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TMI Blog2021 (12) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... od P V (Advocate for CD); MA/144/KOB/2020 :Shri. Vinod P V (Advocate for CD). ORDER Per : Ashok Kumar Borah, Member (Judicial) Since all these applications are inter-connected, they are disposed of by this common order. A brief history of the initiation of CIRP in this matter is given below: 1. An application for the Corporate Insolvency Resolution process was filed under Section 9 of the Insolvency and Bankruptcy Code,2016 (hereinafter referred to as 'IBC'/ 'Code') by the Operational Creditor-Wittur Elevator Components India Pvt. Ltd against the Corporate Debtor- Axiomata Elevators Pvt. Ltd, Cochin, was admitted by this Tribunal on 26.11.20019 vide order in TIBA No.34/KOB/2019 wherein Mr. Sathiq Buhari was appointed as an IRP. Incompliance with the mandates under Sections 13 & 15 and other applicable Sections of IBC read with Regulation 6 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,2016, public announcement was made in the New Indian Express and Mathrubhoomi dailies on 29.11.2019. 2. Except for the Applicant-Operational Creditor, no other person has submitted any claim. Hence in compliance with Section 21 (1) of IBC,2016 read with Regulations 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiate contempt proceedings against Mr. Rammohan and Mr. Aashish Jain Lunia, Advocate (Surana & Surana International Attorneys, Dr. Radhakrishnan Salai, Mylapore, Chennai - 600 004) who misbehaved, annoyed, and threatened the RP in the 2nd CoC meeting held on 14.01.2020 and also obstructed the RP to convene the 3rd CoC meeting by sending misleading Annexures- 18, 19,21,23,25,28 & 30 Emails. d). Set aside the resolutions passed by the single CoC member Mr. Rammohan on 08.02.2020 which were intimated to the RP under Annexure-34 Email as invalid and illegal. e). directing the Directors of Operational creditor to remove Mr. Rammohan from the post of its authorized representative as he had contravened and breached the mandates of the Code and Regulations. f). Order Rs. 2500000/ (Twenty-five lakh) as costs against Mr. Rammohan who breached the mandates of the Code and Regulations and abused the process of this Honourable NCLT. g). Impose penalty under Section 65 of the Code against the Operational Creditor who has maliciously and fraudulently initiated the resolution process for recovery of money instead of resolution as contemplated under the Code. h). Permit the RP to rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection filed by OC against REPORT/28/2020: 9. The Operational Creditor filed an objection to the Report stating that any relief that is being sought under Section 60 read with Rule 11 of National Company Law Tribunal Rules, 2016 has to be made by way of a Miscellaneous Application and not in the form of a report. The RP herein has sought specific reliefs from this Tribunal in the guise of filing a report and the same is invalid in law. 10. When the 2nd CoC Meeting was convened on 14.01.2020 at the office of the Corporate Debtor, it was found that the possession of the registered office of the Corporate Debtor and its assets were still with the defunct Directors and that the bank accounts of the Corporate Debtor were still being operated by the said Directors. Accordingly, Resolution Professional has failed in his statutory duties to take immediate possession and custody of the Corporate Debtor as required under Section 25(1) and Section 25(2)(a) of the Insolvency & Bankruptcy Code, 2016. 11. Their contention is that in spite of multiple emails, phone calls, and circulation of the notice and the proposed agenda, the Resolution Professional did not attend the 3rd CoC Meeting held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional with the following prayers: a) Permit the Applicant to change the Resolution Professional and refer the case to the Insolvency & Bankruptcy Board of India (IBBI) for proposing the name of a new Resolution Professional in place of the Respondent herein. b) Direct stay of functioning of CIRP till the appointment of a new Resolution Professional and handing over of processes by the existing Resolution Professional/Respondent. c) Direct the Respondent to pay nominal damages of Rs. 10,00,000/- to the Applicant for the loss caused to the CIRP owing to his professional misconduct. d) Direct the Respondent to pay the unnecessary CIRP costs incurred to the account of the Corporate Debtor. e) Direct the Respondent to be imprisoned for 6 months and impose a fine of Rs. 5,00,000/- on the Respondent for deliberate contravention of various provisions of Insolvency & Bankruptcy Code, 2016. 16. In the application, the Applicant stated that the 2nd CoC Meeting was convened on 14.01.2020 at the office of the Corporate Debtor wherein it was found that the possession of the Registered Office of the Corporate Debtor and its assets was still with the defunct Directors and that the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 08.02.2020 in the absence of the Respondent/RP, and the resolution was intimated to the RP. 21. The learned counsel concluded his arguments stating that the non-cooperation of the Respondent and failure to cooperate in the 3rd CoC meeting held on 08.02.2020, has completely delayed the CIRP. The Respondent has consistently failed in his duties as an IRP/RP and has also stalled the CIRP by his illegal and self-motivated acts. 22. To fortify the argument to replace the Resolution Professional, the applicants quoted the judgment of Hon'ble NCLAT in State Bank of India V Ram Dev International Limited, Company Appeal (AT) (Insolvency) No. 302 of 2018 dated 16.07.2018;whereinit is observed that: "10. From the aforesaid provision it is clear that during the Corporate Insolvency Resolution Process, at any time, if the Committee of Creditors 'is of opinion' that the Resolution Professional appointed under Section 22 is required to be replaced, it may replace him with another Resolution Professional in the manner provided under said section. In terms of Section 27(2), the Committee of Creditors at a meeting by vote of 75% of voting share (as per un-amended provision) can propose to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The delay in conducting the 3rd CoC Meeting was intentional and they conducted the meeting without the presence of RP, when they are not the CoC members. The CoC member who transgressed all the mandates within the framework of IBC,20I6, and Regulations, issued additional agenda to be placed on the CoC meeting, which is directed to be held on 08.02.2020 by the CoC member. 