TaxTMI 
TaxTMI 
2024 (12) TMI 1774
X X X X Extracts X X X X
X X X X Extracts X X X X
....als before us arising out of common Impugned Order dated 19.01.2024 under 61 of the Insolvency & Bankruptcy Code, 2016 (in short 'Code') passed by National Company Law Tribunal, Kolkata Bench, Court-I, Kolkata (in short 'Adjudicating Authority') in I. A. No's. 1645, 1646, 1647 of 2022 in Company Petition No. (IB)-1067 (KB)/2019. 2. These three appeals have been filed against a common Impugned Order dated 19.01.2024 and have been tagged together, heard together and hence, we shall deal all these three appeals in the following discussion. 3. In Company Appeal (AT) (Ins.) No. 295 of 2024 Mr. Sanjeeb Kumar Jha is the Appellant herein and alleged Financial Creditor of the Corporate Debtor namely, Shraddha Health & Fitness Private Limited against whom the Corporate Insolvency Resolution Process ('CIRP') was initiated. After the public announcement of the CIRP on 10.11.2022 inviting claims against the Corporate Debtor, the Appellants herein filed the claim of Rs. 2 Lakh in Form C as a financial creditor. The Appellant's claims were duly acknowledged and verified by the Respondent and accordingly, the Appellants were admitted as a Financial Creditor who was holding 25.53%. vot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion Process for Corporate Persons) Regulations, 2016. 8. The Appellants stated that the Respondent sent an email on 23.11.2022, informing the Appellants of proposed first CoC meeting. Additionally, on 25.11.2022, the Respondent provided further communication sharing the agenda for the upcoming CoC meeting scheduled for 27.11.2022. The Appellants noted that by classifying their claims as those of a Financial Creditors, the Respondent has conferred voting rights upon them to participate in this meeting. 9. The Appellants submitted that on 26.11.2022, one of the Appellants i.e., Mr. Arun Kumar Bag, communicated via email to the respondent a proposal to substitute the respondent as the IRP for the Corporate Debtor and proposed name of Mr. Umesh Kumar as new proposed IRP. The other two Appellants i.e., Mr. Sanjeeb Kumar Jha and Mr. Rohit Kumar in their capacity as Financial Creditors, accepted this proposal of Mr. Arun Kumar Bag and conveyed their agreement to the respondent, requesting that this agenda be included in the upcoming first CoC meeting for the members to cast their votes. 10. The Appellants further stated that on 26.11.2022, the Respondent No. 1, with ulterior mot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'s admission, the Financial Creditors submitted all necessary documents in accordance with Regulation 8 of the IBBI Regulations, 2016 and when requested by the Respondent No. 1 for clarifications, the Appellants promptly rectified and resubmitted the claim form. 15. The Appellants assailed the conduct of the Respondent No. 1, who in connivance of the Operational Creditor, on being under threat of getting replaced, made the ulterior plot to oust the Appellants as Financial Creditors. The Appellants stated that even the Adjudicating Authority failed to protect their rights. 16. The Appellants denied averment of the Respondent No. 1 w.r.t. to cash transactions as loans. The Appellants stated that there is no statutory prohibition against cash loans to the Corporate Debtor. It is the case of the Appellants that while the Income Tax Act imposes penalties for non-compliance with cash transaction limits, it does not invalidate such transactions under the Code. The Appellants cited judgment of the Hon'ble Madras High Court in the case of K.T.S. Sarma vs. Subramanian, [(2001) 4 CTC 486] that penalties do not nullify contracts. 17. The Appellant also denied the applicability of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Financial Creditors of the Corporate Debtor and no voting rights were conferred upon the Appellants. The Respondent No. 1 denied that he acted with any ulterior motive or that the proposal from the Appellants to replace the Respondent No. 1 as the insolvency professional had any bearing on the matter. The Respondent No. 1 disputed claims of erroneous decision-making and denies obstructing the appellant's participation in the CoC meeting, asserting that the Appellants had no lawful right to participate in such meetings. 24. The Respondent No. 1 denied that the appellant's claims were already verified and contended that the Resolution Professional can revisit claims which were considered in laws on provisional basis based on Form C of the Appellants and that the Respondent No. 1 has obligation to determine the credential of the Appellants as Financial Creditor before participation in the CoC. The Respondent No. 1 clarified that the alleged claims of the Appellants were provisional verified and same were clearly reflected when such information of claims were uploaded on relevant website. 