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TMI Blog2025 (1) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in the First Schedule to these regulations for avoiding conflicts of interest and maintaining independence. Keeping in mind the status of Applicant as a strategic project partner and a key financier of the project, it does stand to reason for them to have raised questions on the manner of selection of consultants followed by the IRP when they were not satisfied with the quality of services rendered. From material on record, it is noticed that the Applicant had issued letters to the IRP to clarify the manner in which these consultants were appointed including details of their credentials, professional profile, work experience, man power and HR structure etc. The stone-walling of such relevant information by the IRP does create room for suspicion on the conduct of the IRP of trying to conceal/supress relevant and necessary facts. The apprehensions of the Applicant with regard to the manner of appointment of the consultants ought to have been allayed by the IRP rather than create a shroud of opacity. There was a clear breach of fiduciary duties on the part of the IRP besides conflict of interest in the appointment of the consultants. Hence the IRP should be immediately replaced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice, the removal of the IRP directed forthwith and the consultants appointed by them. Application allowed. - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Abhijeet Sinha Sr. Advocate with Ms. Khyati Jain, Mr. Diwaker Lohia, Ms. Heena Kochar , Advocates For the Respondent : Mr. Rajat Sinha, Advocate for R1/Homebuyers. Mr. Sunil Fernandes Sr. Advocate with Mr. Anuj Chauhan, Mr. Hritik Mehta, Ms. Rajshree Chaudhary, Ms. Diksha Dadu, Ms. Jeba Boktiar Mondal and Ms. Khyati Khemka , Advocates for IRP Mr. P.K. Dubey, Sr. Advocate with Mr. Hardeep Sachdeva, Mr. Ravi Bhasin, Mr. Abhyudai Singh, Mr. Raghav Chadha, Mr. Mukund Rawat, Mr. Kushank Sindhu and Mr. Benjamin Vanlalvena , Advocates for Eka Life Ltd. Mr. Ashim Sood and Mr. Shahan Ulla, Advocates for R4 ( ABFL ) Mr. Adarsh Srivastava, Mr. Rachit Mittal and Mr. Parish Mishra , Advocates for Noida Authority ORDER ( Hybrid Mode ) Per : Barun Mitra , Member ( Technical ) Present is an application filed under Section 60(5) of Insolvency and Bankruptcy Code 2016 ( IBC in short) by the Applicant-Eka Life Ltd seeking replacement of the Interim Resolution Professional of Sequel Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction shall commence in full swing. On 16.07.2024, it was brought to the knowledge of this Tribunal by the IRP that Environmental Clearance had been granted on 27.05.2024 and that map validation was under the consideration of the Competent Authority. On 12.08.2024, this Tribunal took note that one home-buyer had expressed concern regarding structural stability of the project. On 16.10.2024, EKA filed present IA No. 7159 of 2024 before this Tribunal raising serious allegations against the functioning of the IRP and praying for replacement of IRP of the Corporate Debtor and to appoint any suitable IRP. 3. Making his submissions, the Ld. Sr. Counsel for the Applicant while giving a background of the present matter stated that after the Corporate Debtor was admitted into CIRP, an MoU dated 12.07.2023 was signed between EKA and the Homebuyers which MoU provided that EKA was to arrange and disburse interim finance amount of Rs 75 Cr. and that construction was to be carried out under the supervision of the IRP with the co-operation of the suspended promoter. While EKA had already infused an amount of Rs 25 Cr. towards construction of the project, the IRP on his part had failed to secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d already infused Rs 25 Cr. which fact has not been disputed by the IRP thus proving their bonafide. Neither have they reneged on their assurance to provide the interim finance in full. Without disputing the fact that a time period of 6-9 months was provided to them by this Tribunal to infuse the funds, it was submitted that the IRP was unjustly insisting on the Applicant to infuse the balance of Rs 55 Cr at a time when they themselves had failed on their part to secure the conditions precedent/requisite approvals which this Tribunal had mandated them to provide. The time line of 6-9 months cannot be read in an isolated manner as it was contingent on fulfilment of all four condition precedents, which obligation has not yet been fully discharged by the IRP. 8. It was submitted that the Applicant had sought replacement of IRP in the right earnest to ensure that funds infused by them is not misused or diverted by IRP to its related parties instead of using it for running the Corporate Debtor as a going concern. With a view to prevent further manipulations and frauds by the IRP and to ensure timely development of the project and in the interests of justice, it has been prayed to replac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on their part, it was clarified that this was occasioned by pending litigation before the Hon ble Allahabad High Court on account of which RERA registration was yet to be obtained. Pending RERA registration, the sale of unsold inventory could not have been permitted by the IRP. It is also contended that while the Applicant has mentioned about Master Agreement 19.09.2023, it has deliberately chosen not to mention the orders of this Tribunal dated 25.07.2023 and 16.10.2023 which has an overriding effect on the Master Agreement and mandated completion of fund infusion by EKAApplicant within a stringent time-line. 10. It was vehemently contended that IBC does not allow any intervenor to seek removal of IRP/RP and such powers vest exclusively with the CoC. If the present Applicant is permitted to approach the Adjudicating Authority or this Tribunal for removal of IRP, the special procedure as contemplated under Section 27 of IBC for removal of IRP will be rendered otiose. It was also pointed out that Section 22(2) of IBC provides that the IRP s appointment has to be first confirmed by the CoC during its first meeting with 66% of voting. Since, there is a stay on the constitution of CoC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors, interim finance providers, and prospective resolution applicants to the insolvency professional agency of which he is a member, within the time specified hereunder Explanation- For the purpose of clause 8-B and 8-C above, relationship shall mean any one or more of the following four kinds of relationships at any time or during the three years preceding the appointment of other professionals ... 