2022 (10) TMI 202 - Tri - Insolvency and Bankruptcy

Determination of Preferential Transactions, Undervalued Transactions, Extortionate Credit Transactions, Fraudulent Transactions and Fraudulent Trading - Section 43 to 50 of the insolvency and Bankruptcy code, 2016 - HELD THAT - It is seen that the CIRP process of the CD commences as early as on 18.09.2019 and till date the CIRP is still pending meaning the statutory period of 330 days have very well been crossed. Hence, the purpose of IBC and the substance of the Code has failed to have been achieved. Further, the major part of the COC is made up of 6547 number of NCD Holders forming 99.93%. The present application filed by financial creditors forms only a miniscule 0.24% of the COC. The provisions of IBC, 2016 are clear that the communications during CIRP be made electronically. It was further learned that this case of CD involves huge amount of money which are part of crime and the matter is being contested at different levels of various judicial forums including SEBI which has taken up the matter extensively considering the grievances of the high number of NCD holders. There has been confiscation of the records of the CD by the Crime Branch of Police Kerala wherein proceedings are pending before criminal courts - The AR as well as the RP has also submitted that the NCD holders forming CoC has presently lost hope on the CIRP and the COC has resolved not to proceed with the CIRP and only to pursue the recovery proceedings before SEBI. The applicants can proceed before SEBI or its appellate authority to address their grievances. We further note that the liquidation application of the CD is pending to be heard before this Tribunal and at this stage it is not equitable to allow the prayers of the applicants who only form a miniscule percentage in the COC themselves. The applicants could have very well raised and sorted their concerns before the RP and AR themselves rather than approach this Tribunal at this stage. The present exercise of the applicants to seek such remedies at this stage is frivolous and is only going to delay the process envisaged under IBC further and shall cause detriment to the CIRP and the parties themselves. Application dismissed.

Summary

Issues:
1. Application under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 by Debenture holders against Resolution Professional and Authorised Representative.
2. Allegations of lack of communication, non-involvement in decision-making, and unilateral actions by Resolution Professional and Authorised Representative.
3. Dispute regarding conduct of Committee of Creditors meetings, publication of Invitation for Expression of Interest, and voting instructions.
4. Concerns raised by Debenture holders regarding preferential, undervalued, fraudulent transactions, and forensic audit report.
5. Arguments presented by Resolution Professional and Authorised Representative in response to the allegations.
6. Tribunal's analysis of the situation, adherence to IBC provisions, practical challenges, and involvement of a large number of NCD holders.
7. Decision of the Tribunal to dismiss the application and direct parties to address grievances through SEBI or its appellate authority.

Analysis:
1. The judgment involves an application under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 by Debenture holders against the Resolution Professional (RP) and Authorised Representative (AR) of the Corporate Debtor (CD) seeking various reliefs.
2. The applicants alleged lack of communication, non-involvement in decision-making, and unilateral actions by the RP and AR, stating that crucial decisions were taken without their knowledge, including the initiation of liquidation.
3. Dispute arose regarding the conduct of Committee of Creditors (COC) meetings, publication of Invitation for Expression of Interest, and obtaining voting instructions, with the applicants claiming deprivation of their rights.
4. Concerns were raised by Debenture holders regarding preferential, undervalued, and fraudulent transactions, supported by a forensic audit report that highlighted such irregularities.
5. The RP and AR responded by citing adherence to IBC provisions, challenges in preparing Information Memorandum, and difficulties due to unavailability of records, leading to a forensic audit and application for investigation.
6. The Tribunal analyzed the situation, noting the statutory period had been crossed, the high number of NCD holders, and the practical challenges of physical meetings, ultimately finding no merit in the applicants' contentions.
7. The Tribunal dismissed the application, directing parties to address grievances through SEBI or its appellate authority, considering the ongoing legal proceedings and the COC's decision not to proceed with the CIRP, emphasizing the need to avoid further delays.