TaxTMI 
TaxTMI 
2026 (3) TMI 990
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....and 643(AHM)/2025. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- Operational Creditor. 2. Coming to the brief facts of the case, Gopal Trading Company-Operational Creditor/Appellant had filed a Section 9 application under IBC which led to admission of the Corporate Debtor-Matrushri Fibres Private Limited into CIRP on 25.09.2023. The Interim Resolution Professional after verification and collation of claims constituted the Committee of Creditors ("CoC" in short). The IRP was later confirmed as Resolution Professional ("RP" in short). The CoC consisted only of two Operational Creditors viz. Assistant Commissioner of GST and Assistant Commissioner of State Tax holding 95.01% and 4.99% vote-share respectively. During the conduct of CIRP proceedings, the IRP had issued several communications to the suspended management of the Corporate Debtor seeking statutory financial records which did not elicit any response from the suspended management. The RP had also issued communications to the Appellant for deposit of CIRP costs which the Appellant did not initially deposit on grounds of financial constraints. This had led the RP to initiate contemp....
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.... inconsistency and incongruity both in terms of fact and law. Stagnation of CIRP was the central reason on which the CIRP admission order was reversed by the impugned order. However, this stalemate was not caused by any act of omission or commission on the part of the Appellant but was entirely caused by persistent non-cooperation from the suspended management. Yet inspite of the purported non-cooperation from the suspended management, the RP did not take any coercive or corrective steps under Section 19(2) of the IBC to ensure cooperation of the suspended management. Hence, the RP being responsible for the slow and negligible progress of CIRP, it could not have held the Appellant responsible for contributing to the stagnation of CIRP and made liable to suffer penalty under Section 65 of IBC. Pressing further that the Appellant was not impleaded as a party in IA No. 1316 of 2025 which had been filed by the RP for closure/termination of the CIRP, the matter having been heard ex-parte against them, the Appellant was unfairly subjected to substantial and disproportionate financial liability by imposition of CIRP related costs and levy of penalty on the Appellant. 4. We have duly co....
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....2025 be set aside. This order of the Adjudicating Authority which has been impugned held that the CIRP proceeding had been initiated fraudulently and/or with malicious intent for purpose other than insolvency resolution by the Appellant besides imposition of penalty of Rs 10 lakhs and fastening of fees of RP and CIRP costs amounting Rs 6 lakhs on the Appellant. The prayers in the present appeal, however, makes no reference to IA No. 1316 of 2024. 8. It is the case of the Appellant that the Adjudicating Authority had exceeded their jurisdiction in holding the initiation of CIRP to be fraudulent and malicious at a time when the same Adjudicating Authority had itself admitted the CIRP vide its order dated 25.09.2023 after recording existence of debt and default. In such circumstances, it was not correct on the part of the Adjudicating Authority to hold that the CIRP proceeding was fraudulently initiated. The Respondent No.1-RP had conducted the CIRP proceedings over a long period of two years during which several CoC meetings were also held. Thus, after CIRP had effectively run its course for two years, the invocation of Section 65 by the RP thereafter and holding the CIRP initiati....
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....and circumstances on record, of fraud and/or malicious intent on the part of any party seeking admission of CIRP of the Corporate Debtor. Quite apart from the fact that Section 65 application can be entertained at any time or at any stage of the CIRP proceeding, the plain reading of Section 65 also leaves no doubts in our minds that there is no need of any formal application for its invocation and the Adjudicating Authority is well within its rights to take suo-moto cognizance of any such development at any stage of the proceedings. 11. When we look at the facts of the present case, it is an indisputable fact that the RP had filed the IA No. 643 of 2025 for declaring the CIRP as one tainted by fraudulent and malicious invocation. It is an undisputed fact that the statutory period of 180 days had already expired and the CIRP had entered into a phase of stagnation with no signs of registering further progress. It is the case of the Appellant that when the RP had continued on with the conduct of CIRP for a protracted period of 2 years, the RP could not have abruptly turned volte face thereafter to claim that the CIRP admission was fraudulent in nature. 12. We have already notice....
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....n on the basis of an outstanding operational debt of Rs 3.80 Cr. and that after the Section 9 application was admitted and moratorium had commenced, the Appellant surprisingly slipped into a hibernation mode and did not file any claim in pursuance of public announcement made by the RP. The reasons for not filing their claim have also not been disclosed before the RP by the Appellant. This glaring omission to file claims on part of the present Appellant had rightly arrested the attention of the Adjudicating Authority in finding the conduct of the Appellant to be unusual. This conclusion of the Adjudicating Authority was well justified as the standard and usual response of any operational or financial creditor is to file their claims as and when a Corporate Debtor is admitted into insolvency particularly so when it is their own Section 9 application which led to CIRP of the Corporate Debtor. The Adjudicating Authority had rightly concluded that the intent behind filing the Section 9 application was not genuine in view of the fact that the Appellant who had initiated the Section 9 application, for inexplicable reasons, absented themselves from further participation in the CIRP proceed....
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....ent of Rs 3.90 Cr. of outstanding operational debt. The issue of legal notice and lodging of police complaints by the Appellant also shows that the Appellant was meticulously preparing for the legal battle they had chosen to enter into. Given this background, the plea taken by the Appellant that they did not file the claims because of lack of legal awareness is an after-thought which lacks credibility. In this backdrop, the Adjudicating Authority cannot be said to have taken an arbitrary stand in not accepting this hollow plea of the Appellant to explain the non-filing of claims. Such opacity of reasons for invoking Section 9 and yet not filing claims justifies the finding returned by the Adjudicating Authority that the CIRP was initiated for fraudulent reasons which tantamount to a clear abuse of the insolvency framework. 18. The Adjudicating Authority has further noticed that the Appellant was related to the director of the Corporate Debtor and that this familial relationship was extremely close a relationship as they were real brothers. It has also been noticed by the Adjudicating Authority that the Appellant was also a director of the Corporate Debtor for some period of time....