TMI Blog2022 (12) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... g was going on in between the parties. IBBI directed to conduct an enquiry regarding conduct of the RP and other circumstances which led to filing of petition under Section 33(2) of the IBC before the NCLT. Matter is remitted back to the NCLT to re-examine the issue and consider to change the RP. - COMPANY APPEAL (AT)(INS) NO.612/2021 - - - Dated:- 9-12-2022 - (Justice Rakesh Kumar) Member (Judicial) And (Dr. Ashok Kumar Mishra) Member (Technical) For the Appellant : Mr Rajat Bhardwaj, Advocate For the Respondent : Mr Sharad Tyagi, Ms Yukti Makan, Ms K. Gayatri, Ms Anupriya Gupta, Advocates for R1 and R2 JUDGEMENT JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL) The present appeal has been preferred by an ex-Director of Durha Vitrak Pvt Ltd who was running a full operational hospital namely Febris Multispeciality Hospital of 150 beds (hereinafter referred to as Corporate Debtor ) which was earlier under Corporate Insolvency Resolution Process (hereinafter referred to as CIRP ). The appeal has been preferred under Section 61 of the Insolvency Bankruptcy Code, 2016 (hereinafter referred to as IBC). The appellant herein has assailed the order dated 31.05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feasible and viable and pass resolution for initiation of liquidation process of the Corporate Debtor which is as follows:- RESOLVE THAT pursuant to Section 33(2) of the Insolvency and Bankruptcy Code, 2016 and the rules made thereunder, the consent of members of the Committee of Creditors be and is hereby accorded to approve the filing of an application with Hon'ble Adjudicating Authority, regarding the initiation of liquidation of Corporate Debtor and to appoint existing Resolution Professional, subject to given consent to act as liquidator, as the liquidator of the Corporate Debtor. RESOLVE FURTHER THAT in pursuant to Regulation 4(2) of 1BBI (Liquidation Process) Regulations, 2016, the liquidator shall be entitled to a fee of Rs. 1,25,000/- (Rs. One Lakh Twenty-Five Thousand only per month). RESOLVED FURTHER THAT the Resolution Professional be and is hereby authorized to submit an application before the Hon'ble Adjudicating Authority and to do all such acts, deeds and things as may be required or considered necessary or incidental thereto. 4.Looking at the application and averments thereof, we are of the considered opinion that this is a fit case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said hospital was granted by the Directorate of Health Services. Since 2017 it was in full operation and able to generate business. However, on an application filed by the Financial Creditor, on an allegation of default in payment despite the account being declared as NPA, CIRP proceeding was initiated and by order dated 8.11.2019 NCLT appointed Mr. Aishwarya Mohan Gahrana as Interim Resolution Professional (hereinafter referred to as IRP ) for Durha Vitrak Pvt Ltd, Respondent No.1 herein. The same IRP was made Resolution Professional (hereinafter referred to as RP ). After being appointed as IRP, Mr. Gahrana on 16.11.2019 took over the Corporate Debtor. As per the appellant at that time when IRP took over the Corporate Debtor it was generating a revenue of Rs.87 lakhs in the month of November, 2019. The appellant offered unconditional support to RP to continue the operation of the Hospital to maximise the value of the Corporate Debtor. In the Paper Book at Page 6 monthwise revenue of the Corporate Debtor is reflected in chart which is reproduced hereinbelow: S. No. Month Receipt Credit Billing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Corporate Debtor recovered from the concerned Govt Departments/Agencies. Without adhering to provisions contained in Section 25 of the IBC Code the RP in connivance with the financial creditors mainly LIC Housing Finance Ltd who was having about 93% voting shares in the CoC filed an application under Section 33(2) of the IBC Code for initiating liquidation proceeding. It has also been argued that Learned NCLT without examining viability of going concern of the Corporate Debtor mechanically allowed the petition filed by the RP. It is further case of the appellant that after filing of the application under Section 33(2) of the IBC Code it was heard by the Division Bench of NCLT consisting Hon ble Justice BSV Prakash Kumar, Acting President and Hon ble Mr. V.K. Subburaj, Member (Technical) and order was reserved. However, before passing of the order one of the Member of the Bench i.e. Member (Technical) demitted the office. Even thereafter on 20.05.2021 order was passed by a Bench consisting of Hon ble Justice Mr. BSV Prakash Kumar, Acting President sitting with Hon ble Mr. Hemant Kumar Sarangi, Member (Technical). Since it was against principle of natural justice a rectifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel for the appellant has drawn our attention to running page 62 to show that till 30th November, 2019 the number of doctors was reduced to 8, by December 15, it came down to only 5 and till 31st December there remained only one doctor namely Mr. Amit Garg, Department of Paediatric. This chart is at page 63 and 64 of the Memo of Appeal. He further submits that in the month of January and thereafter there remained no doctor in the hospital. Similarly learned counsel for the appellant has drawn our attention to Annexure 13 which is from running page 67 to 76 showing reduction in number of staff in the hospital and what was the strength when RP took the charge of the Corporate Debtor. In the month of October, 2019 as per chart there were total 82 employees, till 8th November, 2019 the number of employees were 76, and till 30th November, 2019 there were 71 employees. Thereafter the number of employees started decreasing and till 12th December, 2019 it was reduced to 69 number of employees and thereafter by 31st December, 2019 number of employees came down to 45. In the month of January, 2020 the strength of employees/staff was reduced to the negligible number of 8 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximize their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. 