TMI Blog2023 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... o protect the assets of the Corporate Debtor, prevented the suspended management from causing harm to the property of the Corporate Debtor by way of unauthorized leased deeds, undertook several visits to the factory site, made several appearances for hearings before the Adjudicating Authority etc. This finding of the Adjudicating Authority has also been challenged on the ground that in the absence of his regular appointment as liquidator, the liquidation process could not have moved forward and therefore there was no question of submitting progress report. The Adjudicating Authority in the impugned order has narrated the chronology of hearings and stated that though the matter was heard 22 times, in none of the hearings the expeditious appointment of liquidator without delay was emphasized. In fact there were numerous adjournments either on request of the parties or on grounds of settlement being under consideration between parties. The delays were compounded by the lockdown imposed on account of Covid pandemic during the intervening period - for the sluggishness in the appointment of the liquidator, it is not the Resolution Professional alone who can be held solely responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n preferred. 2. Throwing light on the factual background of the present case, the Learned Counsel for the Appellant submitted that following a Section 7 petition having been admitted by the Adjudicating Authority on 08.05.2018 bringing M/s Kushal International Limited/Corporate Debtor under the rigours of Corporate Insolvency Resolution Process ( CIRP in short), Shri Pankaj Khetan, was appointed as Interim Resolution Professional ( IRP in short) who was later confirmed as Resolution Professional. Initiating the CIRP, the Appellant/IRP published a public announcement on 10.05.2018 seeking claims from the creditors of the Corporate Debtor. Having received only one claim from a single Financial Creditor, a one-member Committee of Creditors ( CoC in short) was constituted by the IRP. 3. It is submitted by the Learned Counsel for the Appellant that the IRP who was later appointed as Resolution Professional conducted his duties diligently and with reasonable care. As part of conduct of CIRP, four CoC meetings were held by which the CoC was kept apprised of the CIRP developments. Regular communications were also sent to the CoC apprising them of the financial status of the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Professional. Accordingly, an application under Section 33 of the IBC was filed by the Appellant following which the Adjudicating Authority passed liquidation order on 28.02.2019. It is submitted that though the matter of appointment of new liquidator was listed for hearing on 11.03.2019, the Adjudicating Authority finally issued orders for appointment of a liquidator on 20.12.2021, after a gap of nearly three years. 5. The Learned Counsel for the Appellant further submitted that in the order dated 20.12.2021, the Adjudicating Authority had noted that as the appointment of liquidator remained pending due to various reasons, the Resolution Professional during the period from the date of passing of liquidation order till 20.12.2021 had discharged the functions of Resolution Professional cum liquidator. Enumerating the series of activities undertaken by the Resolution Professional between the passing of the order of the liquidation on 28.02.2019 until the orders for appointment of liquidator on 20.12.2021, it has been stated the Resolution Professional had appointed security guards for safe custody of assets of the Corporate Debtor. Several visits were also undertaken to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese observations ought to be expunged. 8. The Learned Counsel for the Respondent refuting the submissions of the Appellant asserted that inaction and inability on the part of Resolution Professional to follow the various steps in CIRP is clearly evident from the fact that no Resolution Plan emerged. There was failure on the part of Resolution Professional to prepare and submit Information Memorandum before the CoC and issue of Expression of Interest as required under IBC and regulations framed thereunder. The Resolution Professional was also unable to elicit any successful resolution plan for the Corporate Debtor within 180 days from the initiation of CIRP. It was also contended that the Adjudicating Authority has rightly disallowed the payment of any fee/expenses demanded by the Resolution Professional for the period 28.02.2019 till 20.12.2021 since no substantial steps were taken to discharge the duties of a liquidator. In support of their contention, it has been pointed out that the Adjudicating Authority had taken due cognizance of the fact that no status report was filed by the Resolution Professional on what actions or efforts were made by him during the period when the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Resolution Professional on having filed an application under Section 60(5) of the IBC for issue of directions to the Respondent for payment of outstanding fees and expenses, the Adjudicating Authority in its order dated 19.08.2020 had noted that the CoC had claimed to have paid the entire outstanding dues for the period till 28.02.2019. That the fees/expenses of the Resolution Professional have been cleared up to 28.02.2019 i.e. up to the date of the passing of the liquidation order is an undisputed fact and has also been admitted by Resolution Professional which has been excerpted at para 13 of the impugned