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TMI Blog2022 (2) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... nch, Kolkata in C.A. (I.B.) No. 1748/K.B./2019 and C.A. (I.B.) 57/K.B./2020 in C.P. (I.B.) No 1684/K.B./2018, whereby the Adjudicating Authority/NCLT initiated liquidation proceedings against the Corporate Debtor 'INCAB Industries Limited', wherein the Appellant of Appeal No.348 of 2020 was employed until the date of passing the order of liquidation. Parties original status in the Company Petition represents them in these Appeals for the sake of convenience. Appellants Averment 2. The Corporate Debtor was admitted into the Corporate Insolvency Resolution Process (in short 'CIRP'), vide order dated 7th August 2019, and Respondent No. 1 was appointed as Interim Resolution Professional (IRP) of the Corporate Debtor. 3. Under the invitation of claims by the IRP, the Appellant and thousands of other employees who were employed with the Corporate Debtor submitted their claim, along with other Operational Creditors and Financial Creditors. 4. Subsequently, after forming the Committee of Creditors ('COC'), the resolution was adopted on 5th December 2019 to liquidate the Corporate Debtor, thereby sabotaging the chances of revival of the Corporate Debtor and push ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditors with a vote share of 77.20%. 7(b). Under Section 5(24)(a) of the Code, a "related party", in relation to the corporate debtor, means a director or partner of the corporate debtor or a relative of a director or Companies Act. A related party about the Corporate Debtor (public company) includes "a Director of the Corporate Debtor holding more than 2% of the shares capital. Sub-section (f) of 5(24) states that "a body corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of the individual." 7(c). Given the provisions above, it is found that 'Kamla Mills Private Limited' and 'Fasqua Investment Private Limited' (both members of COC) were related party as Mr Ramesh Ghamandiram Gowani had a substantial shareholding of 99.74% in the Financial Creditor Kamla Mills Ltd and is also a Director and Shareholder of the Financial Creditor 'Fasqua Investment Private Limited'. He was the Director of the Corporate Debtor 'Incab Industries Ltd' till the commencement of the CIRP. After that, he resigned from the Directorship of the corporate debtor. 7(d). The Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Committee of Creditors. a. Respondent No. 1/Liquidator contends that Mr Ramesh Gowani claims to be a Director of the Corporate Debtor in terms of the Telefax Communication, dated 4th May 2009, passed by the BIFR in case No. 390 of 1999. In terms of the said order of the BIFR, while approving the Corporate Debtor's change in Directors, Mr Ramesh Gahmandiram Gowani was appointed as an Additional Director of the Corporate Debtor. b. Hon'ble High Court of Delhi, in Writ Petition (Civil) No. 3358/2012, passed an order dated 29th April 2013, set aside the said Telefax Communication of BIFR dated 4th May 2009. Since the said Telefax Communication was set aside by the Hon'ble High Court, therefore, Mr Gowani cannot be said to have been appointed and/or continued as such. c. That even if for the sake of arguments, the stand was taken by the Appellant that Mr Ramesh G. Gowani was appointed and continued as an Additional Director of the Corporate Debtor, is taken as correct, in terms of Section 260 of the Companies Act, 1956, such Director could hold office only till the conclusion of the next Annual General Meeting, which could have been held up to 30th September 1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to a corporate debtor, means- (a) a Director or partner of the corporate debtor or a relative of a Director or partner of the corporate debtor; (b) a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor; (c) a limited liability partnership or a partnership firm in which a Director, partner, or manager of the corporate debtor or his relative is a partner; (d) a private company in which a Director, partner or manager of the corporate debtor is a Director and holds along with his relatives, more than two per cent of its share capital; (e) a public company in which a Director, partner or manager of the corporate debtor is a Director and holds along with relatives, more than two per cent of its paid-up share capital; (f) anybody corporate whose Board of Directors, Managing Director or manager, in the ordinary course of business, acts on the advice, directions or instructions of a Director, partner or manager of the corporate debtor; (g) any limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, acts on the advice, directions or instructions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, in the present case, we are assessing its definition only under the IBC, which is exhaustive. The purpose of defining the term separately under different statutes is not to avoid inconsistency but because the purpose of each of them is different. Hence, while understanding the meaning of "related party" in the context of the IBC, it is important to keep in mind that it was defined to ensure that those entities which are related to the corporate debtor can be identified clearly, since their presence can often negatively affect the insolvency process.