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2023 (8) TMI 547 - AT - Insolvency and BankruptcySeeking direction for payment of fees to the Resolution Professional beyond the period 31.08.2019 - consent was with the caveat of allowing fees and expenses only for the period till 31.08.2019 - RP s fee and expenses is payable till 24.04.2022 or after that - reduction of fees to Rs.1 lakh per month - validity of adverse remarks made on the professional conduct of RP by the Adjudicating Authority - deprecatory remarks on the professional conduct of the RP. Whether the decision of the Adjudicating Authority to allow payment of fees to the RP for the period 01.09.2019 till 24.04.2022 is sustainable in the face of the contention raised by the major Financial Creditor on the CoC - Religare Finvest that it had not given any such consent? - HELD THAT - It is well established that the fees of the RP are required to be ratified by the CoC. Coming to the facts of the present case, perusal of the minutes of the first CoC meeting reveals that it had ratified the appointment of the Interim Resolution Professional including payment of fees and in the second CoC meeting held on 14.06.2019 his appointment as RP was confirmed - in the present case, it is undisputed fact that the CoC even after deciding to replace the RP did not make any endeavours for effectuating the substitution of the RP. Hence the RP continued to remain in position. It is also an admitted fact that the third CoC had resolved to pay the RP on the existing terms and conditions till the date of his demitting office. Contention of Religare Finvest is that it had given consent for payment of fees of RP only up to 30.08.2019 but the Adjudicating authority had wrongly recorded their consent for the period up to 24.04.2022 - HELD THAT - There are no force in their contention. Once the CoC in the third meeting had decided to continue with the RP on the same terms and conditions until the replacement was appointed and this decision was not subsequently modified by the CoC, the logical corollary is that the RP was entitled to claim fees/expenses. Any consent of Religare Finvest in this regard is redundant and inconsequential. When the CoC had itself ratified the fees and allowed the RP to continue to discharge the responsibilities of RP until a fresh RP was appointed, there are no reasons to disagree with the Adjudicating Authority in holding that the RP was well entitled to claim his fees along with actual expenses. Whether the reduction of the fees from Rs. 3.75 lakhs to Rs 1 lakh plus GST by the Adjudicating Authority was reasonable or not? - justified decision or not - HELD THAT - RP admittedly was unable to publish Form G. Neither could Expression of Interest be invited. The RP was also unable to elicit any successful resolution plan for the Corporate Debtor within 180 days from the initiation of CIRP. We find that the Adjudicating Authority had also taken notice of the fact that the RP had entered into a tussle with the CoC which put hurdles in the progress of the CIRP. That resolution of the Corporate Debtor had not taken place due to ongoing tussle between the Appellant and CoC is writ large. In fact, the Adjudicating Authority while considering the liquidation application filed vide MA 3668/2019 had been constrained to note of serious misunderstanding between the RP and the CoC causing a deadlock in the CIRP process leaving no option but for liquidation. Given the material on record and the facts and circumstances in the present matter, the finding of the Adjudicating Authority is agreed upon that the active CIRP period having expired with no substantial work to be taken up further and the Covid pandemic also having generally disrupted work, the scaling down of the fees to Rs 1 lakh was not discriminatory or unfair. The Adjudicating Authority was therefore well within its rights in exercising its wisdom in adjudicating on the reasonability quotient of fees payable to the RP - there are no error in the proportionate reduction of fees/expenses as carried out by the Adjudicating Authority as the rationalization has been done with proper application of mind. Whether the deprecatory remarks on the professional conduct of the RP were appropriate or they deserve to be expunged? - HELD THAT - The CoC had recommended liquidation but RP had orally opposed liquidation of the Corporate Debtor before the Adjudicating Authority even after having filed the liquidation application. The RP had also not acted on the suggestion of the CoC to file a petition before the Adjudicating Authority against the suspended management for non-cooperation in submitting statutory registers and other documents etc. The CoC was of the view that much harm was caused to the Corporate Debtor by handing over the control of its assets to the erstwhile management. These actions of the RP do not reflect well on his professional conduct and cannot be countenanced - RP was more focused on claiming his fees/remuneration and other expenses than discharging his responsibilities of completing CIRP in a time bound manner - the Adjudicating Authority has been justified in taking a serious note of the conduct of the Resolution Professional. There are no reasons to interfere with the impugned order - appeal dismissed.
Issues Involved:
1. Payment of fees and expenses to the Resolution Professional (RP) till 24.04.2022. 2. Justification of reducing RP's fees to Rs. 1 lakh per month. 3. Adverse remarks on the professional conduct of the RP. Summary: Issue 1: Payment of Fees and Expenses to RP The appeals were filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the order directing the Committee of Creditors (CoC) to pay the RP's fees from 01.09.2019 to 24.04.2022. The CoC had ratified the RP's fees of Rs. 3.75 lakhs per month plus GST in the first meeting. Despite deciding to replace the RP in the third meeting, the CoC did not file an application for his replacement, thus the RP continued in his role. The Adjudicating Authority held that the RP was entitled to claim fees and expenses as the CoC had allowed him to continue. Religare Finvest's contention of having consented to fees only till 31.08.2019 was deemed redundant since the CoC had ratified the fees and allowed the RP to continue until a replacement was appointed. Issue 2: Justification of Reducing RP's Fees The Adjudicating Authority reduced the RP's fees from Rs. 3.75 lakhs to Rs. 1 lakh per month plus GST, considering the period of inactivity due to the Covid pandemic and the RP's failure to make substantial progress in the Corporate Insolvency Resolution Process (CIRP). The RP's claim for full fees was not supported by precedents as the cited cases did not deal with fee reduction. The Authority found that the RP had failed to assist in the CIRP effectively, leading to a deadlock and eventual liquidation. The reduction in fees was considered reasonable and justified given the lack of substantial work and the Covid-19 disruptions. Issue 3: Adverse Remarks on RP's Conduct The RP's professional conduct was questioned due to several actions not in sync with the CoC's decisions, such as insisting on a forensic audit instead of a statutory audit and opposing liquidation despite filing for it. The RP's focus on claiming fees rather than completing the CIRP was noted. The Adjudicating Authority's remarks on the RP's conduct were deemed justified, as the RP's actions had impeded the CIRP process and caused harm to the Corporate Debtor. Conclusion: The appeals were dismissed, and the impugned order was upheld, affirming the reduction of the RP's fees and the adverse remarks on his professional conduct.
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