2020 (9) TMI 999 - Tri - Insolvency and Bankruptcy

Direction for payment of outstanding amount of CIRP expenses and the contribution towards the liquidation cost - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - According to the Ld. Counsel for R4 it is the CoC members objected to the inclusion of R4 in the CoC even if it is an unsecured creditor. However, dispute as to whether the R4 is a financial creditor or not has not been settled by the CoC and the said dispute is now referred to the AA and two IAs in that regard are pending. According to her without settling the said dispute, R4 may not be compelled to pay its part of share towards the Cost of CIRP and liquidation. I found some merit in her submission upon a reference to the copy of minutes she brought to my notice. IFCI has already been included as one of the Financial Creditors at the instances of IRP after verifying its claim. According to the liquidator IFCI is a financial creditor since the debenture holder is a creditor or a lender of the CD company. Though it is certain that convertible debentures are long term debt instruments issued by a company that can be converted into equity shares of the company on a future date, since the dispute as to whether it is a debt instrument or not is pending for consideration before the AA, I am not deciding the said dispute here in this application. However being satisfied that IFCI's inclusion as a member in the CoC is disputed by the remaining financial creditors, it appears to me that IFCI cannot be compelled to contribute its part of share towards the CIRP and Liquidation cost. Part payment voluntarily made by the IFCI does not bar it from disputing its liability to pay the amount as demanded by the liquidator. However, to have a fare and just consideration of the objections now raised by the IFCI it appears to me that, that part of the amount to be contributed by the IFCI in accordance of the voting share already determined, by the RP is to be deposited in an interest bearing account of the CD in the name of the liquidator so as to realise the amount by him in case the inclusion of the R4 is found legal and proper. If found it is to be excluded, the amount in deposit is to be refunded to it. Application disposed off.

Summary

Issues Involved:
1. Payment of CIRP expenses and liquidation costs by the CoC members.
2. Dispute regarding the inclusion of IFCI as a Financial Creditor in the CoC.
3. Liquidator's approach to the Tribunal without exhausting remedies with the SCC.

Issue-wise Detailed Analysis:

1. Payment of CIRP expenses and liquidation costs by the CoC members:

The Liquidator, Mr. Yogesh Gupta, filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking directions for the CoC members to pay ?30,75,108.00 towards CIRP expenses and ?24,17,745.00 for liquidation costs outstanding since 04/10/2019. Despite repeated demands via emails, the CoC members failed to pay the substantial amount due. The Liquidator stressed the urgency for these payments to meet obligations towards valuers and insolvency professionals. The Tribunal noted that the respondents had not disputed their obligation to meet the Liquidator's requirements for smooth continuation of the liquidation process. The Tribunal directed that upon satisfying the balance amount payable by the respondents, the payments should be made within 15 days of verification of records submitted by the Liquidator.

2. Dispute regarding the inclusion of IFCI as a Financial Creditor in the CoC:

IFCI contested its inclusion in the CoC, arguing that it is not a Financial Creditor and hence not liable to contribute to CIRP costs. The CoC itself had doubts about IFCI's status and had sought clarification from the Tribunal. The Tribunal noted that the dispute regarding IFCI's status as a Financial Creditor was pending adjudication. Therefore, IFCI was directed to deposit the disputed amount in an interest-bearing account until the resolution of the dispute. If IFCI is eventually found to be a Financial Creditor, the amount, along with interest, will be utilized for CIRP/Liquidation costs; otherwise, it will be refunded.

3. Liquidator's approach to the Tribunal without exhausting remedies with the SCC:

The Tribunal observed that the Liquidator approached it without calling for a Stakeholders Constitution Committee (SCC) meeting to resolve the funding issues. The Tribunal noted that the Liquidator should have first attempted to resolve the issues with the CoC harmoniously. Despite this procedural lapse, the Tribunal did not dismiss the application but provided directions to ensure justice.

Directions:

i) The respondents (R1, R3, and R5) are to pay the balance amount within 15 days of record verification by the Liquidator.
ii) IFCI (R4) is directed to deposit the disputed amount in an interest-bearing account within 15 days.
iii) The amount will remain in the account until the interim applications regarding IFCI's inclusion in the CoC are resolved.
iv) Depending on the outcome, the amount will either be used for CIRP/Liquidation costs or refunded to IFCI with interest.

The Tribunal disposed of the application accordingly and directed the Registry to send email copies of the order to all parties. Certified copies will be issued upon compliance with requisite formalities.