**** 88. An issue of interpretation in relation to the first proviso of Section 21(2) is whether the disqualification under the proviso would attach to a financial creditor only in praesenti, or if the disqualification also extends to those financial creditors who were related to the corporate debtor at the time of acquiring the debt.**** 103. Thus, it has been clarified that the exclusion under the first proviso to Section 21(2) is related not to the debt itself but to the relationship existing between a related party financial creditor and the corporate debtor. As such, the financial creditor who in praesenti is not a related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been the last resort in the CIR process. However, the Company was sent into liquidation in the instant case without even publishing the Information Memorandum. The fact that the Company was a going concern could be reflected from the facts that the Pune plant of the Corporate Debtor was in production till the year 2016, which could be clear from the Custom Returns filed by the Corporate Debtor before the Central Board of Excise and Customs. (Copy of the Customs Return is at Vol.III pages 482 for 486). 13. The Appellant contends that the liquidator worked 'hand in gloves' with the 'COC' to liquidate the Corporate Debtor. During the 3rd 'COC' meeting, dated 18th October 2019, the IRP, who is also liquidator, was informed by one of the Members of the 'COC', namely 'Pegasus Assets Reconstruction Private Limited', that Mr Gowani, who was, in fact, the Director of the Fasqua Investment Private Limited and also the majority Shareholder of the Kamla Mills Ltd was a related party of the Corporate Debtor that is a clear violation of the explanation to Section 21 (2) of the Code. (Ref; Minutes of 3rd COC meeting dated 18th October 2019 is at vol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RP regulations. In the 4th COC meeting, he circulated the quotation for valuation of assets of the Corporate Debtor he received by email from three Registered Valuers. After careful deliberation on the same concluded that the 'CoC' would confirm the names of the valuation professional after having consultations among themselves within two days. After that, in the 5th CoC meeting, at the time of discussion for status/steps taken, the CoC members present proposed and discussed for liquidation of the corporate debtor. After that, the Adjudicating Authority allowed Application u/s 33 of the Code, and he was appointed as liquidator of the Corporate Debtor. 18. Respondent No. 1 further contends that the Appellant, an erstwhile workman of the Corporate Debtor and Operational Creditor, has no locus to institute the Appeal and question the Creditors' Committee's commercial wisdom to liquidate the Corporate Debtor. 19. Respondent No. 1 states that in the notice of the 'CoC' meeting sent to 'COC' members, there was no agenda about the Corporate Debtor liquidation. The members suo-moto took up the issue of liquidation of the Corporate Debtor. None of the membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, i.e. AGM or EGM, have taken place since then." (Verbatim copy) 23. In the above order, the Adjudicating Authority mentions that in the order dated 19th November 2019, it has been held that Mr Ramesh G Gowani has never been a Director of the Company and that order has attained finality. It is pertinent to mention that IRP/RP filed an Application under Section 19(2) of the Insolvency and Bankruptcy Code 2016 for directions to the respondents to give access to the books of account and other statutory records of the Corporate Debtor, provide all information and handover possession of all assets to resolution professional for a smooth implementation of CIRP. The adjudicating authority, while disposing of the said Application C.A. 1453/K.B./2019, made observations; "3. When the matter came up for hearing, representative of one Respondent, i.e. Ramesh Ghamandiram Gowani appeared and pleaded that such person was not a director of the corporate debtor, hence it should not be impleded in the said petition. In support of such claim it was mentioned that the corporate debtor had earlier been subject to proceedings before the BIFR in 1999. In 2008, the additional directors were appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s observation is based on its earlier order dated 19th November 2019 about 'Kamla Mills Ltd' and 'Fasqua Investment Private Limited' being not related parties to the corporate debtor, has attained finality. However, the Adjudicating Authority failed to notice that his earlier order contains a stray observation about the Directorship of Mr Ramesh G Gowani in the corporate debtor company. Because it was not an issue in C.A., 1453/K.B./2019 filed under Section 19(2) of the Code. The said Application was filed U/S 19(2) of I & B code 2016 by IRP/RP, only on a limited issue involving direction to extend cooperation to the IRP. But it appears that the Adjudicating Authority, instead of deciding the main issue to extend cooperation by the suspended directors of the corporate debtor to the IRP, has travelled beyond the scope of Section 19 (2) of the Code and decided that Mr Ramesh Ghamandiram Gowani is not a director of the corporate debtor company and that he should not be impleaded as Respondent in the said petition. The appellants or other parties likely to be affected by such order were not a party to such decision. Their right to question the status of Mr Ramesh Gh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ** It is further observed by the Hon'ble High Court that "we have consciously not said anything about the merits of the matter because that had the potential for confounding the situation even more". 