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. In view of the aforesaid facts and circumstances it was argued by the learned counsel for the appellant that order of liquidation is fit to be set aside. Learned counsel for the appellant has also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 020 and again on September 14, 2020, at the instance of Committee of Creditors. He further submits that CIRP was commenced on 08.11.2019. At the time of initiation of CIRP, the CD was having only Rs.12858/- in its account and its CD unit i.e. Febris Multispeciality Hospital was having Rs.15300/- only in its account. The aforesaid accounts were lying in the Axis Bank. On 6.11.2019 total amount of Rs.4138/- of CD/Hospital was lying in ICICI Bank. He further submits that since September, 2019 the employees of the Corporate Debtor were on strike. To substantiate his submissions that the employees were on strike, learned counsel for the Respondent has drawn our attention to Page 51, 52 and 53 those are photo copies of the clips of electronic news. He further submits that the account of CD was declared NPA on 7.4.2018. He has also drawn our attention to running page 101 of joint reply to show that on 11.5.2020 the RP sent mail which was 9th reminder seeking cooperation of both the ex-directors for preparation of Balance Sheet. He has also drawn our attention to para 7 and 9 of the joint reply to show complete non-cooperation by the ex-directors. By way of referring to statement made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. By way of referring to aforesaid judgement it has been argued that decision for liquidation was commercial wisdom and as such the order impugned may not be interfered with. Besides hearing learned counsel for the parties we have examined entire material available on record and after going through the same we are satisfied that neither impugned order is required to be approved nor the conduct of RP can be considered as a conduct which was expected from a RP. The basic object of the IBC is to see that even if there is financial crunch or a company is in default, the approach should be to get the said company/entity as going concern. Time without number it has been held that a step for revival of the CD would be the first step and this is the reason that under the Code there is provision for inviting interest for selecting persons competent to take over the CD and also to clear the outstanding of the creditors. In any event liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution LLP, Sector 62, Noida. Page 95 i.e. 1st page of the Meeting CoC reflects Members of the CoC and their authorized representative presence. This chart reflects that in the said Meeting only financial creditor i.e. M/s LIC Housing Finance Ltd was represented by its five representatives whereas in respect of other two financial creditors namely Siemens Financial Services Pvt Ltd and HDFC Bank Ltd whose voting share was 4.66% and 1.97% respectively, there was none appearance. Similarly the CD was non-represented. Thereafter 4th Meeting of CoC was held on 29.7.2020 at Aishwarya M Gaharan Associates, 2nd floor in Jangpura Extension, New Delhi of course through video conferencing. Running page 102 of the Memo of Appeal i.e. part of the 4th Meeting of COC reflects that in Item No.6 the CoC took note about the change of address of Resolution Professional, since RP informed that the registered office of the Resolution Professional has been changed w.e.f. 1.2.2020 to 4 Birbal Market, 2nd Floor, Jangpura Extension, New Delhi, NCTof Delhi. We are of the opinion that being RP it was duty on his part to show his independence and fairness, but visiting the premises of LIC Housing Finance L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Services Pvt Ltd and HDFC Bank Limited were represented through their representatives and one of the director from the CD, Mr Rajesh Narang was also present. Even during 2nd CoC the RP placed before the committee measures required before the Committee. The committee discussed the same in detail. The committee noted that presently there are no chance for functioning of the hospital due to the negative public image, mismanagement and lack of required working capital. In the said 2nd CoC Meeting the appellant also expressed to place the proposal before the LIC Housing Finance Ltd, however, the same was denied. Running page 93 of the Memo of Appeal i.e. Part of the 2nd CoC Meeting reflects that the present appellant had even asked the Members what their intention behind the decision of not to accept his proposal ? The intention of the RP is further evident on examining the proceeding of the 3rd CoC held on 25.1.2020 wherein except LIC Housing Finance Ltd none of the other financial creditors or even CD were present. We have already noticed that in the last meeting i.e. 2nd Meeting of CoC it was resolved for holding meeting at the same place i.e. Meeting room of LIC Housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fee has not been provided but seeking advance amount at earliers. The RP on the one hand without the approval of the CoC was taking major decision but on the other hand before the CoC he was giving a picture that he was not getting any information. It is reflected from Page 105, Item No.9, that the RP informs the CoC that he had received three proposals and appointed one M.K. Agarwal and Co, New Delhi. However, even there were some proposals to restart functioning of the hospital, but, on flimsy ground it was turned down. At this stage it is necessary to reproduce the proposal and discussions regarding re-functioning of the hospital by the CoC which is at page 106 to 107, as follows:- C-Proposal to restart functioning of Hospital The Resolution Professional informed that there were some proposals to restart the functioning of the hospital. Mr. Saxena, member of the suspended board of directors, mentioned that there is a proposal to restart the operations received from a third party and the proposal is mailed to the resolution professional and a director. The Resolution Professional submitted that without proper license and permission to run a