2019 (5) TMI 1238 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - declaration of Moratorium - debt amount in default for Financial Creditor - HELD THAT - This Bench has not been informed whether any Information Memorandum is prepared by the Ld. RP and whether advertisement has been made inviting Expression of Interest (EoI). It is also not on record whether any Valuation Report is procured by RP. Rather as of now, as informed, the Insolvency Process is heading towards Liquidation of the company. On verification of description of the expenses, it is noticed that D P fees claimed at ₹1,59,74,250/- and likewise, rest of the fees such as Lawyer fees, meeting fees, the RP insurance appeared to be towards higher side. In the absence of explanation of each items, had to be supported by corroborative evidence, it is not possible on the part of this Bench to allow entire expenditure. This Bench is of the opinion that a guideline can be obtained from IBBI, New Delhi that whether any Regulation or any Notification about the fixation of remuneration of RP has been issued as a guiding factor. I, therefore, refer this problem i.e. fixation of CIRP cost, etc. to IBBI, New Delhi. On receiving the reply from IBBI, New Delhi, this Bench shall again consider this MA - application allowed in part.

Summary

Issues:
1. Application u/s 7 of IB Code by ICICI Bank as 'Financial Creditor' against Gitanjali Gems Ltd.
2. Appointment of IRP and declaration of 'Moratorium'.
3. Permission for Resolution Professional to open a separate Bank Account.
4. Creation of Corpus Fund for CIRP cost.
5. Application for withdrawal of expenses for CIRP cost.
6. Approval of expenses by CoC and claimed amount.
7. Concerns over exorbitant expenses and compliance with regulations.
8. Verification of expenses and need for corroborative evidence.
9. Referral of the issue of fixation of CIRP cost to IBBI, New Delhi.
10. Authorization for RP to withdraw a specific amount.
11. Requirement for RP to submit a detailed report on progress.

Detailed Analysis:

1. The judgment pertains to an application filed by ICICI Bank under section 7 of the Insolvency and Bankruptcy Code against Gitanjali Gems Ltd., a Corporate Debtor, for a debt amount in default.

2. Subsequently, an order was passed admitting the petition and appointing an Interim Resolution Professional (IRP) after the declaration of 'Moratorium' and commencement of Corporate Insolvency Resolution Process (CIRP).

3. The IRP sought permission to open a separate bank account for CIRP purposes, which was granted by the Tribunal to facilitate the management of funds without interference from other authorities.

4. The creation of a Corpus Fund for CIRP cost was approved by the Committee of Creditors (CoC) under the direction of the NCLT, ensuring compliance with the insolvency proceedings.

5. Another application was filed for withdrawal of expenses related to CIRP cost, which was supported by the CoC's approval and voting results.

6. The Tribunal expressed concerns over the claimed amount being exorbitant and referenced previous orders suspending Resolution Professionals for unrealistic fees, emphasizing the need for transparency and adherence to professional ethics.

7. The judgment highlighted the importance of following regulations, disclosing itemized expenses, and obtaining approval from the Adjudicating Authority regarding the necessity of each cost incurred during the insolvency process.

8. The Tribunal scrutinized the expenses claimed, noting discrepancies and the absence of supporting evidence for certain items, indicating the necessity for detailed justifications.

9. Referring the issue of fixing CIRP costs to IBBI, New Delhi, the Tribunal sought guidance on the approval process and the reasonableness of expenses approved by the CoC.

10. The Tribunal partially allowed the application, authorizing the RP to withdraw a specific amount from the escrow account to expedite the insolvency process.

11. Additionally, the RP was directed to submit a comprehensive report on the progress of the insolvency resolution process, emphasizing the need for transparency and accountability in managing the CIRP.