28. Based on telefax communication dated 4th May 2009 and the Hon'ble High Court order dated 29th April 2013, the position that emerges is that the BIFR never passed such order as stated in telefax communication. 29. The Learned Counsel for the Appellant has placed reliance on the master data of the Corporate Debtor annexed with the appeal paper book as Annexure VI. Photocopy of the master data is as under; 30. The Master data of the Ministry of Corporate Affairs clearly shows that Corporate Debtor 'Incab Industries Limited' was having four directors, and one of them was Mr Ramesh Ghamandiram Gowani. It also appears that Mr Gowani is having the DIN/PAN 00005676, was Director of the corporate debtor from 11th May 2009 till 20th November 2019. 31. The master data of the Ministry of Corporate Affairs about Financial Creditor Fasqua Investment Private Limited is annexed with the Appeal paper book volume 2/page 244. The Xerox copy of the master data is as under; 32. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has noted that by implication of Section 260 of the Companies Act 1956, Mr Ramesh Ghamandiram Gowani is deemed to have vacated office, in the event he was found to be Additional Director validly appointed, on 29th September 1999, i.e. much before his resignation on 20th November 2019. 39. The said Finding appears to be incorrect given Section 260 of the Companies Act 1956. Because of the statutory provision, Additional Directors shall hold office only up to the date of the next Annual General Meeting of the Company. The Appellant has filed a copy of the 81st Annual Report of INCAB industries limited, which contain the report from 1st April 1999 to 31st December 1999. Page 7 of this report is the Director's report. Clause 13 of this report specifically provides that Mr Ramesh Gowani (DIN: 00005676) was appointed as an additional director with effect from 11th May 2009. Each of these directors shall hold office up to the ensuing Annual General Meeting. Accordingly, the Board recommends the appointment of these directors for the Company's shareholders approval.----The brief resume/details relating to the directors who are proposed to be appointed/re-appointed are furnished in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court order, it appears that after noticing that there is no such Order dated 4th May 2009 passed by the Bench, the Hon'ble High Court, without adding anything further set aside the telefax communication dated 4th May 2009. It is also clarified in the order that the position that was existing prior to telefax communication, i.e. that is, on 3rd May 2009, stood revived. Hon'ble High Court has further clarified in the order that that they are not saying anything about the merits of the matter because both parties have agreed that the said telefax communication be either set aside or ignored. Since no order was passed on 4th May 2009, there could not be any impact of the said non-existent order. 43. It is pertinent to mention that Mr Ramesh Ghamandiram Gowani resigned from the post of Directorship only after the initiation of CIRP against the Corporate Debtor. Therefore, it is inconceivable that the resignation of Mr Ramesh Ghamandiram Gowani from Directorship of the Corporate Debtor with effect from 20th November 2019 was taken as a precautionary measure to update the MCA records, which were pending updating since 1999. 44. The Appellant has further placed on record th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor can be identified clearly since their presence can often negatively affect the insolvency process. Hon'ble Supreme Court has further propounded that the default rule under the first proviso to Section 21(2) is that only those Financial Creditors that are related parties in praesenti would be barred from the 'COC'. However, the related Party Financial Creditors that seem to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2) should also be considered as being covered by the exclusion thereunder. Therefore Mr Ramesh Ghamanndiram Gowani's resignation from the Board of Directors of the Corporate Debtor 'Incab Industries Limited' after initiation of the Corporate Insolvency Process will not circumvent the exclusion under the first proviso to Section 21 (2) of the Code. Thus Financial Creditors' Fasqua Investment Private Limited' & 'Kamla Mills Ltd' are the related Party of the Corporate Debtor 'Incab Industries Ltd' in terms of Section 5 (24)(f) of Insolvency and Bankruptcy Code 2016 and terms of Ist proviso to Sec 21(2) of I & B Code; they are not entitled to represent, participate and vote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Schedule by any of the aggrieved parties within 180 days from the date of commencement of the Insolvency and Bankruptcy Code, 2016. Hence, the aggrieved parties have wilfully preferred not to address the said issues. Therefore by the principle of estoppel, the parties are barred from raising any such issue, particularly when the proceedings for liquidation of the Corporate Debtor is at such an advanced stage. 