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TMI Blog2021 (3) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... Keeping in view that the Application under Section 7 or Section 9 is not a Suit or a Money Claim and having regard to the fact that the Resolution Professional has filed a detailed Affidavit that the Corporate Debtor is not a going concern and is non-operational , this Tribunal is of the considered opinion that the Learned Adjudicating Authority ought to have taken this aspect into consideration and heard the CoC before issuing the directions. On going through Section 28(1)(a), Section 28(3) and Section 28(4), it is clear that the Resolution Professional can raise Interim Finance only subject to approval of the Committee of Creditors by a vote of 66 % under Section 28. In the instant case it is an admitted fact that the CoC have not approved the raising of any interim funds. The contention of the Learned Counsel appearing for the first Respondent that Section 20(2)(c) is to be relied upon which refers to Management of Operation of Corporate Debtor as a going concern is untenable as the said Section refers to duties of Interim Resolution Professional. Section 25(2)(c) is relevant to the instant case as it deals with Duties of Resolution Professional with respect to ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The application inter-alia seeks payment due to the employees during the CIRP period. The learned Counsel appearing for the RP in an affidavit has mentioned that the total amount available in the Debtor company is about ₹ 1.27 Crore whereas the total out go on account of payment towards CIRP cost is about ₹ 1.74 Crore per month. It was also brought through an affidavit before this Bench that total unpaid CIRP costs is now about ₹ 2.21 Crore till December, 2019. Out of which the payment towards wages and salaries to the employees during the CIRP period is about ₹ 80 lacs per month. Besides, it was brought to the notice of the Bench that certain employees who are on the rolls of the company are coming to the plant but are not being paid any wages. 3. Learned Counsel appearing for the Appellant/CoC contended that the directions issued by the Learned Adjudicating Authority were contrary to the provisions of the IBC; for Section 5(13) of the Code defines Insolvency Resolution Professional Costs and any Interim Finance raised should confirm to the same and also placed reliance on Section 5(15) which defines Interim Finance , Section 25 which deals with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the date of CIRP i.e. 16.08.2019, the Corporate Debtor had work orders amounting to ₹ 307/- Crores; that the said work orders could not be completed owing to the failure of the CoC to raise Interim Finance despite requests made by the Resolution Professional; that the services of the Respondent employees were not terminated; that even though approval of CoC is required for raising any Interim Finance, however, the approval of CoC is not required for payment of salaries to the workmen of the Corporate Debtor for the period of CIRP. 8. It is further submitted that the Appellant has misappropriated the amounts from the Corporate Debtor after commencement of CIRP and the genuine dues of the workmen have not been paid. It is argued by the Learned Counsel that the Corporate Debtor was a going concern and placed reliance on the Minutes of the 2nd Meeting of the CoC in which under point 4 it is noted as follows; 4. Updates on the Operational Matters- The RP informed the CoC members that with the permission of the CoC members IRP RP s Team had visited the Thane Plant on 3rd Oct 2019, 11th Oct 2019 and the RP had visited the Thane Plant on 15th Oct 2019. The RP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved by the CoC as CIRP cost have been cleared. The CoC has not approved the dues of the first Respondent as CIRP cost and therefore the RP could not get these dues cleared. Hence it is prayed that the Impugned Order be set aside as it is in violation of the provisions of the I B Code. 12. Heard both the Parties at length. The main point which falls for consideration here is whether the Corporate Debtor was a going concern and whether the Learned Adjudicating Authority was justified in directing the CoC to raise interim funds and provide to the RP to run the CIRP period and to meet the expenditure incurred till December 2019 to the tune of ₹ 2.21/- Crores. 