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TMI Blog2024 (10) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... ave voted him out. The actions of the appellant IRP are not bona fide in the present matter. He has been very biased in his approach in this matter, particularly after the first CoC meeting where a decision was taken to remove him and appoint a new RP. Prima facie he seems to be guilty of perjury as he has stated before AA on record that the claim of Asha Apartments has been accepted by him on 25.01.2024 and accordingly he has reconstituted the CoC. Whereas in the minutes of the second CoC held on 30.01.2024, he has stated that the claims of all three creditors are under verification category. It should be mentioned that the claim of Respondent No.1 was admitted and informed by him to AA on 12.01.2024 itself. This clearly suggests that the Respondent No.2 was introduced as the Financial Creditor, without proper verification to ensure that the Committee of Creditors consisted solely of financial creditor who would appoint the IRP as RP and further allow him to conduct the CIRP process in tandem with the newly introduced sole member of CoC. The conduct of the RP in the instant CIRP proceeding seems to be premediated, biased and authoritarian in clear violation of the core objectives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short CoC ). The AA's interference with CoC decisions and unwarranted remarks that tarnish the appellant s professional reputation are also contested. The appeal questions the legal validity of removing the appellant as the IRP. 3.The brief facts of the case are as follows: (i)The Respondent No.1 in the present case, Gospell Digital Technology Co. Ltd. (OC) filed a petition u/S 9 of the Code against M/s Altius Digital Private Limited (CD). M/s Altius Digital Private Limited, was admitted in CIRP on December 19, 2023 . The Appellant, Shri Dushyant Dave, was appointed as the IRP from a list provided by the Insolvency and Bankruptcy Board of India (in short IBBI ). (ii)The IRP issued a public announcement on December 23, 2023, inviting creditors of the Corporate Debtor to submit their claims by January 4, 2024. On January 2, 2024, Gospell Digital Technology Co. Ltd. submitted its claim totaling Rs.144,85,99,458.13. This claim was verified and subsequently admitted by the IRP on 11th January 2024 establishing Gospell Digital as the pre-dominant Operational Creditor. On the same day, IRP also verified and admitted the claim of another Operational Creditor M/s Babosa Corporation of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom both parties, the tribunal ruled on March 4, 2024, in favor of Gospell Digital. The tribunal expressed concerns about Dushyant Dave's impartiality in handling Asha Apartments Pvt. Ltd.'s claim and their inclusion in the CoC. The AA found that the resolutions passed in the second CoC meeting, including Dave's confirmation as RP and the appointment of Decode Resolvency International Pvt. Ltd. as the support entity, were questionable. It set aside these resolutions and appointed Mr. Arun Kisanlal Bagadia as the new RP, with a monthly fee of Rs. 2,00,000/- plus GST, effective from March 11, 2024. The Appellant was directed to hand over all records and documents to the incoming RP. (vii)The impugned order passed by the AA on March 4, 2024, addressed multiple concerns raised against the IRP. The AA found that the IRP had acted in a manner that compromised the integrity of the CIRP process. Specifically, the AA highlighted his handling of the inclusion of M/s Asha Apartments Pvt. Ltd. as a financial creditor, which significantly altered the composition of the Committee of Creditors (CoC). (viii)The AA observed that the verification of Asha Apartments' claim was prematu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of Asha Apartment Pvt. Ltd. is stated to be in verification and Respondent No. 1 submitted that he shall take appropriate decision in relation to genuineness in due course. However, this bench has the serious concern in relation to the impartiality of the decision in respect of Asha Apartments Pvt. Ltd. in the light of Respondent No. 1 despite having been voted out was voted in by the same Financial Creditor. We deem it appropriate the proprietary of placing the Resolution for his appointment as Resolution Professional and appointment of M/s Decode Resolvency International Pvt. Ltd., IPE as support entity before the reconstitution of CoC is questionable. Accordingly, we set aside the Resolution passed in 2nd CoC meeting appointing the Respondent No. 1 as Resolution Professional and M/s Decode Resolvency International Pvt. Ltd., IPE as support