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TMI Blog2022 (3) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... to revive the said IA or to file a fresh petition after complying with the directions of this Adjudicating Authority, but the Respondent-RP cannot postpone the implementation of the directions issued by this Adjudicating Authority beyond a reasonable period - no further orders are required to be passed in the instant IA. Application disposed off. - I.A. No. 248 of 2021 in CP (IB) No. 228/BB/2018 - - - Dated:- 22-2-2022 - Ajay Kumar Vatsavayi, Member (J) And Manoj Kumar Dubey, Member (T) For the Appellant : Gautam Ankad, Adv. For the Respondents : A. Murali, Adv. ORDER Ajay Kumar Vatsavayi, Member (J) 1. The instant Application is filed by Wahaca Trading Private Limited (hereinafter referred to as 'Applicant') u/s. 60(5) of the Insolvency and Bankruptcy Code, 2016 against Mr. Shivadutt Bannanje, Resolution Professional of M/s. Bhuwalka Steels Industries Limited (hereinafter referred to as 'Respondent') by inter alia seeking the following: (a) To discharge/replace the Respondent as the Resolution Professional of the Corporate Debtor and in his place and stead, appoint any other Resolution Professional to look after the affairs of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor, the Corporate Debtor along with its subsidiary/affiliated Companies agreed that they shall pay the outstanding amount to UIL and PG Mercantile, and further requested to supply raw material on credit basis so that it could generate revenue which in turn help in paying the said outstanding amounts. As per the terms and conditions recorded in the agreement, UIL and PG Mercantile agreed to supply the raw material to the Corporate Debtor. The agreement executed between the Corporate Debtor, Nava and Beneka and UIL is in form of Minutes of the Meetings dated 24.08.2011 ('MOM'). iv.) The Corporate Debtor, vide letter dated 10.06.2013, confirmed that an amount of ₹ 128,00,58,893.46/- is outstanding towards UIL and PG Mercantile till that date. Due to non-payment of outstanding amount, UIL along with PG Mercantile and HPMPL filed Suit No. 19 of 2014 along with Notice of Motion No. 21 of 2014, before the Hon'ble High Court of Bombay for specific performance of the agreement for sale and for a money decree for the said amount. The Hon'ble High Court, vide its order dated 16.07.2014, in Notice of Motion No. 21 of 2014 held in Para 21 that 'Having r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorised the Respondent to appoint two registered Valuers in consultation with the CoC for valuation of the Corporate Debtor. The Applicant vide email dated 19.06.2019 requested the Respondent to conduct a detailed audit as per the IBBI guidelines for ascertaining siphoning and diversion of funds. x.) CoC in its 3rd meeting held on 14.08.2019 ratified the appointment of two registered Valuers along with appointment of forensic auditor. Also, the RP placed eight (8) Expression of Interest (Eol) received from the prospective Resolution Applicants before the CoC for their consideration. The progress report of the work assigned to the said Valuers and the forensic auditor was placed before the CoC only in its 4th meeting held on 16.09.2019, which is approximately three months from their appointment. When the aforesaid email dated 19.06.2019 was also tabled before it, the Respondent informed the CoC that the same was forwarded to the forensic auditor and was told to investigate the matter and report the same in the forensic audit report. The Respondent even after such a long duration failed to provide the forensic auditor with the required information. The Respondent informed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting held on 07.11.2019 resolved that the Respondent will intimate the forensic auditor to submit the forensic audit report without any further delay. Discussions were also initiated regarding the outstanding dues from one of the related party of the Corporate Debtor i.e. M/s. Shri Durga Trade Links. Even after bringing to the notice of the Respondent that there were fraudulent transactions between the Corporate Debtor and Shri Durga Trade Links, the Respondent merely issued a notice to Shri Durga Trade Links and thereafter failed to take steps to recover the monies. Further, the actions of the Respondent has played into the hands of the suspended Promoters as there is clearly a link between the 2 entities which the Applicant has time and again brought to the attention of Respondent and the CoC, and the same was ignored. xiv.) During the 9th meeting of the CoC it was discussed that the Respondent shall call the Resolution Applicants for the next CoC meeting to discuss and negotiate on their respective plans. CoC in its 11th meeting held on 30.01.2020 decided to open the revised Resolution Plans as received from the Resolution Applicants. Further, draft forensic audit repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was resolved that their request shall be granted by the CoC subject to approval from the Hon'ble Tribunal. Further, the Respondent during the 5th CoC meeting informed that Eol were received from two Resolution Applicants namely, Salagram Power Steel Pvt. Ltd. on 31.10.2019 and from G.K. Ispat Pvt. Ltd. on 28.10.2019. The same were considered by the CoC and was rejected as the acceptance of the same shall not be feasible due to time constraints. xix.) Aggrieved by the CoC decision, G.K. Ispat Pvt. Ltd. and Bipin Textile Processing Industries Ltd. filed a Writ Petition No. 50370 of 2019 before the Hon'ble High Court of Karnataka. The Hon'ble High Court vide order dated 06.11.2019 granted interim stay restraining from opening, considering or evaluating or approving the Resolution Plan in respect of the Corporate Debtor. It has been contended by the Petitioner that the Hon'ble High Court was in error in exercising jurisdiction over the subject matter. The Applicant came to learnt that the minutes of the first, second and Fifth meeting of the CoC were filed by the said parties before the Hon'ble High Court of Karnataka, as the minutes of CoC meeting are conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Resolution Applicants squarely falls on the shoulder of the Respondent. Without forensic audit report, at the 13th CoC meeting held on 18.02.2020, CoC finally approved the Resolution Plan submitted by M/s. Starteck Finance Limited. It is in this meeting the Respondent informed the CoC that the final forensic audit report has been received. xxiv.) Pursuant thereto, the Respondent preferred an IA No. 133 of 2020 u/s. 60 and 66 of the Code and Regulation 35A of IBBI (IRP for Corporate Persons) Regulations, 2016, inter alia seeking to direct the Promoters to make good the losses suffered by the Corporate