2021 (9) TMI 795 - Tri - Insolvency and Bankruptcy

Remission of share of the CIRP costs and expenditure in proportion to their voting rights - whether the first respondent is required to pay the CIRP in relation to the corporate debtor and if not so, what will be consequences? - HELD THAT - In the claim form filed by the first respondent along with DBS Bank Ltd., Singapore, the proceeds of the amount pursuant to the resolution plan, if any, approved by this Tribunal would go into the account of the DBS Bank India Ltd. - As per regulations 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 it is the duty of the members of the committee of creditors to pay the fees and the cost incurred by the resolution professional, once the same has been ratified by the CoC by passing a resolution to that effect. The first respondent in the present case is not willing to pay the CIRP costs citing the reason that they have to get approval of the RBI in order to the pay the CIRP costs in relation to the corporate debtor, which reason we find it quite bizarre and we are unable to comprehend. The first respondent is ready to receive the proceeds of the resolution plan, into its bank account, however for the purpose of the paying the CIRP costs they are raising a feeble defence that they have to get the approval of the RBI - The Regulations framed by the IBBI and the provisions of IBC, 2016 have no specific provisions in relation to the same. However, it would be a futile exercise, if we direct a member of the CoC who has already expressed its inability to make the payment towards the CIRP costs. The IBC, 2016 being a time bound process ; the RP cannot run from pillar to post to collect the CIRP cost. Hence, on equity, since the first respondent cannot contribute towards the CIRP costs, the first respondent is debarred from participating in the meetings of the CoC. Also, the first respondent has categorically stated in the counter that they are not the financial creditor in respect of the corporate debtor and they are acting only as an arranger for DBS Bank Ltd., Singapore. Since both of them are not ready to bear the CIRP costs, both the first respondent as well as DBS Bank Ltd., Singapore cannot participate in the meetings of the CoC. The first respondent has expressed its inability to pay the CIRP costs, the applicant is directed to remove the first respondent from the member of committee of creditors and to reconstitute the CoC afresh, without the first respondent - application disposed off.

Summary

Issues Involved:
1. Whether the first respondent is required to pay the CIRP costs in relation to the corporate debtor.
2. Consequences if the first respondent does not pay the CIRP costs.

Detailed Analysis:

1. Whether the first respondent is required to pay the CIRP costs in relation to the corporate debtor:

The applicant, the resolution professional of M/s. Easun Reyrolle Ltd., filed an application under section 60(5) read with section 25(2)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) seeking direction for the first respondent to remit their share of the CIRP costs. The applicant constituted the committee of creditors (CoC) with six financial creditors, and during the second CoC meeting, the CIRP costs of ?16,02,392 were ratified and the members were instructed to pay their shares.

The first respondent, acting as the power of attorney holder for DBS Bank Ltd., Singapore, refused to pay citing the need for RBI approval due to the external commercial borrowing (ECB) facility provided by DBS Bank Ltd., Singapore. The applicant argued that the RBI approval was not required for CIRP contributions and highlighted that other CoC members, including one situated in the UK, had made their contributions.

The Tribunal noted that the claim form submitted by the first respondent was filed jointly by DBS Bank Ltd., Singapore and DBS Bank India Ltd., and the proceeds of the resolution plan would go to DBS Bank India Ltd. The Tribunal found the first respondent's argument for needing RBI approval for CIRP payments unconvincing and bizarre, especially since they were ready to receive proceeds from the resolution plan.

2. Consequences if the first respondent does not pay the CIRP costs:

The Tribunal emphasized that under regulations 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, CoC members are obligated to pay the fees and costs incurred by the resolution professional once ratified by the CoC. The Tribunal found no exceptions in the IBC, 2016 or its regulations that would exempt a CoC member from paying CIRP costs.

Given the first respondent's categorical refusal to pay the CIRP costs, the Tribunal considered it futile to direct them to make the payment. Consequently, the Tribunal decided that the first respondent, and by extension DBS Bank Ltd., Singapore, should be debarred from participating in CoC meetings. The Tribunal directed the applicant to remove the first respondent from the CoC and reconstitute the CoC afresh without the first respondent. However, the claim of the first respondent would remain intact, and they would only be barred from participating in CoC meetings related to the corporate debtor.

Conclusion:

The application was disposed of with the direction to exclude the first respondent from the CoC due to their refusal to pay the CIRP costs, ensuring compliance with the IBC, 2016 and maintaining the integrity of the insolvency resolution process.