entity. We deem it appropriate to appoint Insolvency Professional Mr. Arun Kisanlal Bagadia as a Resolution Professional of the Corporate Debtor for a fee of Rs. 2,00,000/- per month plus GST and discharge the Respondent No. 1 with effect from 11.03.2024. The Respondent No. 1 is directed to handover all the records whatever available wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l obligations. In this regard he cited Katra Realtors (P) Ltd. v. Rajesh Ramnani, 2024 SCC OnLine NCLAT 302. The appellant draws a parallel between the respondents' actions and the contractual failures observed in the aforesaid case. By doing so, he emphasized that the respondents' breach of contract is a pivotal issue that justifies their claims and supports their position in the dispute. 9.The appellant further highlighted the lack of transparency and due diligence in the management of stressed assets by the respondents, citing Stressed Assets Stabilization Fund v. Piyush Periwal, 2024 SCC OnLine NCLAT 185. This judgment is used to support the claim that the respondents did not fulfill their legal obligations regarding the management of such assets. The appellant argues that this lack of due diligence is a significant factor that undermines the respondents' legal standing and further strengthens the appellant's case. 10.Furthermore, the appellant points to the failure of the respondents to adhere to strict legal standards required of government bodies, referencing Hari Narayan Tewari v. Cantonment Board, Ramgarh Cantonment, 2024 SCC Online SC 1643. This case illus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.2 and the same was instantly transferred to the account of CD. 16.The counsel further stated that the Loan Agreement required the Corporate Debtor to pay 18% annual interest on the principal, plus an additional 2% for late payments, but no payments were made. 17.The counsel stated that on October 4, 2023, the NCLT reserved its order on the Company Petition (IB) No. 137 (MB) of 2023 for initiating CIRP proceedings against the CD. It is seen, that immediately thereafter, a Deed of Hypothecation was executed on October 12, 2023, by Mr. BK Sancheti Director of CD in favour of Respondent No. 2. The CIRP petition was admitted on December 19, 2023, and Mr. Dushyant Dave was appointed as IRP. A public announcement was made on December 23, 2023, setting a deadline for claim submissions as January 4, 2024. 18.Counsel for Respondent No. 1 submitted that he has filed a claim for Rs.144 Crore on January 2, 2024. On 10.01.2024 the appellant sought certain additional documents from R-1 for verification of its claim. Subsequently, the claim was verified and admitted by the appellant. The Appellant filed the Certification for Constitution of the CoC and List of Creditors on January 12, 2024, befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner only to get himself reappointed, after being voted out in the 1st COC meeting. That various proceedings have been initiated against the Appellant before the IBBI during his previous assignments. 24.The Respondent No. 1 further stated that Respondent No.2/Asha Apartments had preferred an independent appeal bearing CA (AT) (INS.) No. 915 of 2024, against the impugned order, which was disposed of on May 9, 2024. The coordinate bench of this Tribunal did not find any fault with AA s order in the present matter. The Appellant in the present case was impleaded as Respondent No. 2 in the aforesaid proceedings. 25.Considering the above, the Respondent No.1 contended that the impugned order is devoid of any error and that the remarks made by the AA should not be expunged. It is prayed that the current appeal be dismissed with exemplary costs in favour of Respondent No. 1. 26.The counsel for Respondent No.2 did not make any submission nor did he file any written submission. Analysis and Findings 27.We have heard the counsels in detail and examined the records submitted by the parties. 28.The date wise sequence of events in this case in very crucial to understand the actions by various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition and the subsequent appointment of the Interim Resolution Professional (IRP) by the AA, the IRP filed a report on 12.01.2024, concerning the constitution of the Committee of Creditors (CoC) to AA. The relevant paras 3,4, and 5 of the same are reproduced below: 3. As on January 04, 2024, the IRP has received the following claims that have been verified in accordance with the Code and the rules and regulations made there under: S. No. Name of Creditor Address of Creditor Category of creditor Amount claimed (INR) 1 Gospell Digital Technologies Co. Ltd.. Gospell Industrial Park, Guanshandong Street, Chenzhou City, Suxian District, Hunan, China 423000. Operational Creditor 1,44,85,99,458 2 M/s Babosa Corporation Building No. A3, Unit No. 101, Babosa Industrial Park, Operational creditor 1,07,289 Saravali Village, Bhiwandi- 421 302 Total 1,44,87,06,747 It is pertinent to note that, the present Composition of CoC has been arrived at in accordance with the list of creditors. 