Debtor. The said IA was dismissed vide order dated 10.03.2021 by making scathing observations against the Respondent to the effect that the said Application is premature in nature and the whole basis of such application was the forensic report which was prepared on mere assumptions and further directing the Respondent to carry out basic enquiry of all surrounding facts to make out his case. However, the Respondent has failed to adhere to the directions of this Tribunal. xxv.) In light of negligent act of the Respondent on various instances in conducting the CIRP process, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted by the RP through his email dt. 03.06.2019. Despite not being a part of the CoC, the Applicant is unnecessarily interfering with the CIRP process. The CoC consists of Canara Bank, Indian Overseas Bank, IDBI Bank, SBI Global Factors and Deccan Mining Syndicate Pvt. Ltd. In accordance with the directions of the CoC, the provisions of the Code and Regulations thereunder, the Respondent was carrying out his duties. iv.) As regards the allegation that the RP has caused delay in conducting forensic audit, it is submitted that given the volume of the scope of the forensic audit, which was vast in nature, the forensic auditor took some time to review all necessary documents and provide his findings. These documents were to be provided by the Corporate Debtor's erstwhile directors and employees, there was some delay caused by them. It is also on account of the fact that the offices of the Corporate Debtor had been shut since the year 2016, and all employees had been laid off. Further, as and when the documents were provided, the Respondent followed up with the forensic auditors with a view to conclude it as quickly as possible. v.) Even though the appointment of forensic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. The RP, in terms of the instructions received at the 6th CoC meeting, had instructed his counsel that the resolution of the proposed applicant, G.K. Ispat Pvt. Ltd. would be accepted only if the Hon'ble High Court directed the RP to do so. This was pursuant to the counsel for RP specifically advising the RP and the member of the CoC that the resolution plan can be accepted. It was only in this context that the writ petition came to be allowed. It would be wholly false to state that the RP acted contrary to the directions of the CoC. Further, through a competitive bidding process held at the CoC meetings pursuant to the order in the writ petition, it was Starteck Finance Ltd., who emerged as the Successful Resolution Applicant. x.) As regards the allegation that the RP considered the Resolution Applicants without a Valuation Report with respect to the Corporate Debtor, it is submitted that as the draft forensic audit and valuation report are confidential documents, the RP shared them only with the CoC of the Corporate Debtor first. Further, the valuation report was ready as of 10.10.2019, and was provided to the members of the CoC before the Resolution Plans were del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ROC or the IT Department for the last several years. Despite multiple requests, no records have been provided by the promoters. The Promoters have also not cooperated, and have only sought further time to furnish the same. Thus, the order of this Tribunal on IA No. 133 of 2020 must be viewed in light of these practical difficulties. Further, the RP is in the process of taking appropriate steps against all necessary parties, in accordance with the liberty granted. 4. In response to the aforesaid objections, the Applicant vide its rejoinder dated 03.01.2022, further inter alia submitted as under: i.) The timeline of the CIRP of the Corporate Debtor as set out in the said Application clearly suggest that there was in fact a considerable delay in conducting the forensic audit of the Corporate Debtor. ii.) In the 3rd CoC meeting, the appointment of forensic auditor was ratified by the CoC. It was only in the 11th CoC meeting held on 30.01.2020, draft forensic audit report was discussed with the members of the CoC by the representatives of forensic auditors. It is pertinent to note that in 10th CoC meeting held on 21.01.2020, the CoC had already initiated the discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Further, the Respondent failed to give any cogent reasons as to why legal actions were not initiated against Shri Durga Trade Links after issuance of notice in that regard. viii.) The Tribunal in IA No. 106 of 2020 inter alia noted that it was premature to make allegations regarding the conducting of CIRP at that time and that issues raised in that Application will be considered by the Tribunal at the time of considering the Resolution Plan. Thus, the Applicant has rightly filed the said Application for bringing out the issues regarding the misconduct of the Respondent and the manner in which CIRP has been conducted. 5. Heard Shri Gautam Ankad, learned Counsel for the Applicant, Shri A. Murali, learned Counsel for the Respondent/Resolution Professional and carefully perused the pleadings on record. 6. When this IA is taken up for hearing, the learned Counsel appearing for the Applicant, at the outset, submitted that he is pressing only reliefs at Para 26 (c) and (d) and not pressing any other reliefs. 7. It is the case of the Applicant that the Respondent-RP filed IA No. 133 of 2020 in CP (IB) No. 228/BB/2018 under section 60 r/w section 66 of the I B Code, 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade Links Private Limited, which has not made any public filings, whether with the Registrar of Companies, or the Income Tax Department for the last several years. No documents are available in respect of these companies. No records have been provided by the promoters, despite multiple requests being made. The only documents available have already been furnished to the forensic auditor. In this light, it has been nearly impossible for the Respondent to produce further evidence of wrongdoing. The promoters have also not cooperated, and have only sought further time to furnish necessary information and clarifications. It is humbly submitted that the order of this Hon'ble Tribunal on IA 133 of 2020 must be viewed in the light of these practical difficulties. In fact the Resolution Professional is in the process of taking appropriate steps against all necessary parties, in accordance with the liberty granted. 9. It is to be seen that this Adjudicating Authority while disposing of the IA No. 133 of 2020 vide order dated 10.03.2021, though not fixed any specific time to the RP to revive the said IA or to file a fresh petition after complying with the directions of this Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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