2024 (2) TMI 1092 - AT - Insolvency and Bankruptcy

Challenge to direction that entire cost be paid by the Applicant/Appellant - Admission of CIRP set aside - Corporate Debtor was NBFC - HELD THAT - In a situation where CIRP has been admitted and there is interim order passed by the Appellate Authority to the effect that in the CIRP no final decision shall be taken with regard to resolution plan since the order was challenged on the ground that CIRP cannot proceed against a NBFC, the CoC and the Resolution professional should have been more cautious in proceeding and incurring costs in the CIRP of the Corporate Debtor. The ends of justice be served in giving liberty to the Resolution Professional to file an application before the Adjudicating Authority to take a decision on payment of balance cost, as to whether entire balance cost is fully payable and as to whether entire cost be borne by the Appellant or shared by all the members of CoC and/or Resolution Professional. Taking into consideration the sequence of events and facts which have taken place in the CIRP proceedings of the Corporate Debtor, the Adjudicating Authority shall pass orders in the application. Appeal disposed off.

Summary

Issues Involved:
The judgment involves the challenge against the order admitting Corporate Insolvency Resolution Process (CIRP) against a Non-Banking Financial Company (NBFC) under Section 7, the imposition of costs on the Financial Creditor, and the resolution of costs incurred in the CIRP proceedings.

CIRP Commencement Against NBFC:
The appeal was filed against the order admitting CIRP against the Corporate Debtor, a NBFC, which was challenged on the grounds that CIRP cannot be initiated against a NBFC by a Financial Creditor under Section 7. The Adjudicating Authority set aside the CIRP, noting that despite the Corporate Debtor being classified as a NBFC in the RBI portal, CIRP proceeded. The appeal was filed on limited grounds related to observations in the order.

Imposition of Costs on Financial Creditor:
The direction issued in the impugned order imposed a cost of Rs. 50,000 on the Financial Creditor and directed that the entire CIRP cost and legitimate expenses of the Resolution Professional be borne by the Financial Creditor. The Financial Creditor had already deposited the imposed amount, but there were disputes regarding the total cost claimed by the Resolution Professional and the Financial Creditor's share in the CoC.

Resolution of Costs Incurred in CIRP:
The judgment emphasized the need for caution in incurring costs during the CIRP proceedings, especially when there is an interim order preventing final decisions on the resolution plan due to challenges against proceeding with CIRP against a NBFC. The Resolution Professional was given liberty to file an application before the Adjudicating Authority to determine the payment of the balance cost and whether it should be borne by the Financial Creditor, shared by CoC members, or the Resolution Professional.

Conclusion:
The direction to pay the entire cost by the Applicant was modified, and the contempt application filed by the Resolution Professional was closed. The appeal was disposed of accordingly, addressing the issues related to the CIRP commencement against a NBFC, imposition of costs on the Financial Creditor, and the resolution of costs incurred in the CIRP proceedings.