4.In view of the above, the undersigned has constituted the Committee of Creditors comprising of the creditors as mentioned above based on the information available as on date with the IRP in accordance with Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Persons) Regulations, 2016 ( CIRP Regulations ) intimating the public in general and the creditors of the Corporate Debtor in particular of the initiation of Corporate Insolvency Resolution Process ( CIRP ) and inviting claims from the creditors of the Corporate Debtor. The same was published on December 23, 2023, in Free Press Journal (English) and Navashakti (Marathi). The last date for submission of claims was on January 04, 2024. 3.The Applicants submits that as on January 04, 2024, he had received claims form two Operational Creditors being, Gospell Digital Technologies Co. Limited and M/s Babosa Corporation. The Applicant in discharge of his duties under Regulation 1 7 of CIRP Regulations had filed the Report of constitution of the Committee of Creditors and list of creditors on January 12, 2024, bearing filing no 2709138078742022. Accordingly, the Applicant convened the First (1 st) Meeting of the Committee of Creditors on January 19, 2024. 4.The Applicant submits that he, thereafter, received a claim under Claim form C of CIRP Regulations from a Financial Creditor, Asha Apartments Private Limited, on January 24, 2024. In pursuance of the said receipt, the Applicant verified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that in accordance with Regulation 6 of CIRP Regulations had published Form A, intimating the public at large and the creditors of the Corporate Debtor of initiation of CIRP against and Corporate Debtor and inviting claims from the Creditor of the Corporate Debtor. The last date for the submission of claims as per Form A was January 04, 2024. 2.The IRP on January 24, 2024, received a claim under claim Form C from a Financial Creditor, Asha Apartments Private Limited. Accordingly, the IRP accepted the claim and filed for an updated list of creditors and reconstitution of the COC with Hon'ble NCLT on January 25, 2024. The financial creditor could produce the copy of the charge created on the assets of the CD in the MCA records as well as the transfer of the funds to the CD account in the bank statement of the financial creditor. 3.The IRP in compliance with Regulation 12 and 13 of CIRP Regulations is under the process of verifying the claims received by him. Mentioned below are the details of the said claims as received by IRP and them treatment there of: S.No Name of Creditor Type of Creditor Date of receipt of claim Amount claimed (INR) Status of claim 1 Asha Apartments Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as reconstituted with Asha Apartments as the sole financial creditor with 100% voting share. The agenda items that were previously rejected during the first CoC meeting, which pertained to the removal of the IRP and the Insolvency Professional Entity (IPE), were reintroduced in the second CoC meeting. With the support of Respondent No. 2, now the sole member of the CoC, the IRP secured his own reappointment. (Emphasis supplied) 41.The discussion in previous paras shows that the actions of the appellant IRP are not bona fide in the present matter. He has been very biased in his approach in this matter, particularly after the first CoC meeting where a decision was taken to remove him and appoint a new RP. Prima facie he seems to be guilty of perjury as he has stated before AA on record that the claim of Asha Apartments has been accepted by him on 25.01.2024 and accordingly he has reconstituted the CoC. Whereas in the minutes of the second CoC held on 30.01.2024, he has stated that the claims of all three creditors are under verification category. It should be mentioned that the claim of Respondent No.1 was admitted and informed by him to AA on 12.01.2024 itself. This clearly suggests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution plan and the powers of CoC regarding the same. (iii)The Judgment of this Tribunal in the Stressed Assets Stabilization Fund v. Piyush Periwal , 2024 SCC Online NCLAT 185, involved the CoC retaining the RP with a majority vote, wherein a request was made by Operational Creditor to remove the RP due to his inefficiency. This