55. The Appellant has relied on Section 5 of the SARFAESI Act 2002 and the Factoring Act, 2011. Section 5 of the SARFAESI Act 2002 provides debt assignment only to an Asset Reconstruction Company. However, the SARFAESI Act 2002 does not apply to the proceedings under the Insolvency and Bankruptcy Code 2016 since there is no condition prescribed under the Insolvency and Bankruptcy Code 2016 mandating the assignment of debt only to an Asset Reconstruction Company. Further, the provisions of the Factoring Act 2011 shall not be available to the Appellant since the assignment in the instant case took place much before the commencement of the Factoring Act 2011. It was promulgated to provide liquidity to the micro, small and medium enterprises sector by devising a mechanism for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of liquidation is passed on the pretext of the proviso to Section 33 (2) of the Insolvency and Bankruptcy Code. In the instant case, liquidation has been started even without valuation and determination of the liquidation value. 62. Under the Insolvency and Bankruptcy Code 2016, the role assigned to the Committee of Creditors is of paramount importance. Section 28 of the I & B code 2016 specifically provides the actions that require the approval of the Committee of Creditors. The success of corporate insolvency resolution entirely depends upon the validly constituted Committee of Creditors. Therefore the legislature has barred the representation, participation and voting by related parties in a meeting of Committee of creditors under the proviso to section 21 (2) of the I.B. code 2016. 63. In the instant case, in addition to the representation, participation and voting by related parties in the Committee of Creditors, other serious irregularities have been noticed in the conduct of the corporate insolvency resolution process, so we think it proper to deal with other issues also to avoid such malpractices in the conduct of the CIRP. 64. Completing the Corporate Insolvency Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d post) from one Operational Creditor other than workers and employees as of 31st August 2019 (date of receipt of claims), i.e., the cut of date per public announcement namely. Serial number Name of the creditors Amount claimed by the creditors (amounting to rupees) Amount admitted (amounting to rupees) till date Remarks 1 Tata steel limited 77,66,49,726.65 (including interest Rs. 35,09,89,602.24 * Total 77,56,49,726.65 * 64(c). No claim was received from creditors (other than Financial Creditors and Operational Creditors) in form F until 21st August 2019. 64(d) A list of these claims received as of 21st August 2019, i.e. (cut off date is), was placed before the Committee of Creditors in the meeting and discussed except claim from employees. The chairman further informed that the voting percentage of the members of the committee of creditors as of date are as follows; Serial No. Name of the Financial Creditor voting percentage 1. Pegasus Assets Reconstruction Private Limited 9.31% 2. Kamla Mills Ltd 77.41% 3. Fasqua Investment Private Limited 13.28% Total 100 % 64(e) The interim resolution professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at different locations is ascertained, valuers' appointment will be made. It was also decided that once the statutory records, audited accounts, and books of accounts of the corporate debtor's are available, the forensic audit can be conducted. The existence of preferential transaction, if any, cannot be ascertained. 66. Summary of Third COC meeting took place on 18th October 2019; Minutes of the CoC meeting has been filed by the Appellant which shows that during this meeting Chairman informed about receiving a letter from Pegasus Assets Reconstruction Private Limited wherein it was stated c (in which Mr Ramesh Ghamandiram Gowani, a director of Incab, holds substantial shareholding) had been made the member of CoC which is void ab initio and in violation of IBC 2016. It is again stated that Information Memorandum could not be prepared on account of the non-availability of statutory records, audited accounts, books of accounts of the corporate debtor. It is also stated that the COC decided that appointment of valuers will be made once the list of assets at different locations is ascertained. Likewise, the same decision was taken for the appointment of a transaction and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also holds 22% shares Fasqua Investment Private Limited. 