be deposited in the designated. Bank Account of CD by the respective COC members in their share and the IRP be permitted to withdraw the same as reimbursement....
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....t has applied to be empaneled with Canara Bank Ltd but as on date his name does not appear in the list of Insolvency Professionals Empaneled with Canara Bank Ltd. Proposed Resolutic 1 :- The COC discussed the same and there were no objections during the meeting, accordingly :- RESOLVE THAT, p irsuant to the provisions of section 27 of IBC the COC has proposed to Kommer P01104/2017-18/117 10 as Resolution Professional of Prince MFG Industries Pvt Ltd, as per his written con sent dated 29th December 2021 in place of the exiting Resolution Professional Mr Kair v Trivedi having IBBI/IPA-002/IP-N00728/2018-2019/12332 RESOLVE FURTHR THAT, the necessary application for change in RP u/s 27 would be filed by the COC with the Hon'ble NCLT Mumbai Document 6 10.11.2021 The first meeting of the Committee of 9 Creditors was held, wherein the IRP was appointed as Resolution Professional (RP) u/s 22 of IBC. Hereto annexed and marked as Exhibit "D" is the copy of minutes of first meeting of Committee of Creditors. 15. The existing Resolution Professional is not an empanelled Insolvency Professional with Canara Bank Therefore, the Canara Bank proposed for change of Res....
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....vote of sixty-six professionel appointed under section 22 anitha another resolution professional. subject to a weillen consent Jam the proposed resolution professional in the specified ferme. (3) The committee of crediters shall forward the name of the insolvency professional proposed by these to the Adpeticeting Authority. (4) The Adjudicating Authority shall forward the name of the proposed resolution professional to the Board for its confirmation end # resolution professional shall be appointed in the seme reanrer &s leid doas in section 36. (5) Where any disciplinary proceedings ere pending against the proposed resolution professional under sub-section (3), the resolution professional apprenies under section 22 aludt continue till the appointment of another resoluties professional under this section" 3 From the aforesaid provision it Is clear that during the Corporate Insolvency Resolution Process ("CIRP"), at any time, if the Commritt of Creditors ("COC") "is of opinion' that the Resolution Profesional VIO appoinand under Section 22 of [SC is required to be replacedist may replace him with another Resolution Professional in the ripper provided under Sectio....
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....s not desirous of continuing him as RP. The CoC in order to avoid making any allegation on record avoided to state details of unprofessional conduct of Mr. Kairav Trivedi. The said approach was adapted by CoC on the basis of legal advice and also on the basis of binding judgment of the Hon'ble NCLAT in State Bank of India us. Ram Dev International Ltd. which reads thus. a. "If the COC record any adverse opinion for replacement of RP. it will not only larm hun for the present but will also affect him in future daring appointment as RP in another proceeding. In such case, the COC will have to refer the matter to IBBI for initiation of departmental proceeding, which is also not desirable in all the cases. Angel Document 11 b. If the COC forms opinion on the basis of performance of the RP and not because of allegation, it unll also go against the RP in interest of the Resolution Process." 10 The Hon'ble NCLAT In the matter of Axis Bank Ltd. vs. Sixth Dimension Project Solution Ltd. categorically held that Section 22 of IBC does not require giving ressona for replacement. In the said matter the IRP had raised objection that the COC has failed to put forth any valid or tenab....
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....rivate Limited (Corporate Debtor) and appointed Mr. Kalrav Anil Trivedl (existing RP) as Interim Resolution Professional (IRP) of the Corporate Debtor. 16. 05.10.2021 PANI JO. 17: 03 11.2021 The IRP/RP filed a report certifying 's constitution of Committee of Creditors (COC). Amen Document 13 Violation of Section 28 of IUC: IRP executed MOU with third party in collusion with suspended directors and handed-over the possession of factory at Haridwar along with plant & machinery, moulds, elc. to third party: 10 11 2021 The IRP without any authorisation, knowledge or approval of the CoC, executed a MOU falsely representing himself as a RP appointed by CoC. on a Rs. 100 stamp paper dated 02.11.2021 with a third party i.e. Sarvashree Industries Private Limited ("SIPL") for contract manufacturing at Haridwar with retrospective effect from 05.10.2021. The MOU is unregistered, unstamped and not notarised. It is evident from the MOU that It was executed in collusion with the suspended Director of the Corporate Debtor as one of the suspended Directors Mr. Piyush Chheda is witness to the MOU. The IRP with mala fide intentions falsely represented himself as a RP duly....