25. The Respondent No. 1 emphasised that the Appellant's alleged claims arise from i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncluding his fee and has already spent huge money. The Respondent No. 1 submitted that his remuneration of Rs. 1.5 lakhs per month as the Resolution Professional was carefully evaluated and approved by the CoC after considering several factors. The Respondent No. 1 justified CIRP cost incurred for the management of assets of the Corporate Debtor, including gym equipments, a temperature-controlled swimming pool, and overall fitness centre operations. The Respondent No. 1 stated that the CIRP cost included salary payments to the Corporate Debtor's workforce comprises 28 skilled staff members, compliance with various regulatory frameworks, including GST, PF, and ESI regulations and for maintaining operational integrity. 30. Concluding his pleadings, the Respondent No. 1 requested to dismiss all three appeals with exemplary cost. Response of Respondent No. 2 31. During the hearing held on 24.07.2024, three I.A. No. 1987, 1988 and 1989 of 2024 were filed by the Applicant / Operational Creditor with a request to be impleaded as a Respondent in the present appeals. We heard the parties and noted that the Applicant was the person who has filed the original Section 9 applicatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 37. Another point raised by the Respondent No. 2 is that verification of claims and substantiation of claims with proof is a prerequisite under the Regulation before the CoC is constituted and in this connection, the Respondent No. 2 defended the action taken by the Respondent No. 1/IRP to exclude the Appellant from the CoC and cited few judgments i.e., Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr. [(2024) SCC OnLine SC 122] and NRC Limited v. State of Maharashtra & Anr. (Write Petition No. 8449 of 2022). 38. Concluding his arguments, the Respondent No. 2 requested to dismiss all three appeals with cost. Finding 39. We note that Form C were filed by two Appellants, namely, Mr. Sanjeeb Kumar Jha and Mr. Rohit Kumar claiming financial debt of Rs. 2 Lakhs each having security interest of Rs. 3.08 Lakhs. In the respect, we note that the loan agreements do not contain any details of such security interest. 40. We note that two separate loan agreements have been entered into by both the Appellants Mr. Sanjeeb Kumar Jha and Mr. Rohit Kumar dated 28.09.2022 with almost identical contents in which the amount of Rs. 2 Lakhs is supposed to have be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....report of constitution of CoC was filed before the Adjudicating Authority on 23.11.2022. 43. We have noted from the pleadings that after collation of the claims and after tentative verification of the claims, the Respondent No. 1 sought further clarification from the Appellants since the Respondent No. 1 as IRP was not sure about the Appellants status as Financial Creditors. The main reason for such decision were based on the nature of such purported loan agreements which were given in cash. The Respondent No. 1 also observed that such perpetrated cash transactions/ loan agreement were in violation of Jharkhand Private Money Lending (Prohibition) Act, 2016 and the Bihar Money Lenders Act, 1974. 44. The Respondent No. 1 also noted that the provisions of Companies Act, 2013 were also not met. The Respondent No. 1 categorically stated that the Appellants could not be entitled for any voting rights in the CoC Meeting to be held on 22.11.2022 since the Appellants status as Financial Creditors were not established. 45. We note that during hearing on 24.07.2024 we enquired from the Appellants Mr. Sanjeeb Kumar Jha and Mr. Rohit Kumar about their nature of business, their relation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'s status as a financial creditor and does not take care of other sundry circumstances or concurrent conditions etc. as seen from the above definitions of the financial debt and the Financial Creditors. 12. Thus, the claims of the creditor to be included in the CoC shall have to pass through the above rigor before they can be given a place in the CoC. However, it appears that in the present case, the IRP has hastily formed the CoC without proper verification of the claims just on a "preliminary examination", which finds no place either in the act or in the Regulations. The IRP should have followed the stipulations of the statute including the regulations before forming of the CoC. 13. We restrain ourselves at this stage from passing any orders against the Financial Creditors but we direct the RP to re-examine the entire process of formation of the CoC and ensure that the Statute including relevant rules and regulations are properly complied with and then proceed to reconstitute the COC if required." (Emphasis Supplied) 49. We note that the Adjudicating Authority has only directed the Respondent No. 1 to re-examine the constitution of the CoC in accordanc....