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TMI Blog2023 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... had decided on the quantum of fees and other expenses payable to the Resolution Professional and in the course of determination of fees/expenses had also made some adverse observations on the conduct of the Resolution Professional in respect of insolvency proceedings of M/s Kushal International Limited which had entered into liquidation. The Resolution Professional (present Appellant) being aggrieved with the negative comments made on his professional conduct as also by the reduced quantum of fees/expenses as determined by the Adjudicating Authority in the impugned order, the present appeal has been preferred. 2. Throwing light on the factual background of the present case, the Learned Counsel for the Appellant submitted that following a Section 7 petition having been admitted by the Adjudicating Authority on 08.05.2018 bringing M/s Kushal International Limited/Corporate Debtor under the rigours of Corporate Insolvency Resolution Process ('CIRP' in short), Shri Pankaj Khetan, was appointed as Interim Resolution Professional ('IRP' in short) who was later confirmed as Resolution Professional. Initiating the CIRP, the Appellant/IRP published a public announcement on 10.05.2018 seeki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor. Furthermore, since the Sub-Divisional Magistrate concerned was also not cooperating in sharing land details of the Corporate Debtor, an application under Section 19 was filed against him which was taken on record by the Adjudicating Authority in its order dated 18.09.2018. 4. Due to non-compliance of statutory requirements and persistent non-cooperation from the suspended management in allowing CIRP to proceed, the 4th CoC meeting held on 12.10.2018 recommended that an application for the liquidation of the Corporate Debtor be filed before the Adjudicating Authority by the Resolution Professional. Accordingly, an application under Section 33 of the IBC was filed by the Appellant following which the Adjudicating Authority passed liquidation order on 28.02.2019. It is submitted that though the matter of appointment of new liquidator was listed for hearing on 11.03.2019, the Adjudicating Authority finally issued orders for appointment of a liquidator on 20.12.2021, after a gap of nearly three years. 5. The Learned Counsel for the Appellant further submitted that in the order dated 20.12.2021, the Adjudicating Authority had noted that as the appointment of liquidato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Resolution Professional was more focussed on remunerations rather than closure of CIRP; that unnecessary expenditure was incurred on appointment of security guards; that no progress reports on liquidation process was submitted; that the fees/expenses claimed were exorbitant and disproportionate and that certain illegal action was taken in attaching the asset of a subsidiary of the corporate Debtor without seeking legal opinion. It was vehemently contended that these derogatory remarks are unwarranted and that there is sufficient material on record to prove to the contrary and hence these observations ought to be expunged. 8. The Learned Counsel for the Respondent refuting the submissions of the Appellant asserted that inaction and inability on the part of Resolution Professional to follow the various steps in CIRP is clearly evident from the fact that no Resolution Plan emerged. There was failure on the part of Resolution Professional to prepare and submit Information Memorandum before the CoC and issue of Expression of Interest as required under IBC and regulations framed thereunder. The Resolution Professional was also unable to elicit any successful resolution plan for the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of issue of liquidation order, we note that it has been admitted by the Appellant that a sum of Rs. 10,00,000/- plus Rs. 2,50,935/- being IRP expenses from 08.05.2018 to 04.06.2018 was reimbursed by the CoC. The 2nd CoC meeting held on 26.06.2018 approved an expenditure of Rs.50,000/- incurred from 05.06.2018 to 18.06.2018. The 3rd meeting of CoC on 13.08.2018 approved the remuneration and fee of the Resolution Professional at the rate of Rs.3,50,000/- per month besides ratifying reimbursement of expenses of Rs.2,27,614/- for the period 06.07.2018 to 12.08.2018. It is also noted that the Resolution Professional on having filed an application under Section 60(5) of the IBC for issue of directions to the Respondent for payment of outstanding fees and expenses, the Adjudicating Authority in its order dated 19.08.2020 had noted that the CoC had claimed to have paid the entire outstanding dues for the period till 28.02.2019. That the fees/expenses of the Resolution Professional have been cleared up to 28.02.2019 i.e. up to the date of the passing of the liquidation order is an undisputed fact and has also been admitted by Resolution Professional which has been excerpted at para 13 