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.... dated 20.11.2021 of online voting platform provider. C Document 15 Violation of Regulation 26: Not submitted the copy of record of 1" COC meeting: 20.11.2022 For reasons best known to the RP the electronde voting of the 1" COC meeting dated 10.11.2021 commenced on 17.11.2021 Le. after 7 days after the meeting and concluded on 20.11.2021. As per Regulation 26 of CIRP Regulations the IRP/RP is ought to announce and make a written record of the summary of the decision taken on a relevant agenda item along with name of members of the COC who voted for or against the decision or abetalned from voting. Further, the IRP/RP ought to circulate a copy of the record made to all the COC members/participants by electronic means within 24 hours of the conclusion of the voting. Despite repeated requests of the COC the IRP/RP has till date not provided the report of results of 1" COC meeting to the COC members. Neither submitted the report of 1" COC meeting nor conducted the 24 meeting of COC for 50 days: 24. The IRP/RP has abstained from providing the report of 1" COC meeting as required as per Regulation 26 of CIRP regulations, Despite of regular requests the IRP/RP neither ....
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....ation of Regulation 35: Delay to furnish Information Memorandum to the COC till date (94 days delay): 28. 02.03.2022 As per Regulation 36(1) of CIRP Regulations the IRP/RP Is ought to submit the Information memorandum to cach member of COC within 2 weeks of his appointment but not later than 54 days from the insolvency commencement date. The RP submitted the Information Memorandum after 145 days Le. on 02.03.2022. thereby delaying it by 94 days. 29. The RP gave spurious resson for delay stating that"efforts were being made by the RP to obtain the balance information required for preparing the Information Memorandum, but there was delay in receipt of the information from the Corporate Debtor due to no staff Being available and the nature of the personalized software being used th the accounts". CONEJO 1 Document 18 However, the IRP/KP has till date grossly failed in lake any step or action collect the required Information From the Auditors/employees/suspended Directors of the Corporate Deblor or flied any application agalsat the suspended Directors a/'s 19(3) of IBC againat suspended Directors of the Corporate Deblor. This raises serious doubt upon the conduct of ....
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....ese queries have no relevance in the present application since these have been raised after the second COC meeting en 30"" December 2021 Le. after the decision of replacement thus an afterthought just to misrepresent the real facts since decision to replace cannot be Justified and this misleading action of COC Is detrimental to the objectives of the Code. 8 All these facts shows that after the Hon'ble bench has raised concerns on the justification of the reasons of removal of the RP the COC Is trying create false and misleading evidence which cannot be a ground of removal after the date of passing of resolution on 30" December 2021. Further these reasons mentioned in the Second Affidavit are in complete contradiction of the Affidavit filed at the time of application, thereby proving that the second affidavit is an after though and therefore Itrelevant for taking any decision. The RP continues to perform his duties diligently and in compliance of the requirement of the Code and thus the reason of replacement of the RP as not being empanaled with Cana Bank la against the object of IBC of Independence of the RP even for the Financial Creditors, there by the COC has not mainta....
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....ppoints Mr. Kairav Anil Trivedi, (Registration No. IBBI/IPA- 002/IP-N00728/2018-2019/12332) as the Resolution Professional ("RP") of the Corporate Debtor and thus his services would continue as an RP. RESOLVED FURTHER THAT the COC approved the RP fees of Rs 1,50,000/- per month and this be treated as CIRP expenses." 2.1.2 It was further noted from the perusal of 2" CoC meeting held on 30.12.2021, that a resolution for appointment of Mr. Pradeep Kabra as resolution professional in place of Mr. Trivedi was approved by 100% voting of CoC after which an application for the replacement of RP under section 27 of the Code was filed before the AA. It was observed from the perusal of affidavit (para 22) dated 281) March 2022 filed by the CoC in the IA for change of RP, that the CoC had in its first meeting voted against the appointment of Mr. Trivedi as RP. The email from online voting platform Right2Vote Infotech Private Limited also shows the voting result of item regarding appointment of IRP as RP appears as "dissent". But the Mr. Trivedi recorded minutes of 1" CoC meeting by misrepresenting the fact. 2.1.3 The SCN finds it evident from the said affidavit of the CoC and email da....
