TaxTMI 
TaxTMI 
2026 (2) TMI 30
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..... (AT) (Ins.) No.1356/2023 has been filed challenging the order passed in I.A. No.170/2021 & Comp. App. (AT) (Ins.) No.1357/2023 has been filed challenging the order passed in I.A. No.74/2022. 2. Both the appeals raise common question of facts and law and have been heard together and are being decided by this common judgement. 3. Brief facts of the case necessary to be noticed for deciding the appeals are: i. The appellant, Lotus Auto Engineering Limited (for short the 'Lotus') has been the group company of Amtech Auto Limited (AAL) being holding company of the appellant. There was another group company known Castex Technologies Ltd. (CTL). AAL and its two group companies, Lotus and CTL were engaged in the business of manufacturing of automotive parts. ii. The business transaction between AAL, CTL and Lotus were carried in a way that as and when AAL received order for manufacture of any auto parts, it would order Lotus to carry out machining/mechanically components of the parts. Lotus would in turn order CTL to undertake iron casting (automotive components to Lotus). The end product was supplied to AAL which in turn sold the end part to automotive customer, ....
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....ies were separate legal entities but collectively called as AAL group companies. In the CIRP of AAL, Lotus filed a pre-CIRP claim of Rs. 23.12 crore and by I.A. No.170/2023, it claimed receivables as CIRP cost to the extent of Rs. 22.95 crore (reduced to Rs. 18.98 crore as on date). It is submitted that during the CIRP period of the AAL, under the direction of the RP of AAL, appellant continued with supplies to the AAL, receivables of which is Rs. 22.95 crore which was liable to be paid to the appellant as CIRP cost, which amount need to be paid in priority as per Section 53 of the Insolvency and Bankruptcy Code, 2016 (for short the Code or the IBC). RP in its reply has disputed the quantum of Rs. 22.95 crore, however, admitted that amount due to appellant is Rs. 8.7 crore. The outstanding amount payable for supplies made by Lotus to the AAL, during CIRP of the AAL has to be classified as CIRP cost as payable in priority. The CIRP cost of AAL was recorded and ratified in the Minutes of the Meeting of CoC of AAL dated 22.08.2017 and 22.11.2017 as well as 18.02.2019. The business model which was continuing prior to CIRP between AAL group continued after CIRP of the AAL to keep the AA....
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....deal with any of the issues raised by the respondent and the application has been erroneously dismissed, relying on the judgement of the Hon'ble Supreme Court in 'Ghanshyam Mishra and Sons Pvt. Ltd.' (supra). In any view of the matter, RP having admitted the outstanding dues of Rs. 8.7 crore is required to make payment of the admitted CIRP dues. 6. Learned counsel Mr. Sumant Batra appearing for the RP refuting the submissions of the appellant submits that amount of Rs. 18.98 crore as claimed by the appellant as CIRP cost has never been approved by the CoC of the AAL. It is submitted that for any expense to become CIRP cost, approval of the CoC is required as per provisions of the IBC and regulation. What was approved by the CoC in its meeting referred by the appellant are related party transactions. Approval of related party transaction during the CIRP is required by Section 28(1)(f) of the IBC. The cost which is claimed by the appellant as CIRP cost having never been approved by the CoC, there is no right in the appellant to claim its CIRP cost nor there is any obligation to pay the said amount of CIRP cost. Related party transaction continued during CIRP to keep the corporate ....
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....lan in order to manage and supervise the process of monetisation or sale of the asset and Asset Monitoring Committee was constituted. No relief is maintainable against the R-2, which was constituted for a limited purpose of managing and supervising the process of monetisation. The tenure of AMC has also come to an end and DBI has been vested with the responsibility. The CIRP cost has already been dealt with under the resolution plan duly approved by the CoC. Neither the plan approval or order of adjudicating authority has been challenged, hence the CIRP cost as was contemplated in the plan has frozen and cannot be questioned. The application filed by the appellant as well as this appeal is an attempt by appellant to delay. 8. We have considered the submissions of the counsel for the parties and perused the records. 9. Learned counsel for the parties have placed reliance on various judgements of this Tribunal and the Hon'ble Supreme Court, which we shall refer to hereinafter while considering the submissions in detail. 10. Both the applications i.e., I.A. No.170/2021 & I.A. No.74/2022 were filed in the C.P. (IB) No.42/Chd/Hry/2017, which was CIRP proceeding initiated agains....
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....t, whereas, they are making direct payment to the CTL. In the application, following prayers were made: "a) Allow the present Application; b) Pass urgent directions declaring that the difference in the claim filed amount and the current outstanding amount (being due in lieu of the goods supplied by Lotus Auto Limited after the commencement of CIRP of Amtek Auto Limited) be considered as the CIRP Costs of the Corporate Debtor; c) Pass urgent directions restraining the Respondent Nos. 1 and 2 from making any direct payments to Castex Technologies Limited on behalf of Lotus Auto Engineering Limited out of the CIRP Costs of the Corporate Debtor due towards Lotus Auto Engineering Limited; d) Pass urgent directions restraining the netting of dues between the Corporate Debtor and Castex Technologies Limited w.r.t. Lotus Auto Engineering Limited; e) Pass urgent directions directing the Respondents to provide information to the Applicant regarding the treatment of the Claim filed by the Applicant on behalf of Lotus Auto, under the Resolution Plan approved for the Corporate Debtor; f) Pass such other or further orders in favour of the App....
