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2018 (12) TMI 1124 - Tri - Insolvency and BankruptcyCorporate insolvency proceedings - decision taken by the Lenders for removing the Resolution Professional at the expiry of the CIRP - Held that - If the provisions of Section 33 of the I&B Code, 2016 are taken into consideration, the prayer can only be made for passing an Order for liquidation of the Corporate Debtor viz., M/s. Oceanic Tropical Fruits Pvt. Ltd. The Applicants, who are the lenders, have prayed to replace the Resolution Professional under the abovestated provisions of law in terms of meeting held on 03.09.2018 among SBI, CBI and ICICI Bank Ltd., having 100% of voting share with a further direction to him to hand over income and expenditure details incurred during CIRP period as duly approved by CoCs and consequently appoint Mr. P.R. Raman (RP) after excluding the time period consumed by the 1st Respondent (RP) in order to complete CIR Process within the time frame limit as mandated under the provision of I&B Code, 2016 and pass such further or other orders as deemed fit and proper and thus render justice. However, this Application has been filed after expiry of the maximum period of CIRP as provided under Section 12 of the I&B Code, 2016, which is not falling within the purview of the provisions of the Code, and is not maintainable at the instance of the lenders. Applicants have filed the instant Application at the fag end of the CIR Process to replace the Resolution Professional who has already acquainted with the details of the business ventures, assets and other transactions of the Corporate Debtor. Therefore, the reasons given by the lenders for replacing the Resolution Professional and the procedure followed is not known to law. Moreover, it has also been noted by this Authority that the lenders have convened the meeting on 03.09.2018, which was not conducted in accordance with the provisions of the I&B Code, 2016. Conducting of the meetings of the CoCs is the responsibility of the Resolution Professional as and when required or deemed fit or at the request of any the CoCs members or any mandatory meeting warranted by the I&B Cade, 2016 and the Resolution Professional shall act as Chairman of such meetings. However, no such request was made by the CoCs to the Resolution Professional for conducting the meeting on 03.09.2018. Therefore, the same cannot be said to be the meeting of the CoCs as envisaged by the provisions of I & B Code, 2016. Thus, the decision taken by the Lenders for removing the Resolution Professional at the expiry of the CIRP is not in accordance with the law and the same is illegal and arbitrary action of the lenders and deserves to be set aside. Therefore, the resolution passed by the lenders on 03.09.2018 for replacing RP is declared null and void and set aside. Otherwise also, after the expiry of the CIRP period such a demand for replacing the Resolution Professional appears to be an afterthought and without backing of any of the provisions of the I&B Code, 2016. In the circumstances, the Application filed by the lenders stands dismissed.
Issues Involved:
1. Allegations against the Resolution Professional (RP) by the lenders. 2. Reply and defense by the Resolution Professional. 3. Validity of the application under Section 33 of the I&B Code, 2016. 4. Conduct and procedures followed during the Corporate Insolvency Resolution Process (CIRP). 5. Validity of the lenders' meeting held on 03.09.2018. 6. Request for replacement of the Resolution Professional. 7. Application for liquidation of the Corporate Debtor. Issue-wise Detailed Analysis: 1. Allegations against the Resolution Professional (RP) by the lenders: The lenders filed an application on 06.09.2018 under Section 33 of the Insolvency and Bankruptcy Code, 2016 (I&B Code, 2016), alleging various technical violations by the RP, including delays in providing draft minutes, insufficient notice for meetings, incomplete Information Memorandum, lack of due diligence on related party transactions, and arbitrary actions without discussing key issues with the Committee of Creditors (CoCs). The lenders claimed these actions caused prejudice to CoCs members and warranted the RP's removal. 2. Reply and defense by the Resolution Professional: The RP denied all allegations, stating the application was baseless, malicious, and ultra vires. The RP argued that the application was filed to settle personal scores and became infructuous as the CIRP period had ended. The RP maintained transparency in dealings and conducted nine CoCs meetings, ensuring the Information Memorandum was dynamic and updated. The RP also highlighted that the CoCs refused to allow Resolution Applicants to present their plans and that the termination of a key contract by PepsiCo during the CIRP was not challenged by the CoCs. 3. Validity of the application under Section 33 of the I&B Code, 2016: The tribunal noted that Section 33 deals with liquidation and not the replacement of the RP. The application by the lenders to replace the RP was not maintainable under this section, especially since it was filed after the CIRP period had expired. 4. Conduct and procedures followed during the CIRP: The RP ensured the CIRP was conducted within the stipulated timeframe, despite delays caused by disagreements among CoCs members. The RP's actions, including the preparation of the Information Memorandum and inviting Resolution Applicants, were in compliance with the I&B Code, 2016. The tribunal found the grounds for the application to be false and frivolous. 5. Validity of the lenders' meeting held on 03.09.2018: The tribunal found the meeting held by the lenders on 03.09.2018 to be invalid as it was not conducted in accordance with the I&B Code, 2016. The meeting was not requested by the CoCs to the RP, who is responsible for convening such meetings. Therefore, the resolution passed by the lenders to replace the RP was declared null and void. 6. Request for replacement of the Resolution Professional: The tribunal dismissed the request to replace the RP, noting that the application was filed at the fag end of the CIRP and the reasons for replacement were not in accordance with the law. The tribunal emphasized that the RP was already acquainted with the Corporate Debtor's details, and replacing him at this stage was not justified. 7. Application for liquidation of the Corporate Debtor: The RP had already filed an application seeking an order for liquidating the Corporate Debtor, which was granted by the tribunal. The tribunal concluded that the lenders' application to replace the RP was an afterthought and not backed by any provisions of the I&B Code, 2016. Therefore, the application filed by the lenders was dismissed, and the order for liquidation was upheld. Conclusion: The tribunal dismissed the application filed by the lenders to replace the Resolution Professional, declared the lenders' meeting and resolution null and void, and upheld the liquidation order for the Corporate Debtor.
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