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....solution for replacement of the RP in the next CoC meeting. Thus, in the 1" CoC meeting, neither the CoC obtained the consent from any Resolution Professional along with his Form 2 for replacement of the IRP u/s 22 nor could even propose the name of any resolution professional to be replaced, nor did the COC proposed any resolution for replacement of the IRP u's 22 in the 1" CoC meeting. 2.1.6 Accordingly, the CoC agreed during the meeting that this process of replacement of RP would be done in the second CoC meeting, till then the IRP will continue as RP since after 45 days the IRP will be a deemed RP and in order to perform his functions it is necessary that he has complete clarity and properly authorized so as he is allowed to perform his duties with full support of the CoC. Some of the COC members suggested that all this be put for e-voting but on deliberations it was found that the process of e-voting could take another 10 to 15 days due to the leaves during Diwali and this would delay the approval process. 2.1.7 Further the matters discussed during the COC which were put for approval was of the routine CIRP expenses already incurred by the IRP like advertisement in news....
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.... of IBC. The resolution for replacement of the existing RP was proposed by the COC in the 2nd meeting which was approved by 100% voting. Thereafter, application was filed by the CoC with AA for replacement of Mr. Trivedi, where the CoC at various places has mentioned that the IRP was appointed as RP in the 1" CoC meeting. Furthermore, the application was filed under section 27 of the Code which talks of replacement of resolution professional. Findings of the DC 2.1.10 Regulation 17 of the CIRP Regulations provides as follows - "17. Constitution of committee (3) Where the appointment of resolution professional is delayed, the interim resolution professional shall perform the functions of the resolution professional from the fortieth day of the insolvency commencement date till a resolution professional is appointed under section 22" Therefore, the regulations make it clear that in case the appointment of resolution professional is being delayed, the duties of resolution professional are performed by the interim resolution professional. 2.1.11 In terms of regulation 17(3) of the CIRP Regulations, the IP appointed as IRP for the CD has to perform the functions of RP, till ....
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.... Plant operations at Haridwar, by a third party, on contractual basis, during the CIRP period and pass appropriate resolutions, if approved, by CoC." 2.2.2 The said issue was further discussed in the 200 meeting of CoC as under: "7. To Review the efforts being made by RP for entering into Third party MOU and the possibility of continuation of the Plant operations at Haridwar during CIRP Period by a Third Party, on contractual basis. The RP shared the Draft Copy of the MOU for contract Manufacturing di 10.11.21 with the COC members. Further to the discussions shared in the last meeting, the RP has completed his due diligence on the party interested in Contract Manufacturing and confirms that the same is not covered under 29A of IBC. .There were a few further clarifications which have been sorted and the draft MOU has been shared with the said party. They are presently getting a second opinion before signing. It is suggested that a further period of max two weeks be provided to them for their second opinion. It was proposed by the COC members during this meeting that this Draft MOU be vetted by the Council of COC though Canara Bank." 2.2.3 The SCN notes that the dra....
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....P and the existing RP has been continued along with the Contract Manufacturing activity. 2.2.8 Mr. Trivedi further submitted that the contract manufacturing activity has ensured that the CD remains a going concern during the CIRP. This has ensured maximization of value of the assets besides providing employment opportunity to the locals, also the entire CIRP expenses are being met from the Contract Manufacturing Income which otherwise would have to be contributed by the CoC since the CD was non-operational. 2.2.9 Mr. Trivedi further submitted that the plant has never been handed over to any other person as has been wrongly concluded by the investigating officer as the RP continues to have complete possession of the Plant along with the machinery. The Contract manufacturer is only allowed to enter premises on temporary monthly basis to undertake contract manufacturing activity by using the Fixed assets are under the control of the RP and these facts have been clearly specified in the MOU. The Contract manufacturer does not have any rights on the assets as these are under CIRP. This fact is re confirmed by the frequent visits made by the RP to the Plant location. Further the li....