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2024 (10) TMI 401 - AT - IBCDisregard of commercial wisdom of the Committee of Creditors - removal of the Interim Resolution Professional (IRP) and the appointment of a new Resolution Professional (RP) - appointment of Appellant as the RP of the CD as per the voting in the 2nd CoC meeting - HELD THAT - The claim of Respondent No. 2 in Form-C was received by IRP on 24.01.2024. It is also seen that M/s Asha Apartments Pvt. Ltd. was inducted as Sole Financial Creditor with 100% voting rights in the Committee of Creditors by the appellant as IRP at a stage when he was already voted out as IRP of the CD by the existing CoC. At no point the appellant informed the AA about the fact that first CoC has not approved his proposal for ratification as RP, rather they have voted him out. The actions of the appellant IRP are not bona fide in the present matter. He has been very biased in his approach in this matter, particularly after the first CoC meeting where a decision was taken to remove him and appoint a new RP. Prima facie he seems to be guilty of perjury as he has stated before AA on record that the claim of Asha Apartments has been accepted by him on 25.01.2024 and accordingly he has reconstituted the CoC. Whereas in the minutes of the second CoC held on 30.01.2024, he has stated that the claims of all three creditors are under verification category. It should be mentioned that the claim of Respondent No.1 was admitted and informed by him to AA on 12.01.2024 itself. This clearly suggests that the Respondent No.2 was introduced as the Financial Creditor, without proper verification to ensure that the Committee of Creditors consisted solely of financial creditor who would appoint the IRP as RP and further allow him to conduct the CIRP process in tandem with the newly introduced sole member of CoC. The conduct of the RP in the instant CIRP proceeding seems to be premediated, biased and authoritarian in clear violation of the core objectives and principles of the Code, which seeks to ensure fair and transparent insolvency proceedings. The facts and circumstances presented above clearly reveal the Appellant's abuse of authority, demonstrating both overreach and bad faith; further compromising the integrity and trust that is essential to the insolvency resolution process. It is found that the conduct of the appellant has not been neutral and impartial in the aforesaid CIRP proceedings. He had tried to conduct CIRP in such a manner to keep himself as RP by prematurely admitting the claim of Respondent No.2 as Financial Creditor and reconstituting the IRP. The Respondent No.2 in turn helped him by appointing him as RP. This conduct goes against the objectives of the Code. If such conduct and collusive practices are allowed to continue, the entire edifice of IBC would collapse. This would enable entry of erstwhile promoters though back door in the CD. Appeal dismissed.
Issues Involved:
1. Legality of the removal of the Interim Resolution Professional (IRP) and the appointment of a new Resolution Professional (RP). 2. Allegations of bias and lack of impartiality by the IRP. 3. Verification and inclusion of claims in the Committee of Creditors (CoC). 4. The influence of the CoC's composition on the insolvency resolution process. 5. Procedural lapses and adherence to the Insolvency and Bankruptcy Code (IBC). Detailed Analysis: 1. Legality of the Removal of the IRP: The appeal challenged the order of the National Company Law Tribunal (NCLT) removing the appellant as the IRP and appointing a new RP. The appellant argued that the decision was arbitrary and disregarded the commercial wisdom of the CoC. The tribunal found that the IRP's actions compromised the integrity of the Corporate Insolvency Resolution Process (CIRP) by prematurely verifying and admitting the claim of Asha Apartments Pvt. Ltd. as a financial creditor, which altered the CoC's composition. The tribunal concluded that the IRP's conduct warranted his removal and upheld the appointment of Mr. Arun Kisanlal Bagadia as the new RP. 2. Allegations of Bias and Lack of Impartiality: The tribunal examined the IRP's handling of claims, particularly the inclusion of Asha Apartments as a financial creditor with 100% voting rights. It found that the IRP acted in a biased manner, favoring Asha Apartments, which led to his reappointment as RP despite being voted out in the first CoC meeting. The tribunal emphasized the importance of impartiality in the CIRP process and found the IRP's actions to be prejudiced, thereby justifying his replacement. 3. Verification and Inclusion of Claims in the CoC: The tribunal scrutinized the IRP's verification process of claims, noting discrepancies in the dates and status of claims. The IRP admitted Asha Apartments' claim despite it being under verification and after the deadline for claim submissions. This premature inclusion led to a reconstitution of the CoC, excluding the operational creditor Gospell Digital Technologies Co. Ltd. The tribunal highlighted the procedural lapses in the verification process and the improper reconstitution of the CoC. 4. Influence of the CoC's Composition on the Insolvency Resolution Process: The tribunal observed that the reconstitution of the CoC with Asha Apartments as the sole financial creditor significantly influenced the CIRP. The IRP's actions effectively sidelined the operational creditor, who had a substantial claim, in favor of a financial creditor with a much smaller claim. This manipulation of the CoC's composition was deemed contrary to the principles of the IBC and raised concerns about the fairness of the insolvency resolution process. 5. Procedural Lapses and Adherence to the IBC: The tribunal found multiple procedural lapses by the IRP, including the premature verification of claims and the failure to disclose the CoC's decision to remove him. The tribunal emphasized the need for strict adherence to the IBC and its regulations to ensure a fair and transparent insolvency process. The appellant's conduct was found to be in violation of the IBC, prompting the tribunal to direct the Insolvency and Bankruptcy Board of India (IBBI) to investigate the IRP's role and take necessary action. Conclusion: The tribunal upheld the NCLT's decision to remove the IRP and appoint a new RP, citing the IRP's biased conduct and procedural lapses. It emphasized the importance of impartiality and adherence to the IBC in the CIRP process. The appeal was dismissed, and the tribunal directed the IBBI to investigate the IRP's conduct.
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