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....f 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" 13. As per the above definition any cost incurred by the RP in running the business of the corporate debtor as a going concern is insolvency resolution process cost. Regulation 31 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulations 2016, (for short the CIRP Regulations, 2016) defines insolvency resolution process cost, which regulation is as follows: "31. Insolvency resolution process costs.- Insolvency resolution process costs under Section 5(13)(e) shall mean- (a) amounts due to suppliers of essential goods and services under Regulation 32; (aa) fee payable to authorised representative under 3[sub-regulation (8)] of regulation 16A; (ab) out of pocket expenses of authorised representative for discharge of his functions under section 25A; [(ac) fee payable to facilitator under clause (c) of sub- regulation (1) of regulation 16C. (b) amou....
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.... of Creditors of Essar Steel India Limited (Supra) and Prashant Properties (Supra) and others, the appellant-operational creditor cannot seek intervention by this Adjudicating Authority after the approval of the resolution plan of the corporate debtor. We, therefore, do not wish to go into the merits of the case, which in any case cannot be entertained post- approval of the resolution plan." 17. There can be no dispute to the proposition laid down by the Hon'ble Supreme Court in 'Ghanshyam Mishra and Sons Pvt. Ltd.' (supra), that after approval of the resolution plan an operational creditor cannot seek intervention of the adjudicating authority, the said proposition fully applies with regard to any claim of an operational creditor, which is dealt in the resolution plan. In the present case, appellant has filed pre-CIRP claim of Rs. 23.12 crore with regard to which NIL payment was proposed in the resolution plan, which had become final. In the present case, in the application I.A. 170/2021, claim of the appellant was not for pre-CIRP cost rather it was for cost incurred by the appellant after commencement of the CIRP by making supplies to the corporate debtor who was being run as....
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....a determination of the amount which is payable to an expert valuer as an intrinsic part of the CIRP costs. Regulation 34 of the IRP Regulations defines 'insolvency resolution process cost' to include the fees of other professionals appointed by the RP. Whether any work has been done as claimed and if so, the nature of the work done by the valuer is something which need not detain this Court, since it is purely a factual matter to be assessed by the Adjudicating Authority." 19. The RP has categorically submitted before us that the CIRP cost as is being claimed by the appellant was never placed before the CoC nor ever approved by the CoC. The issue which need consideration before us is as to whether the CIRP cost, which is claimed by the appellant in I.A. No.170/2021 was approved by the CoC or not. 20. Appellant in support of its contention that the CIRP cost claimed by the appellant was recorded and ratified in the Minutes of the Meeting of CoC held on 22.08.2017, 22.11.2017 and 18.02.2019 which Minutes have been brought on the record which need consideration. The convenience compilation has been filed by the appellant where the extract of the 1st Meeting held on 22.08.2017, 4....
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.... Subsidiary 0 -5 3 - - -2 OCL Iron & Steel Limited 19 -2 1 0 - -1 Stride Auto parts Pvt Ltd. Subsidiary 1 -0 - - - -0 Fenece Auto Limited Subsidiary 6 - - - - - Indiglobal Tradelinks P. Ltd. Directorship of KMP -17 -1 1 - 0 1 Total -38 -46 28 11 -13 -20 The ratification of the Related Party Transactions is sought by electronic voting by members. Dinkar assured that an analysis of the arms length nature of the transaction would be presented within a month." 22. Similarly, in the 2nd Meeting held on 22.11.2017, the related party transactions from 25.07.2017 to 31.10.2017 were noted, which is as follows: "RELATED PARTY TRANSACTIONS FROM 25 JULY 2017 TILL 31 OCTOBER 2017 The Chairman presented the list of Related Party Transactions carried out during the period beginning 25July, 2017 to 31 October, 2017. He explained that these transactions are trade related and thus imperative to maintain the Company as a going- concern. As provided under the IBC Code, the same is put before the CoC Members as a voting it....
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....with the heading "ratification of related party transaction from 25.07.2017 to 17.08.2017". The Minutes notices the related party structure and mechanism for monitoring the transaction and payments made to related parties which required approval of the CoC, hence it was claimed. 26. Learned Counsel for the RP out of the same Minutes has referred to Minutes of item No. 4, where appointment of legal counsel of the CoC was approved with the limit of necessary expenses. We have noticed the Minutes of 13th CoC Meeting held on 18.02.2019 and we had already noted sub- paragraph (m) related party transaction approval was done. The next sub- paragraph (n) is relevant to notice which contains the heading CIRP cost. Paragraph (n) is as follows: "CIRP Cost: n) Member of RP's Team presented the CIRP cost and explained that it is still within the limit of INR 70Cr as approved by the COC with Liberty's Resolution Plan. Representative of India Opportunities enquired about the payment of Interest on Interim Finance. The member of RP team further clarified about the default on interim financing due to delay in Resolution Plan and timely payback of the Interim Finance. Representa....