69. Based on the minutes of all the five 'COC' meetings, it is crystal clear that entire CIRP proceedings were conducted & completed even without any valuation of the Corporate Debtor. In all the COC meetings, it was informed that no records are available and suspended directors are not cooperating. The Interim Resolution Professional has constituted the Committee of Creditors even without admitting the claims. The Committee of Creditors has been formed based on claims submitted. In the column of a status report, It is everywhere mentioned that verification of claims is under process. No Information Memorandum was prepared, and the decision to liquidate the Corporate Debtor was taken. There was no publication of Form 'G' for inviting expression of interest. One of the Financial Creditors objected to the participation of Financial Creditors, Kamla Mills Ltd and Fasqua Investment Private Limited, as they are related parties. However, this objection was overruled by the Adjudicating Authority while he was issuing directions to the suspended Director to extend cooperation to the IRP for submission of records of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator. 21. Committee of creditors.-(1) The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. (2) The committee of creditors shall comprise all financial creditors of the corporate debtor: Provided that a [financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6-A) or sub-section (5) of Section 24, if it is a related party of the corporate debtor,] shall not have any right of representation, participation or voting in a meeting of the committee of creditors: [Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (a) or sub-section (6), the interim resolution professional shall make an application to the Adjudicating Authority along with the list of all financial creditors, containing the name of an insolvency professional, other than the interim resolution professional, to act as their authorised representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the committee of creditors; (c) is represented by a guardian, executor or administrator, such person shall act as authorised representative on behalf of such financial creditors, and such authorised representative under clause (a) or clause (b) or clause (c) shall attend the meetings of the committee of creditors, and vote on behalf of each financial creditor to the extent of his voting share. (6-B) The remuneration payable to the authorised representative- (i) under clauses (a) and (c) of sub-section (6-A), if any, shall be as per the terms of the financial debt or the relevant documentation; and (ii) under clause (b) of sub-section (6-A) shall be as specified which shall form part of the insolvency resolution process costs.] [(7) The Board may specify the manner of voting and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of committee of creditors, but shall not have any right to vote in such meetings: Provided that the absence of any such director, partner or representative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting. (5) [Subject to sub-sections (6), (6-A) and (6-B) of Section 21, any creditor] who is a member of the committee of creditors may appoint an insolvency professional other than the resolution professional to represent such creditor in a meeting of the committee of creditors: Provided that the fees payable to such insolvency professional representing any individual creditor will be borne by such creditor. (6) Each creditor shall vote in accordance with the voting share assigned to him based on the financial debts owed to such creditor. (7) The resolution professional shall determine the voting share to be assigned to each creditor in the manner specified by the Board. (8) The meetings of the committee of creditors shall be conducted in such manner as may be specified. 25. Duties of resolution profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n.-For the purposes of this section, "relevant information" means the information required by the resolution applicant to make the resolution plan for the corporate debtor, which shall include the financial position of the corporate debtor, all information related to disputes by or against the corporate debtor and any other matter pertaining to the corporate debtor as may be specified. 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 meeting; (b) create any security interest over the assets of the corporate debtor; (c) change the capital structure of the corporate debtor, including by way of issuance of additional securities, creating a new class of securities or buying back or redemption of issued securities in case the corporate debtor is a company; (d) record any change in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stence of debt due to the financial creditor may be proved on the basis of- (a) the records available with an information utility, if any; or (b) other relevant documents, including- (i) a financial contract supported by financial statements as evidence of the debt; (ii) a record evidencing that the amounts committed by the financial creditor to the corporate debtor under a facility has been drawn by the corporate debtor; (iii) financial statements showing that the debt has not been [paid]; or (iv) an order of a court or tribunal that has adjudicated upon the non-payment of a debt, if any. 12. Submission of proof of claims.