8C. An insolvency professional shall ensure disclosure of the relationship, if any, of the other professionals engaged by it with itself, the corporate debtor, the financial creditor, the interim finance provider, if any, and the prospective resolution applicant, to the insolvency professional agency of which he is a member, within the time specified as under 14. An insolvency professional must not act with mala fide or be negligent while performing its functions and duties under the Code. 23-B An insolvency professional shall not engage or appoint any of his relatives or related parties, for or in connection with any work relating to any of his assignment. 23-C An insolvency professional shall not provide any service for or in connection with the assignment which is being undertaken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence statement and profile of the PMC alongwith details of key personnel were also not shared. It was also pointed out that the IRP had deliberately supressed the credentials and profile of the PMC and LC as it would have clearly exposed their conflict of interest in selecting and appointing the consultants. It was also alleged that AMS Consultants-PMC was the last entity to submit their bid in response to the EOI and was appointed as the PMC basis their fee quote being the lowest. Their experience and professional credentials were not factored in by the IRP in their selection as PMC. A similar pattern of manipulation of the EOI process took place in the appointment of Pinnacle Law Chambers as the LC of the IRP. Pinnacle Law Chambers which got finally picked up as LC was again the last entity to have submitted their bid and the sole criteria for appointment was again the lowest fee quoted without factoring in other professional credentials. 16. When we look at the manner of selection, we cannot be unmindful of the fact that there seems to be strange pattern in the manner in which the successful consultants were selected. In both the cases of PMC and LC, the consultants which got se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had filed four other CIRP petitions and in all of them the present IRP was nominated to conduct the CIRP process. Prima-facie, we are not much impressed by this assertion of the Applicant since in terms of the statutory provisions of the IBC, the appointment of IRP is the prerogative of the Operational Creditor or Financial Creditor or Corporate Debtor subject to approval of the Adjudicating Authority. Hence it would be a little too far-fetched to believe that CLL had a role to play in the selection of IRP in the other entities undergoing CIRP. 20. We now proceed to dwell upon another set of allegations raised by the Applicant to substantiate that there was continuing and subsisting professional association and monetary dealings between the IRP and CLL. It was contended that IRP had formerly served as a Designated Partner in CLL and continued to remain affiliated with CLL by virtue of having close association with Shri Prit Pal, the current Designated Partner of CLL. The IRP held that it was misconceived on the part of the Applicant to make this allegation since the IRP s association with CLL had terminated more than 3 years back. Since the Code of Conduct stipulated making disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch all go to corroborate IRP s relationship with all these entities at some point of time. 22. It was contended by the Applicant that the IRP having deliberately failed to disclose his associations with the PMC, LC as well as CLL which were related parties tantamount to violation of the Code of Conduct for Insolvency Professionals. There was a clear breach of fiduciary duties on the part of the IRP besides conflict of interest in the appointment of the consultants. Hence the IRP should be immediately replaced. Per contra, the IRP has justified non-disclosure of its association with CLL, PMC and other related business entities on the ground that Clauses 8B, 8C and 8D of the Code of Conduct apply only to a period of 3 years preceding their appointment of IRP and since their association had terminated more than 3 years back, it need not have been disclosed. We are of the considered view that this cannot come to the rescue of the IRP since in terms of Clause 8C of the Code of Conduct, the disclosure requirement comes into play at any time when the IRP is a key managerial person, a partner of a related party or a partner or director of the concerned company, firm or LLP. The explanatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory can be sold as per the law without any hindrance. (ii) Procure Environment Clearance for the project within four months from the dated of this agreement (with a grace period of 30 days). (iii) Procure RERA extension/approval for all phases of the project within 4 months from the date of this agreement (with a grace period of three months). (iv) Application for revalidation of all approvals including for all expiry/applicable approvals including revised building plan from Noida Authority. Items no. (i) and (iii) above are admittedly still pending while items no. (ii) and (iv) above have been achieved. 25. The Applicant has indisputably infused sums of money to the tune of Rs 25 Cr. to ensure that construction is continued while it is also indisputable that the conditions precedent have not been fulfilled by the IRP. In the given facts and circumstances, we are inclined to agree with the Applicant that when two of the condition precedent remain unmet on the part of the IRP, it does not behove of the IRP to put blame on the Applicant for not infusing the balance amount. The Applicant not having evaded its responsibility to contribute to the interim financing nor having refused to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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