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2025 (9) TMI 682
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....d order, the present appeal has been preferred by the Appellant. 2. Coming to the facts of the present case, Shreebhav Polyweaves Pvt. Ltd- the Corporate Debtor was admitted into CIRP vide CP(IB)No. 385 of 2020 filed by State Bank of India ("SBI") as the Financial Creditor. The Adjudicating Authority on the suggestion of SBI, had appointed Shri Nirav Tarkas-Appellant as the Interim Resolution Professional ("IRP" in short) on 31.08.2021 to which appointment the IRP had given his prior consent in Form-2. The Adjudicating Authority while appointing the IRP had directed SBI to pay a sum of Rs. 2,00,000/- only to the IRP as fees and expenses till the Committee of Creditor ("CoC" in short) took a decision on the fees and expenses. The CoC which comprised of only one member with SBI having 100% exposure, in the 1st CoC meeting held on 01.12.2021 resolved to replace the IRP as discussed in Agenda Item No. 3. The Adjudicating Authority on 25.04.2022 allowed the application filed by the CoC seeking replacement of the IRP based on the resolution passed by the CoC in its first meeting. Accordingly, Mr. Vikash Jain was appointed as the Resolution Professional ("RP" in short). The IRP was inv....
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....o run the Corporate Debtor as a going concern. Another flaw in the impugned order is that the Adjudicating Authority did not consider the fact that when the resolution plan already stood approved, the MC did not have the authority to further pursue the IA filed earlier by the RP for recovery of IRP fees. Contention was also made that the IRP fees anyways stood extinguished from the plan once the plan was approved and hence recovery of the same was not possible. Thus, the MC had no jurisdiction to maintain the present application post approval of the resolution plan. It was also asserted that when no allegations of incompetence, fraud or lack of diligence had been raised against the IRP on the conduct of the CIRP proceedings, his replacement, without giving an opportunity of hearing, was an act in violation of natural justice. 4. Refuting the contentions raised by the Appellant-IRP, the Ld Counsel for the Respondent, Shri Karan Valecha submitted that the Adjudicating Authority had rightly observed that IRP had unauthorisedly withdrawn fees from the account of the Corporate Debtor since the fees had not been ratified by the CoC which was a statutory requirement. The IRP had additi....
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....on which are as reproduced below: "8. We have heard the learned counsel for the applicant and perused the documents on record. The issues for determination are as under:- (1) Whether the Respondent's withdrawal of fees totaling Rs. 12,46,248/- without CoC approval or ratification violates the IBC and CIRP Regulations, warranting a refund. (2) Whether the IA is maintainable post-approval of the Resolution Plan on 27.09.2023, considering the Applicant's alleged functus officio status and the Monitoring Committee's resolution. (3) Whether the Respondent's conduct, including delays and non- compliance, impacts the adjudication of this IA. (4) What relief, if any, is appropriate in the interest of justice?" Needless to add, aggrieved with the findings of the Adjudicating Authority, these issues have been agitated before us by the Appellant-IRP for our consideration which we now propose to tackle hereunder. 7. Coming to the first limb of the argument of the Appellant, it is their case that the SBI had selected the IRP and also approved a monthly fee of Rs. 1,21,000/- as communicated in their appointment letter. This arran....
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....ans- (a) the amount of any interim finance and the costs incurred in raising such finance; (b) the fees payable to any person acting as a resolution professional; (c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern; (d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board;" Section 5(13) of the IBC clearly includes fees payable to the IRP as integral to CIRP Costs. 11. Further it is important to take notice of Chapter IX of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which deals with "Insolvency Resolution Process Costs". "33: Costs of the interim resolution professional. (1) The applicant shall fix the expenses to be incurred on or by the interim resolution professional. (2) The Adjudicating Authority shall fix expenses where the applicant has not fixed expenses under sub-regulation (1). (3) The applicant shall bear the expenses which shall be reimbursed by the committee to the extent it ....
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....hich make it imperative that the fees of the IRP need to be ratified and approved by the CoC, we also notice that the Adjudicating Authority in its order of 13.08.2021 had also mandated the approval of the fees by the CoC. That brings us to the question as to whether the fees so withdrawn was ratified by the CoC in its meetings. 14. At this stage, we may turn to the findings of the Adjudicating Authority in the impugned order on the aspect of fee withdrawal undertaken by the IRP and the validity of such withdrawal. The relevant excerpts of the impugned order read as follows: "13.1. The Applicant alleges that the Respondent withdrew Rs. 9,83,684/- during the CIRP and Rs. 2,62,564/- in April 2022 without CoC approval or ratification, violating Regulation 33 and the Tribunal's order. The CoC's minutes (27.05.2022 and 21.06.2022) confirm that the fees were neither approved nor ratified, and the Applicant's emails (Annexure-F) demanding a refund went unanswered. 13.2. The Respondent claims that SBI, as the sole CoC member, gave in-principle approval for fees at Rs. 1.65 lakhs per month, and no formal resolution was required. However, the Respondent has n....