order, which is as reproduced below: - 10. That the Sole Financial Creditor, Jammu Kashmir Bank, has obligation to pay the Fee of RP and expenses incurred by the RP since inception till 20.12.2021 and the CoC in October 2020, has paid the Fee of RP and Legal expenses upto 28.02.2019 i.e. upto the date of passing of the Liquidation Order by this Hon ble Tribunal .. (Emphasis supplied) 12. This now brings us to the contentious issue of fees/expenses claimed as Resolution Professional from the date of liquidation order i.e. 28.02.2019 onwards. It is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egations of inaction and inability raised against the Resolution Professional by the suspended management, while also observing that no material was however placed on record by the suspended management to substantiate their allegations of bias against Resolution Professional. However, in deference to the wisdom of CoC, vide its order of 28.02.2019, it was held by the Adjudicating Authority that for smooth functioning of the liquidation of the Corporate Debtor , the Appellant should not continue as liquidator. In other words, the Adjudicating Authority had taken a conscious decision not to appoint the Resolution Professional as the Liquidator. 14. It is also noted that the Adjudicating Authority on 20.12.2021 also did not find the Resolution Professional fit to be appointed as liquidator and replaced him with another insolvency professional. It is pertinent to add here that the order of the Adjudicating Authority dated 20.12.2021 while directing the Resolution Professional to hand over all documents/assets of the Corporate Debtor to the newly appointed liquidator also noted that since liquidator had not been appointed earlier, the period from 28.02.2019 till 20.12.2021 is exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al could not have taken any action in the commencement or furtherance of the liquidation process having not been appointed as regular liquidator. In such exceptional circumstances, the Adjudicating Authority has therefore taken a well-considered decision to pay a lump sum amount of Rs. 2,00,000/- only to the Resolution Professional for the entire period starting from 01.03.2019 till the passing of the order. It has also correctly noted that since no major legal services have been rendered during this period except for pursuing applications before the Adjudicating Authority, a consolidated fee of Rs.50,000/- only for the legal advisor would suffice. The decision to allow payment of salary of security guards for the period their services was utilized and payment of Rs.50,000/- towards meeting expenses to visit factory site is also found reasonable. We find no error in the proportionate reduction of fees/expenses as carried out by the Adjudicating Authority as the rationalization has been done with proper application of mind. Further, to our mind, this decision of the Adjudicating Authority is in conformity with the ratio laid down by the Hon ble Supreme Court of India in Devarajan Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pite of clear directions of the Adjudicating Authority. On the activities undertaken post passing of the liquidation order, we notice that the Adjudicating Authority has returned the findings that no progress report was filed by the Resolution Professional on the efforts made by him during the period when the liquidator remained to be appointed. While this is factually correct, it also cannot be discounted that he had undertaken several steps including appointment of security guards to protect the assets of the Corporate Debtor, prevented the suspended management from causing harm to the property of the Corporate Debtor by way of unauthorized leased deeds, undertook several visits to the factory site, made several appearances for hearings before the Adjudicating Authority etc. This finding of the Adjudicating Authority has also been challenged on the ground that in the absence of his regular appointment as liquidator, the liquidation process could not have moved forward and therefore there was no question of submitting progress report. We find that these explanations offered by the Resolution Professional are not totally unfounded and it would, therefore, be unfair to cast aspersio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property and unauthorisedly attempting to dispose it off, it became incumbent upon the Resolution Professional to protect the same being the custodian of the assets of the Corporate Debtor. Hence, we are of the considered view that the conduct of the Resolution Professional cannot be assailed on this score either. 20. We are therefore satisfied with the findings of the Adjudicating Authority that the fees/expenses claimed by the Resolution Professional for the period following the passing of the liquidation order is exorbitant and not commensurate with the work performed by him as is clearly borne out from material on record. We are also of the considered view that the Adjudicating Authority while re-fixing the fees/expenses has determined the same having kept the reasonability quotient in mind. However, we are not persuaded to agree with the adverse observations made by the Adjudicating Authority on the professional conduct of the Resolution Professional in view of the attendant reasons and peculiar circumstances as cogently explained by him. 21. In result, we concur in the directions of the Adjudicating Authority as contained in the impugned order with respect to the determ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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