26. Resolution Professional contended that he is an independent person acting as the Officer of the court and has the absolute discretion to decide who has to be engaged as his Counsel to represent him before this Tribunal especially a petition under Section 19 of the Code. As the Corporate Debtor and his service providers failed to provide required accounting data to the Resolution Professional or Accountant to complete and prepare financial statements of the Corporate Debtor, he personally filed a compliance petition under Section 19 of the Code on 27.01.2020 before this Tribunal. 27. Per contra, the submission of the Resolution Professional is that he convened the 3rd CoC meeting on 05.02.2020 at 11 am in the office of the Corporate Debtor at Ernakulam as scheduled. Suspended Directors Mr. Aneesh and Shebin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The CoC member (FC), a representative of OC, and suspended Director attended the meeting and after elaborate evaluation of the current situation, CoC by 100% voting right resolved to liquidate the Corporate Debtor and instructed the RP to file an application before this Tribunal for orders of liquidation. The resolution passed on 07.03.2020 before the expiry of 180 days as stipulated in Section 12 of IBC, 2016 has been produced. MA/144/KOB/2020 32. This application has been filed by Shri Sathiq Buhari, Resolution Professional with a prayer to conduct an inquiry and on satisfaction refer the matter for prosecution against the Corporate Debtor. 33. The learned Resolution Professional stated that on verification of bank Statements of CD, it was found that after the moratorium order of this Tribunal, the CD had effected certain debit transactions from 27.11.2019 to 09.01.2020 amounting to Rs. 7,56,006/- from its bankers IOB, Federal Bank, and IDBI at Ernakulam.On 15.01.2020 the RP issued an Email to the CD directing to credit all the aforesaid money debited from its Bank accounts within seven days. 34. To fortify his argument, the RP referred to a decision of Hon'ble NCLAT in Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal is that he has taken symbolic possession of the Registered Office and records of the Corporate Debtor. For the purpose of the resolution, the control and custody of the assets from the corporate debtor is taken over by the resolution professional as per Section 18 (f). At this point, it is important to quote the relevant portion of Section 18 of the code which refers to the duties of Interim Resolution Professional, which is as follows:- "18. Duties of interim resolution professional. - (1) The interim resolution professional shall perform the following duties, namely: - (a) collect all information relating to the assets, finances, and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to - (i) business operations for the previous two years; (ii) financial and operational payments for the previous two years; (iii) list of assets and liabilities as on the initiation date; and (iv) such other matters as may be specified; (b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15; (c) constitute a committee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Insolvency Resolution Process (CIRP), the CoC assumes decision-making powers for the management of the CD. IRP/ RP is an independent professional to take care of the interests of all the stakeholders. Thus both IRP/RP and CoC have to work in tandem and the overall interest of resolution while balancing the interests of all stakeholders. But here there is a clash of interest among the member of CoC and the Resolution Professional. In its first meeting of the CoC, it appointed the Resolution Professional, who was then convening and conducting the meetings of the committee. Further, as per Section 24(2), the resolution professional conducts all the meetings of the Committee of Creditors. Whereas, in this matter neither 2nd CoC nor 3rd CoC meetings were conducted by the Resolution Professional as the Chairman or even not attended the meeting. The meeting which was said to be convened was without his knowledge. As per the annexures submitted by the applicant (M/s. Wittur Elevator Components India Private Limited) in M.A. No./15/KOB/2020, only in the minutes of the 1st CoC Meeting, the RP has signed. It is also found that Applicants themselves issued agendas for the 3rd CoC Meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en whose daily bread is dependent on the outcome of the corporate insolvency resolution process. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible." ii. The Hon'ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. &Anr. Vs. Union of India & Ors. Writ Petition (Civil) No.99 of 2018 dated 25.01.2019, it is observed that: "What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. ... It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its management and from a corporate death by liquidation." iii. The Hon'ble NCLAT in the matter of Jayanta Banerjee v. Shashi Agarwal and another, Company Appeal (AT) (Insolvency) No. 348 of 2020 dated 4th June 2021, it is observed that: "80. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Creditor and the reliefs sought for in the report. b. Since, the Committee of Creditors is reconstituted with the Financial Creditor M/s Bajaj Finance Limited and the Operational Creditor is not having any voting right in the CoC, the main prayer in MA/15/KOB/2020 to permit them to change the Resolution Professional and refer the case to Insolvency and Bankruptcy Board of India (IBBI) for proposing the name of a new RP cannot be entertained, since they have no locus standi to do so. Hence, other prayers also cannot be granted by this Tribunal. c. In view of the fact that the Resolution Professional has without calling the Expression of Interest (EoI) and without following the mandates, accepted the approval of a CoC member to liquidate the Corporate Debtor and file this application hurriedly, this application for liquidation cannot be entertained now. The Resolution Professional is allowed to continue with the CIRP from the stage of reconstitution of CoC and proceed with the CIRP as per the Regulations. However, the fee of the Resolution Professional is to be restricted during the period of litigation before this Tribunal and the Hon'ble High Court of Kerala. d. As we ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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