Tribunal upheld the decision of CoC to retain the RP stating that unless there is a conflict of interest or evidence of misconduct, the CoC s decision to retain the RP should not be interfered with. In the present case the misconduct of IRP and questions about his impartiality and fairness in conduct of CIRP are the issue. Therefore, the ratio laid down by the Judgment (supra) does not apply in the present case. (iv)In Katra Realtors (P) Ltd. v. Rajesh Ramnani , 2024 SCC Online NCLAT 302 decided by this Tribunal, the focus was on procedural compliance in CoC meetings, and it was CoC s conduct which was in question. The present case on the other hand deals with the IRP's conduct in CIRP proceedings. (v)The Judgment of Hon ble SC in Hari Narayan Tewari v. Cantonment Board, Ramgarh Cantonment , 2024 SCC Online SC 1643, pertains to natural justice in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.10.2023. These agreements were made after insolvency proceedings had been initiated, leading to concerns about the legitimacy of the financial debt claimed by Asha Apartments and its subsequent participation in the CoC. 50.We also note that, the loan agreement stipulated an interest rate of 18% per annum but it appears no payment has been made by Respondent No. 2 to the Corporate Debtor to date. 51.It was also pointed out that the R2 company was known as entry operator from Kolkata and its conduct has been investigated by Income Tax Authorities in the past. 52.Our attention was invited to the judgment of the Hon'ble Gujarat High Court in Special Civil Application No. 17786 of 2018, Navnidhi Dyeing and Printing Mills Pvt. Ltd. vs. Assistant Commissioner of Income Tax, Circle 1(1)(2), Ahmedabad , wherein the court noted prima facie findings from the Assessing Officer indicating that Asha Apartments Private Limited appears to be a shell company based in Kolkata, controlled by Mr. Manoharlal Nangalia. Mr. Nangalia admitted to providing accommodation entries through shell companies to various beneficiaries in exchange for commission. The relevant para 18 of the Judgment (supra) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inflating or fabricating the presence of certain financial creditors, distressed companies can tip the scales in favor of a particular resolution plan, leaving genuine operational creditors sidelined. In more extreme cases, these creditors are completely excluded from the recovery, despite their legitimate and often overdue claims. This case seems to be following the same pattern. 55.We have also seen the Judgment of a Principal Bench of this Tribunal dated 09.05.2024 in the appeal filed by Asha Apartment Pvt. Ltd. /Respondent No.2 wherein Company Appeal (AT) (Ins.) No. 915 of 2024 in Asha Apartments Pvt. Ltd . Vs. Gospell Digital Technology Co. Ltd . In this appeal the same impugned order was under challenge regarding keeping the claim of Asha Apartments as Financial Creditor on hold till final decision of the new RP. The relevant portions of the order in para 2 to 6 are reproduced below:2. This Appeal has been filed against the order dated 04.03.2024 passed in IA No.503 of 2024. The Adjudicating Authority by impugned order has appointed new Resolution Professional and has issued following directions in paragraphs 24 and 25: - 24) It is not in dispute that the claim of Asha Apartm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate debtor. It shall be open for the Resolution Professional to file an appropriate application and take steps and complete the verification as directed the Adjudicating Authority as early as possible. The Adjudicating Authority has not made any observations in the order regarding merits of the claim of the appellant and the Resolution Professional shall proceed to verify the claim as per the records available as early as possible preferably within the period of two months. 6.The Appeal is disposed of. 56.We would therefore not like to make comments regarding the eligibility of Asha Apartments as Financial Creditor at this stage, since a decision in the matter is pending. 57.In conclusion, we find that the conduct of the appellant has not been neutral and impartial in the aforesaid CIRP proceedings. He had tried to conduct CIRP in such a manner to keep himself as RP by prematurely admitting the claim of Respondent No.2 as Financial Creditor and reconstituting the IRP. The Respondent No.2 in turn helped him by appointing him as RP. This conduct goes against the objectives of the Code. If such conduct and collusive practices are allowed to continue, the entire edifice of IBC would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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