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TMI Blog2025 (1) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... Hybrid Mode ) Per : Barun Mitra , Member ( Technical ) Present is an application filed under Section 60(5) of Insolvency and Bankruptcy Code 2016 ('IBC' in short) by the Applicant-Eka Life Ltd seeking replacement of the Interim Resolution Professional of Sequel Buildcon Private Limited-Corporate Debtor undergoing Corporate Insolvency Resolution Process. 2. The salient facts of the present matter which are relevant to be noticed are as outlined below: The Corporate Debtor-Sequel Buildcon Pvt Ltd was admitted into Corporate Insolvency Resolution Process ("CIRP" in short) on 16.06.2023 by the Adjudicating Authority, following which Shri Amar Pal was appointed as the Interim Resolution Professional ("IRP" in short). On 07.07.2023, this Appellate Tribunal passed an order staying the constitution of the Committee of Creditors ("CoC" in short). On 25.07.2023, this Tribunal took cognisance of a Memorandum of Undertaking ("MoU" in short) dated 12.07.2023 entered between the home-buyers and M/s EKA Life Ltd. ("EKA" in short) in terms of which EKA was to act as the Strategic Financier and Project Partner in the Reverse CIRP of the Corporate Debtor. The salient directions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse interim finance amount of Rs 75 Cr. and that construction was to be carried out under the supervision of the IRP with the co-operation of the suspended promoter. While EKA had already infused an amount of Rs 25 Cr. towards construction of the project, the IRP on his part had failed to secure the necessary approvals which were a condition precedent for further infusion of funds by EKA. 4. It was further asserted that keeping in view their status as a strategic project partner and a key financier of the project, the Applicant was entitled to raise questions on the conduct/ misconduct of the IRP in the selection process of the consultants. 5. It was pointed out that the IRP was related to the Law Firm-Centrik Legalistic LLP ("CLL" in short) which had filed the CIRP petition of the Corporate Debtor before the Adjudicating Authority. It was added that IRP had formerly served as a Designated Partner in that Law Firm and continued to be still affiliated with CLL. This ongoing and subsisting relationship between the IRP and CLL provided a substratum to their clear conflict of interest which was a violation of the Code of Conduct of insolvency professionals. It was added that the sele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not misused or diverted by IRP to its related parties instead of using it for running the Corporate Debtor as a going concern. With a view to prevent further manipulations and frauds by the IRP and to ensure timely development of the project and in the interests of justice, it has been prayed to replace the IRP. In the present case, when the IRP has clearly violated the Code of Conduct and failed to act impartially in the discharge of their duties there is sufficient ground for his replacement. It was also submitted that this Tribunal possesses requisite powers under Rule 11 of NCLAT Rules, 2016 to take appropriate action including replacement of IRP. 9. Rebutting the contentions advanced by the Applicant, Ld. Sr. Counsel for the IRP submitted the IRP meets all eligibility criteria as prescribed under IBC as well as qualifications and experience prescribed in Regulations 4 and 5 of the CIRP (IP) Regulations, 2016. The purported nexus between the IRP and CLL as alleged by the Applicant is an unnecessarily hyped-up exaggeration. It was vehemently contended that in any case the IRP is not answerable to the Applicant since he is merely an interim financer and not even a CoC Member. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedure as contemplated under Section 27 of IBC for removal of IRP will be rendered otiose. It was also pointed out that Section 22(2) of IBC provides that the IRP's appointment has to be first confirmed by the CoC during its first meeting with 66% of voting. Since, there is a stay on the constitution of CoC, the confirmation of appointment of IRP by CoC has not taken place. It was therefore urged that this Tribunal may permit the IRP to constitute the CoC and convene a meeting with the limited agenda of confirmation of IRP as RP. It was submitted that in the proposed CoC meeting, both the Applicant and the IRP could be present to make their submissions before the CoC before the CoC casts its vote either confirming or not confirming the IRP. 11. We have duly considered the arguments advanced by the Learned Counsel for both the parties and perused the records carefully. The short question before us is whether the conduct of the IRP in the given factual matrix gives adequate reason to believe that there was a breach of the Code of Conduct of Insolvency Professionals by IRP warranting his removal and replacement by another IRP. 12. Before we come to our analysis and findings, it may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performing its functions and duties under the Code." "23-B An insolvency professional shall not engage or appoint any of his relatives or related parties, for or in connection with any work relating to any of his assignment." "23-C An insolvency professional shall not provide any service for or in connection with the assignment which is being undertaken by any of his relatives or related parties." 