-(1) Subject to sub-regulation (2), a creditor shall submit [claim with proof] on or before the last date mentioned in the public announcement. [(2) A creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit the claim with proof to the interim resolution professional or the resolution professional, as the case may be, on or before the ninetieth day of the insolvency commencement date.] (3) Where the creditor in sub-regulation (2) is [a financial creditor under Regulation 8], it shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial debt or where all financial creditors are related parties of the corporate debtor, the committee shall be set up in accordance with this regulation. (2) The committee formed under this Regulation shall consist of members as under- (a) eighteen largest operational creditors by value: Provided that if the number of operational creditors is less than eighteen, the committee shall include all such operational creditors; (b) one representative elected by all workmen other than those workmen included under sub-clause (a); and (c) one representative elected by all employees other than those employees included under sub-clause (a). (3) A member of the committee formed under this Regulation shall have voting rights in proportion of the debt due to such creditor or debt represented by such representative, as the case may be, to the total debt. Explanation.-For the purposes of this sub-regulation, 'total debt' is the sum of- (a) the amount of debt due to the creditors listed in sub-regulation 2(a); (b) the amount of the aggregate debt due to workmen under sub-regulation 2(b); and (c) the amount of the aggregate debt due to employees under sub-regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osest estimates of a value shall be considered the fair value or the liquidation value, as the case may be. (2) After the receipt of resolution plans in accordance with the Code and these regulations, the resolution professional shall provide the fair value and the liquidation value to every member of the committee in electronic form, on receiving an undertaking from the member to the effect that such member shall maintain confidentiality of the fair value and the liquidation value and shall not use such values to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub-section (2) of Section 29. (3) The resolution professional and registered valuers shall maintain confidentiality of the fair value and the liquidation value.] 36. Information memorandum.-[(1) Subject to sub-regulation (4), the resolution professional shall submit the information memorandum in electronic form to each member of the committee within two weeks of his appointment, but not later than fifty-fourth day from the insolvency commencement date, whichever is earlier.] (2) The information memorandum shall contain the following details of the corporate debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional shall publish brief particulars of the invitation for expression of interest in Form G of the Schedule at the earliest, not later than seventy-fifth day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit resolution plans. (2) The resolution professional shall publish Form G- (i) in one English and one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the corporate debtor and any other location where in the opinion of the resolution professional, the corporate debtor conducts material business operations; (ii) on the website, if any, of the corporate debtor; (iii) on the website, if any, designated by the Board for the purpose; and (iv) in any other manner as may be decided by the committee. (3) The Form G in the Schedule shall- (a) state where the detailed invitation for expression of interest can be downloaded or obtained from, as the case may be; and (b) provide the last date for submission of expression of interest which shall not be less than fifteen days from the date of issue of detailed invitation. (4) The detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 29. (8) The resolution professional shall conduct due diligence based on the material on record in order to satisfy that the prospective resolution applicant complies with- (a) the provisions of clause (h) of sub-section (2) of Section 25; (b) the applicable provisions of Section 29-A, and (c) other requirements, as specified in the invitation for expression of interest. (9) The resolution professional may seek any clarification or additional information or document from the prospective resolution applicant for conducting due diligence under sub-regulation (8). (10) The resolution professional shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date for submission of expression of interest to the committee and to all prospective resolution applicants who submitted the expression of interest. (11) Any objection to inclusion or exclusion of a prospective resolution applicant in the provisional list referred to in sub-regulation (10) may be made with supporting documents within five days from the date of issue of the provisional list. (12) On considering the objections received under sub-regulation (11), the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the best estimate of the amount of the claim. But this Regulation cannot apply to the Financial Creditor because Regulation 12 (3) specifically provides that where the creditor fails to submit a claim with proof within the stipulated time, such Financial Creditor shall be included in the creditors' committee from the date of admission of such claim. Thus under Regulation 12 (3) of CIRP Regulations, the IRP/RP has no discretionary power to constitute the Committee of Creditors without admission of a claim. 