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2024 (12) TMI 360 - AT - IBCIrregularities and non-compliance of CIRP Regulations identified by the Adjudicating Authority purportedly committed by erstwhile Resolution Professional in the CIRP of the Corporate Debtor - discharge of professional duties by the erstwhile RP - HELD THAT - In the impugned order, it has been observed by the Adjudicating Authority that the RP did not act in accordance with the provisions of the IBC and the CIRP Regulations framed thereunder in the conduct of CIRP of the Corporate Debtor and the issue before us is to decide on the tenability of these adverse remarks. It is an admitted fact that the RP had taken the following steps as envisaged in the IBC for conduct of CIRP including the preparation of Information Memorandum; publication of Form-G inviting Expressions of Interest; preparation of provisional list of eligible PRAs; appointment of Transaction Auditor; filing of Section 43 and 66 IBC applications; approval of CoC to the bidding documents and bid process etc. The irregularities in the conduct of the RP have been observed in the impugned order by the Adjudicating Authority only after the stage of receipt of resolution plans from the three eligible PRAs. One allegation which has been taken note of by the Adjudicating Authority is that RP had allowed multiple revisions in the plan - The RP has also been held responsible by the Adjudicating Authority for having committed the irregularity in that the marking of resolution plans was done by the CoC on the basis of evaluation matrix on 02.04.2024 while the plan of Sanklecha was received on 03.04.2024. The Adjudicating Authority held that marks could not have been allocated by the CoC prior to the date allowed for submission of modifications to the resolution plan. It was held that CoC had never deliberated on the revised resolution plan of Sanklecha which was received on 03.04.2024 which was the last date granted by CoC to the PRAs for submitting resolution plan. The RP cannot be blamed for having breached the IBC for the CoC to have approved the resolution plan of Parth with requisite majority share which action was taken by the CoC in the exercise of its commercial wisdom - the erstwhile RP has acted in deference to the wisdom of the CoC which is in line with the well settled legal precept of attaching paramount importance to the commercial wisdom of the CoC. The impugned order is modified to the extent that the observations made by the Adjudicating Authority on the performance and conduct of the RP is expunged. Rest of the operative portion of the impugned order remain unchanged - Appeal disposed off.
Issues Involved:
1. Alleged irregularities and non-compliance by the Resolution Professional (RP) in the Corporate Insolvency Resolution Process (CIRP). 2. The validity of the Adjudicating Authority's decision to reinitiate the CIRP process. 3. The challenge to the removal of the erstwhile RP and the appointment of a new RP. 4. The scope of the commercial wisdom of the Committee of Creditors (CoC) in the CIRP. 5. The implications of restarting the CIRP process from the stage of issuance of Form-G. Detailed Analysis: 1. Alleged Irregularities and Non-Compliance by the RP: The Adjudicating Authority identified several irregularities purportedly committed by the erstwhile RP, Fintech Restructuring LLP, during the CIRP of the Corporate Debtor. These included multiple revisions in the resolution plan allowed in violation of Regulation 39(1A) of the CIRP Regulations, voting by CoC members in violation of Regulation 25(3), and non-consideration of a resolution plan submitted by one of the applicants. The erstwhile RP contended that the multiple revisions were permissible under the commercial wisdom of the CoC, as supported by precedents from this Tribunal. Regarding the voting irregularity, the RP argued that Regulation 25(5)(b) allowed seeking votes from CoC members not physically present via electronic means. The Tribunal found merit in these contentions, noting that the RP acted in accordance with the CoC's directions and within the regulatory framework. 2. Validity of the Adjudicating Authority's Decision to Reinitiate the CIRP Process: The Adjudicating Authority's decision to reinitiate the CIRP process from the stage of issuance of Form-G was challenged by both the erstwhile RP and the Financial Creditor. The Tribunal observed that the ongoing CIRP process was progressing smoothly under the new RP, with fresh expressions of interest received from multiple prospective resolution applicants. The Tribunal emphasized that restarting the process would only cause delays and potentially diminish the value of the Corporate Debtor's assets. Therefore, the Tribunal upheld the continuation of the ongoing CIRP process. 3. Challenge to the Removal of the Erstwhile RP and Appointment of a New RP: The removal of the erstwhile RP, Fintech, and the appointment of Mr. Ravindra Kumar Goyal as the new RP was contested. The Tribunal noted that the new RP had already taken significant steps in the CIRP process, including issuing fresh invitations for resolution plans. Given the advanced stage of the ongoing process and the participation of multiple prospective resolution applicants, the Tribunal found no justification to disrupt the current proceedings. The Tribunal also expunged adverse remarks made by the Adjudicating Authority regarding the erstwhile RP's conduct, acknowledging that the RP had acted in accordance with the CoC's commercial wisdom. 4. Scope of Commercial Wisdom of the CoC in the CIRP: The Tribunal reiterated the principle that the commercial wisdom of the CoC is paramount and not subject to judicial scrutiny, provided the resolution plan complies with the requirements of the IBC. The Tribunal cited precedents affirming the CoC's authority to negotiate and approve resolution plans, emphasizing that the RP's role is to facilitate the CoC's decisions. The Tribunal found that the CoC's decision to approve the resolution plan with a majority vote was a valid exercise of its commercial wisdom. 5. Implications of Restarting the CIRP Process from the Stage of Issuance of Form-G: The Financial Creditor argued against restarting the CIRP process, citing concerns about delays and the potential impact on asset value. The Tribunal agreed, noting that the ongoing process was on track to be completed within the timeline set by the Adjudicating Authority. The Tribunal emphasized that maximizing asset value and ensuring timely resolution are core objectives of the IBC. By allowing the ongoing process to continue, the Tribunal aimed to achieve these objectives while fostering competition among prospective resolution applicants. Conclusion: The Tribunal modified the impugned order to expunge adverse remarks against the erstwhile RP but upheld the continuation of the ongoing CIRP process under the new RP. The Tribunal's decision underscores the importance of adhering to the commercial wisdom of the CoC and ensuring timely resolution in line with the IBC's objectives.
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