13. It is observed from the record that the Impugned Order was passed without hearing the CoC. 14. It is an admitted fact that the CIRP proceedings began on 16.08.2019 and the Resolution Professional was confirmed on 14.10.2019. In the Reply filed by the RP to the MA all facts with respect to the salaries of 51 employees were placed on record till 31.08.2019. It is stated in the Reply that any salary dues prior to the commencement of CIRP process will be considered by the Resolution Applicant, whose Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is stated by the RP in his Affidavit that the CD has not been contributing the sufficient amounts to meet the gratuity, liabilities for its employees and workmen which cannot be attributed to the RP. At this juncture, Learned Counsel for the Appellant placed reliance on the recent Judgement of this Tribunal in Savan Godiawala, Liquidator of Lanco Infratech Ltd. V/s. Apalla Siva Kumar , in Company Appeal (AT) (Insolvency) No. 1229 of 2019 in which this Tribunal has held that the Provident Fund, the Pension Fund and the Gratuity Fund, do not come within the purview of liquidation Estate for the purpose of distribution of assets under Section 53 of the Code . We are conscious of the fact that at this stage when admittedly an Application under Section 33 seeking a direction for liquidation is still pending before the Adjudicating Authority, we refrain from making any observations. 18. It is pertinent to mention that the Resolution Professional filed his Affidavit in Reply to the MA 4002 of 2019 before the Learned Adjudicating Authority stating as follows; 7. With respect to the contents of the para 6 of the Application, it is submitted that I as an RP is aware about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the resolution professional in running the business of the corporate debtor as a going concern; (d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and (e) any other costs as may be specified by the Board. 21. Section 5 (15) of the Code defines Interim Finance; 5 (15). Interim Finance means any financial debt raised by the resolution professional during the insolvency resolution process period. 22. Section 28 (1) refers to approval of Committee of Creditors for certain actions. Section 28(1)(a), Section 28(3) and Section 28(4) read as follows; 28. Approval of committee of creditors for certain actions.- (1) Notwithstanding anything contained in any other law for the time being in force, the resolution professional, during the corporate insolvency resolution process, shall not take any of the following actions without the prior approval of the committee of creditors namely;- (a) raise any Interim Finance in excess of the amount as may be decided by the committee of creditors in their meaning . 28(3) No action under sub-section (1) shall be approved by the committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c or justness of the commercial opinion expressed by the majority of the financial creditors albeit by requisite percent of voting share to approve the resolution plan; and in the process authorize the adjudicating authority to reject the approved resolution plan upon accepting such a challenge. That is not the scope of jurisdiction vested in the adjudicating authority Under Section 31 of the I B Code dealing with approval of the resolution plan 48. Suffice it to observe that the amended provision merely restates as to what the financial creditors are expected to bear in mind whilst expressing their choice during consideration of the proposal for approval of a resolution plan. No more and no less. Indubitably, the legislature has consciously not provided for a ground to challenge the justness of the commercial decision expressed by the financial creditors be it to approve or reject the resolution plan. The opinion so expressed by voting is non-justiciable. Further, in the present cases, there is nothing to indicate as to which other requirements specified by the Board at the relevant time have not been fulfilled by the dissenting financial creditors. As noted earlier, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive under 2[sub-regulation (8)] of regulation 16-A; (ab) out of pocket expenses of authorized representative for discharged of his functions under 2[Section 25-A];] (b) amounts due to a person whose rights are prejudicially affected on account of the moratorium imposed under Section 14(1)(d); (c) expenses incurred on or by the interim resolution professional to the extent ratified under regulation 33; (d) expenses incurred on or by the resolution professional fixed under regulation 34; and (e) other costs directly relating to the corporate insolvency resolution process and approved by the committee. 27. Further Section 30(2)(a) of the Code specifies that if a Resolution Plan is approved then the same would provide for the payment of Insolvency Resolution Professional Process cost in a manner specified by the Board in priority by the repayment of other debts of the Corporate Debtor and if such a Plan is not approved and if companies go into liquidation under Section 33(1) of the Code, then the distribution of assets under Section 53(1) would arise. 28. Keeping in view all the aforenoted reasons and the ratio of the Hon ble Supreme Court in K. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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