hospit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit of Rs.15 lakhs in case of a plan not accepted or approved, which will be adjustable in case plan accepted and approved. However, this amount shall be refunded in case the person withdraws before finalization of Final List of Prospective Resolution Applicants. The condition of forfeiture of Rs.15 lakh even in case of non-acceptance and/or approval of the expression of interest itself reflects that the very invitation of expression of interest was to frustrate or deter the participants to offer any express of interest. It appears that this stringent criteria was fixed on 29.07.2020 in the 4th CoC Meeting. However, at much belated stage on 7th September, 2020 in 5th CoC Meeting it was resolved to substitute the said condition. It would be appropriate to reproduce the said Resolution which is at running page 131 of 7th September, 2020 Meeting: Resolved that on-page 6 of Invitation of Expression of Interest in place of words: Each person submitting an expression of interest shall submit a non-refundable earnest money deposit of Rs.15 lakhs in case of the plan not accepted or approved, which will be adjustable in case plan accepted and approved. However, this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hereinbelow: The member of the suspended board of directors Mr. Narang made a proposal orally and communicated his intention to place it in on record in writing that promoters of the corporate debtors are indented to make an out of court settlement with one of the financial creditors and member of the committee M/s LIC Housing Finance Ltd by making an offer of Rs.32.5 crores lump sum. The proposal was not consented by the members of the committee unilaterally and same has been communicated to Mr. Narang. The representative of the LIC Housing Finance Limited have conveyed Mr. Narang that corporate insolvency resolution process can be withdrawn only if entire payment of the LIC Housing Finance Limited be made in one go. Same views were expressed by representative of Siemens Financial Services Pvt Ltd and HDFC Bank Ltd. All representatives communicated that all payment of all members of the committee of creditors should be settled in one go only thereafter the committee may consider the settlement. During Covid period the Hon ble Delhi High Court in CWP No.5049/2021, CM No.15453/2021on 18th May, 2021 on the petition filed by one of the directors in a Writ Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om today. 4. With these observations, the writ petition and the application are disposed of. The entire record and proceeding of the CoC Meeting, which we have discussed hereinabove, reflects that even the order of the Hon ble Delhi High Court was also not complied with whereas the order was very much specific. We can take judicial notice of the fact that during the peak period of Corona when such offers were made to run the hospital, all the citizens were crying for medical help and running for getting bed in hospitals. Number of Covid patients died due to non-availability of beds in the hospital. However, even during such a situation the behaviour of RP was detrimental to the entire society. It is common knowledge that during Covid period number of hospitals besides rendering service to society generated huge funds, however, even in such situation in the present case, to the reasons best known to him, the RP did not allow anyone to run the hospital as going concern. We are of the opinion that in such a situation considering all those facts it was not appropriate for the NCLT to allow application filed by the RP under Section 33(2) of IBC. The order impugned is oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asible and viable and pass resolution for initiation of liquidation process of the Corporate Debtor which is as follows:- RESOLVE THAT pursuant to Section 33(2) of the Insolvency and Bankruptcy Code, 2016 and the rules made thereunder, the consent of members of the Committee of Creditors be and is hereby accorded to approve the filing of an application with Hon'ble Adjudicating Authority, regarding the initiation of liquidation of Corporate Debtor and to appoint existing Resolution Professional, subject to given consent to act as liquidator, as the liquidator of the Corporate Debtor. RESOLVE FURTHER THAT in pursuant to Regulation 4(2) of 1BBI (Liquidation Process) Regulations, 2016, the liquidator shall be entitled to a fee of Rs. 1,25,000/- (Rs. One Lakh Twenty-Five Thousand only per month). RESOLVED FURTHER THAT the Resolution Professional be and is hereby authorized to submit an application before the Hon'ble Adjudicating Authority and to do all such acts, deeds and things as may be required or considered necessary or incidental thereto. 4.Looking at the application and averments thereof, we are of the considered opinion that this is a fit case fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident and the Hon ble Member (Technical) Dr. V.K. Subburaj, therefore, sought for rectification of the mistake crept in the said order. On realising the mistake crept in, since the Hon ble Member (Technical) Dr. V.K. subburaj with whom this matter was heard has already demitted Office, the order that has come in the name of Acting President and Technical Member Shri Hemant Kumar Sarangi is hereby declared as void and the matter is reopened for hearing by the Regular Principal Bench i.e. the Acting President and the Hon ble Member (Technical) Shri Hemant Kumar Sarangi. List IA 2323/2021 for hearing on 31.05.2021. (B.S.V Prakash Kumar) Acting Chairperson (Hemant Kumar Sarangi) Member (Technical) . Admittedly first order i.e. 20.05.2021 was passed by a Division Bench of which one of the Member i.e. Technical Member was not party at the time of hearing and reserving orders. This was the reason that on petition filed by one of the directors for rectification of the order, the same Bench on 25.05.2021 declared the earlier order i.e. order dated 20.05.2021 as void and directed to post on 31.05.2021 for hearing afresh and thereafter impugned order was pass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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