13. It is the case of the Appellant that M/s AMS Consult which had been appointed as the PMC by the IRP was responsible for the critical aspects of the construction work but the PMC was not discharging its obligations properly. The Applicant expressed apprehension of the risks entailed in having an inexperienced PMC team as it could lead to unsafe construction. Highlighting the shortcomings in the performance of the PMC, it was stated by the Applicant that the PMC had put in place a team of two engineers of junior level who lacked the requisite level of experience in the handling execution of large-scale housing projects. 14. We cannot be oblivious of the fact that it was as much the responsibility of the Applicant as a strategic project partner to ensure the structural stabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the sole criteria for appointment was again the lowest fee quoted without factoring in other professional credentials. 16. When we look at the manner of selection, we cannot be unmindful of the fact that there seems to be strange pattern in the manner in which the successful consultants were selected. In both the cases of PMC and LC, the consultants which got selected were the last ones to have filed their bids and the quotes of the last to bid somehow turned out to be the lowest. Still more curiously, the address of PMC and LC was also the same i.e. Office No. 2401, 24th Floor, Corenthum Iconic Tower, Sector-62, Noida and only subsequently the address of the LC changed to Faridabad. What is more surprising and inexplicable is that on the one hand CLL had appointed the same IRP to conduct the resolution process for various entities and on the other hand, the IRP had appointed the same PMC and LC in the CIRP of the other firms also. It is too much of a strange coincidence for the same PMC and LC to succeed in the bid process conducted by the IRP in the CIRP of other entities. The allegation of manipulation in the selection process thus cannot be ruled out altogether. 17. Keep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Partner in CLL and continued to remain affiliated with CLL by virtue of having close association with Shri Prit Pal, the current Designated Partner of CLL. The IRP held that it was misconceived on the part of the Applicant to make this allegation since the IRP's association with CLL had terminated more than 3 years back. Since the Code of Conduct stipulated making disclosure of related parties only to a period of upto 3 years preceding the appointment of the insolvency professional, there was no need on the part of IRP to have disclosed such information. 21. However, what is pertinent to note is that the IRP had business/shareholding in companies jointly with Prit Pal Singh who is the existing Designated Partner of CLL. Their joint shareholding is noticed in the case of Centrik Suportiaz Foundation ('CSF" in short) and Novative Solution Pvt. Ltd. ("NSPL" in short). In both these entities, Amar Pal, the present IRP and Prit Pal Singh are joint shareholders. Moreover, both the IRP and Prit Pal Singh, present Designated Partner of CLL are directors of CSF which again establishes clear nexus between the IRP, CLL and CSF. Yet more intriguing is that as per MCA website, CSF and CLL has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 years back, it need not have been disclosed. We are of the considered view that this cannot come to the rescue of the IRP since in terms of Clause 8C of the Code of Conduct, the disclosure requirement comes into play "at any time" when the IRP is a key managerial person, a partner of a related party or a partner or director of the concerned company, firm or LLP. The explanatory clause therein clearly states that the "relationship" shall means any one or more of the following four kinds of relationships "at any time" or "during three years preceding the appointment of IRP". The IRP was therefore obligated in the interest of transparency to disclose and notify the stakeholders of such relationship with CLL, PMC and LC as IRP continued to be current shareholder/director in entities such as CSF, HEPL, TTIPL and TPCL. The IRP has also acted in contravention of IBBI Circular No. IP/005/2018 dated 16.01.2018 on "Disclosures by Insolvency Professionals and other Professionals appointed by Insolvency Professionals conducting Resolution Processes". This circular defines "relationship" to include where insolvency professional or the other professionals are a shareholder, Director, Key Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve not been fulfilled by the IRP. In the given facts and circumstances, we are inclined to agree with the Applicant that when two of the condition precedent remain unmet on the part of the IRP, it does not behove of the IRP to put blame on the Applicant for not infusing the balance amount. The Applicant not having evaded its responsibility to contribute to the interim financing nor having refused to infuse the balance funds, we do not find substance in the contention of the IRP that the Applicant had filed this application to cover up its inability to provide the balance amount. 26. In the conduct of Reverse CIRP, the relationship between the IRP and stakeholders of the Corporate Debtor including home-buyers and interim financier is built on trust. Once this trust is belied, it has the potential to jeopardise the resolution process. In the present case, the IRP has been found to be forthcoming in parting with all relevant information with regard to the credentials of their consultants to the Applicant. As a key financier, the Applicant had a definite stake in the manner of appointment of the PMC and LC. The contention of the IRP that the consent of the Applicant had been obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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