75. Regulation 27 of CIRP regulations provides the maximum timeline for the appointment of registered valuers, i.e. within seven days from the date of his appointment but not later than the 47th day from the insolvency commencement date. Regulation 35 provides that valuers appointed under Regulation 27 shall submit the Resolution Professional and estimate of the fair value and the liquidation value computed in accordance with internationally accepted valuation a standard, after physical verification of the inventory and fixed assets of the Corporate Debtor. Thus it is clear that IRP/RP has not conducted the Corporate Insolvency Resolution Process as per the CIRP Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-availability of books of accounts and other records, no business in operation of the C.D. 4. To deliver it, decide about the status of information memorandum.**** The minutes circulated vide your email dated 10th of December 2019 did not capture the discussions not the decisions taken by the COC members.*** 2(d) CIRP process; as RP is unable to get access to books of accounts, fixed assets register and other data-he expresses helplessness to prepare the IM and appoint valuers and transaction auditors and letter for calling EOI's, he stated that liquidation is the way forward and it is not to be construed as the decision of the COC. The minutes gives an impression that it was the members of the COC suggesting liquidation which is to be amended accordingly. Since the RP is unable to follow the CIRP process as required under IBC, he is required to seek necessary orders from NCLT and not propose liquidation without verifying eligible voting percentage are verifying claims of the secured creditors for this purpose. A copy of our letter addressed to the RP taking necessary compliance under the IBC and action is appellant herewith. Request you to take on record the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP, five meetings of the Committee of Creditors took place. Still, till the end of CIRP, IRP did not verify the claims submitted by the Financial Creditors but allotted the voting share to the Financial Creditors, based on the submission of claims. The procedure adopted by the IRP/RP was against the statutory provision of the Code despite the fact that compliance with the statutory requirements of the Code was mandatory. 83. We have also noticed that the IRP/RP has not prepared the Information Memorandum. In the Minutes of the fourth COC meeting dated 11 November 2019, it is stated that verification of claims is under process, and the amount of claims is to be determined. The Information Memorandum, as specified under Regulation 36, will be ready by 22 November 2019. However, in the fifth CoC meeting, i.e. the last meeting, it was decided that there is no need for an Information Memorandum. It was also decided that there is no requirement of Transaction and Forensic Audit and also no need for publication of Form-G for the invitation of expression of interest. The COC also decided to liquidate the corporate debtor. Therefore, there is no need to prepare Information Memorandum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also pertinent to mention that when the Constitution of the Committee of Creditors itself is found to be tainted, then the decision of that COC cannot be validated on the pretext of exercise of commercial wisdom. 86. We have also noticed that the role of IRP/RP/liquidator was not impartial in the conduct of the corporate insolvency resolution process; therefore, we think it proper to change the Resolution Professional. The above discussions show that the Resolution Professional failed to discharge duties and responsibilities cast on the Resolution Professional under the IBC and Regulations' provisions. 'Kamla Mills Private Limited' and 'Fasqua Investment Private Limited' are related parties that were made part of this CoC and were in a commanding position to rush through the decision to liquidate the Corporate Debtor. Facts show that the Corporate Insolvency Resolution Process was initiated in view of Section 9 of the IBC. The petition was admitted on 7th August 2019, and the 5th CoC meeting held on 8th December 2019, which is within 122 days, decided to liquidate the Corporate Debtor. The CoC had two entities holding the majority of the voting rights of 77.20%. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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