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances leading to the passing of the liquidation order on 28.02.2019. The 4th CoC meeting was held on 12.10.2018 wherein the CoC with 100% vote share decided that liquidation of the Corporate Debtor should be initiated having denied the request made by Resolution Professional to file an application seeking extension of CIRP. The Resolution Professional had thereafter filed an application before the Adjudicating Authority for passing of liquidation order. We find that the Adjudicating Authority had noted complaints of bias and corrupt conduct as well as allegations of inaction and inability raised against the Resolution Professional by the suspended management, while also observing that no material was however placed on record by the suspended management to substantiate their allegations of bias against Resolution Professional. However, in deference to the wisdom of CoC, vide its order of 28.02.2019, it was held by the Adjudicating Authority that for "smooth functioning of the liquidation of the Corporate Debtor", the Appellant should not continue as liquidator. In other words, the Adjudicating Authority had taken a conscious decision not to appoint the Resolution Profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharging the function of liquidator had claimed the same fees as that of Resolution Professional. This was not in order since the fees of the Resolution Professional and that of a liquidator cannot be equated as their duties are different and therefore the matrix for evaluating the reasonability of their fees would also differ. In any case, the Resolution Professional was at best technically continuing in the absence of appointment of liquidator. Further by his own admission, beyond being a custodian of assets of the Corporate Debtor, the Resolution Professional could not have taken any action in the commencement or furtherance of the liquidation process having not been appointed as regular liquidator. In such exceptional circumstances, the Adjudicating Authority has therefore taken a well-considered decision to pay a lump sum amount of Rs. 2,00,000/- only to the Resolution Professional for the entire period starting from 01.03.2019 till the passing of the order. It has also correctly noted that since no major legal services have been rendered during this period except for pursuing applications before the Adjudicating Authority, a consolidated fee of Rs.50,000/- only for the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor, holding of 4 CoC meetings in which CIRP progress reports have been furnished, filing of section 19 and 70 IBC applications against the concerned parties before the Adjudicating Authority etc. Moreover, the Respondent never raised any qualms against the conduct of the Appellant throughout the tenure of the CIRP. Further we cannot be unmindful of the constraints faced by the Resolution Professional on the ground that delay in the closure of CIRP was caused due to withholding of information and non-cooperation by the suspended management in spite of clear directions of the Adjudicating Authority. On the activities undertaken post passing of the liquidation order, we notice that the Adjudicating Authority has returned the findings that no progress report was filed by the Resolution Professional on the efforts made by him during the period when the liquidator remained to be appointed. While this is factually correct, it also cannot be discounted that he had undertaken several steps including appointment of security guards to protect the assets of the Corporate Debtor, prevented the suspended management from causing harm to the property of the Corporate Debtor by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that security guards were appointed and huge expenditure incurred thereon while no valuation of the property has been done by the Resolution Professional. In his defence, the Learned Counsel for the Appellant has stated that the appointment of security guards has no correlation to non-appointment of valuers and that in any case the valuers could not be appointed due to non-cooperation in providing requisite information by the suspended management and the statutory auditor. Moreover, when the suspended management was itself trying to interfere with the property and unauthorisedly attempting to dispose it off, it became incumbent upon the Resolution Professional to protect the same being the custodian of the assets of the Corporate Debtor. Hence, we are of the considered view that the conduct of the Resolution Professional cannot be assailed on this score either. 20. We are therefore satisfied with the findings of the Adjudicating Authority that the fees/expenses claimed by the Resolution Professional for the period following the passing of the liquidation order is exorbitant and not commensurate with the work performed by him as is clearly borne out from material on record. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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