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....t there is no ambiguity that the order had clearly directed that the fees/expenses of the IRP will have to be decided by the CoC. However, the IRP had failed to get the stamp of approval of the CoC before drawing the fees. 16. In the given backdrop, we find no infirmity in the impugned order that the withdrawal of fees by the IRP was unauthorised and in contravention of the statutory provisions of IBC and CIRP Regulations as well as the order of the Adjudicating Authority dated 31.08.2021. 17. It is an incontrovertible fact that IRP had withdrawn Rs. 2,62,564/- in April 2022 and Rs. 9,83,684/- during CIRP towards fees without the approval of the CoC. Unless the fee was ratified by the CoC, the IRP could not have taken such fee from the account of the Corporate Debtor. The CoC having refused to ratify the fees clearly rendered the withdrawal of fees by the IRP as an unauthorized act. Once the Corporate Debtor had been admitted into the rigours of CIRP, it is the responsibility of the RP to take custody of the assets of the Corporate Debtor. Hence, the RP cannot be faulted for having sent an e-mail to the IRP seeking refund of the fees which had been unauthorisedly drawn. Howev....
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.... the MC thereafter became responsible for safeguarding the objectives of the approved plan. Therefore, any action undertaken by the RP in pursuance of a resolution duly passed by the MC for pursuing pending CIRP related legal proceedings was legally tenable and justifiable. 20. Coming to our analysis, we are of the considered view that it cannot be denied that with the approval of the resolution plan, the role of the RP comes to an end and so does the CoC cease to exist. Regulation 38 of CIRP Regulation, however, envisages an MC to come into position for overseeing the implementation of the plan. There is no statutory bar on the MC which is entrusted with overseeing the plan implementation to delegate on to the erstwhile RP to pursue applications/court proceedings if the MC is either authorised either by the terms of the plan or by the stakeholders to act accordingly. We notice that I.A. No. 92 of 2023 for recovery of fees was filed before Adjudicating Authority on 12.01.2023, while Resolution Plan came to be approved on 27.09.2023. Thus, the IA was already validly instituted prior to plan approval. When we look at the statutory provisions of IBC, we do not come across any speci....
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....herein that IA No. 92 of 2023 would be pursued by the Chairman of the MC who happened to be the former RP. The locus of the RP to pursue IA No. 92 of 2023 therefore cannot be said to be questionable because the RP as the Chairman of the MC had been duly authorised by the MC to pursue the IA No. 92 of 2023 in the interest of all stakeholders. Nothing has been placed on record by the Appellant to demonstrate how the MC exceeded its mandate in having passed a resolution on 07.03.2025 authorising the RP to recover the fees which had been unauthorisedly withdrawn by the IRP. We therefore feel that it was sufficient for the Adjudicating Authority to note that the MC had passed a resolution authorising the former RP to pursue the matter. When the MC had passed this resolution after detailed deliberations, we feel it is irrelevant to examine the terms of the resolution plan in this regard. 23. Hence, we find nothing wrong in the impugned order, for holding that IA No. 92 of 2023 seeking refund of unratified fees of IRP was fully maintainable as applications relating to CIRP costs including fees and expenses of IRP/RP incurred during CIRP continue to survive for adjudication. We find tha....
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.... on the conduct of the IRP as this is not germane for the issue at hand since we have to be guided by the statutory provisions of the IBC to assess whether the replacement was done by following the due process. 25. It may be pertinent to deal with the assertion raised by the IRP that his unilateral replacement by the CoC was done without giving him an opportunity to defend himself. When we look at Section 27 of the IBC which deals with the replacement of the IRP by the CoC, we find that this statute empowers the CoC to replace an IRP at any time during the CIRP. In the present case, the CoC in the 1st meeting, after passing a resolution to replace the IRP with majority vote had thereafter filed an application for this purpose before the Adjudicating Authority. 26. If we look at Section 27 of IBC, there can be no disagreement that the process of the replacement of IRP is complete when the required decision is taken by the CoC in its meeting with requisite majority. The law nowhere says that the CoC is required to give an opportunity for hearing to the IRP or to adduce reasons for seeking replacement of the IRP . It is well settled that the relationship between the IRP and the ....