Alok Kaushik vs Cheema Spintex Ltd. & Ors.

[Per: Barun Mitra, Member (Technical)]

The present application has been preferred by the former Resolution Professional seeking revisitation of certain portions of order (hereinafter referred to as Impugned Order) passed by the National Company Law Tribunal, Chandigarh Bench) in IA No.510/2021 in CP(IB) No.352/Chd/CHD/2018 in pursuance of order dated 13.12.2022 passed by the Hon’ble Supreme Court of India in Civil Appeal No.8629/2022.

The chronological sequence of events of the present case, put briefly, is that the Appellant, Shri Alok Kaushik, was appointed as Interim Resolution Professional, (“IRP” in short) of M/s Cheema Spintex Ltd. (Corporate Debtor) which came under Corporate Insolvency Resolution Process (“CIRP” in short) in pursuance of a Section 9 application of Insolvency and Bankruptcy Code, 2016 (“IBC” in short). Following a settlement between the Operational Creditor and suspended management of the Corporate Debtor, the IRP filed an application vide I.A. No.510/2021 before the Adjudicating Authority, inter-alia, seeking approval of CIRP withdrawal application filed under Section 12-A of the IBC; discharge from duties as IRP and for payment of actual expenses incurred by him as IRP. The Adjudicating Authority vide impugned order dated 30.05.2022 while allowing the withdrawal application, discharged the IRP from his duties after modifying the reimbursement of expenses claimed by the IRP besides making certain remarks deprecating the conduct of IRP. The IRP, who in the meantime was confirmed as Resolution Professional, challenged the above impugned order before this Tribunal in Company Appeal (AT) (Ins.) No.896 of 2022. In exercise of its appellate jurisdiction this Tribunal, on 05.09.2022, dismissed the appeal and affirmed the impugned order. Aggrieved by the decision of this Tribunal, the present Appellant filed a Civil Appeal before the Hon’ble Supreme Court, which Appeal got dismissed on 13.12.2022. However, liberty was granted by the Hon’ble Supreme Court to the present Appellant “to file an application before the NCLAT in reference to the facts which have been noticed in Paragraphs 14 and 15 of the order impugned dated 30^th May, 2022.”

The factual matrix of the present case having remained unaltered, we do not wish to recapitulate the facts. Suffice to add, since the passing of the impugned order by the Adjudicating Authority, there have been no notable subsequent developments which has any material bearing on the facts of this case deserving further consideration.

We have heard the Learned Counsel for the Appellant and perused the records carefully. Further, in deference to the precise directions of the Hon’ble Supreme Court dated 13.12.2022, we have closely scrutinized the findings returned by the Adjudicating Authority at paragraphs 14 and 15 of the impugned order which is reproduced below for sake of convenience: -

It is noticed that in paragraph 14, the impugned order has enlisted a table of expenses comprising of 17 items which have been claimed by the IRP as incurred by him in the conduct of CIRP of the Corporate Debtor. Coming to paragraph 15 of the impugned order, we find that the Adjudicating Authority has analyzed the items of expenditure as furnished by the IRP and classified them into “essential and non-essential” categories. The Adjudicating Authority has admitted only 7 items as “essential”. We find that there is no difference of opinion between the Adjudicating Authority and the IRP on the items of expenses which have been categorized as “essential”. The Adjudicating Authority has allowed expenses incurred on the above stated essential activities amounting to Rs. 1,48,237/-besides payment of fees of Rs.2 lakhs to the IRP.

Coming to the items classified as “non-essential” by the Adjudicating Authority, we find that the Adjudicating Authority disregarded the expenses claimed by the IRP in respect of valuation exercise and payments to the Advocate in the context of PUFE transactions as these tasks were not initiated. The Appellant has, however, contended that he has claimed CIRP cost and expenses only on items of work which had actually been completed and such expenses have been also ratified by the Committee of Creditors (“CoC” in short). It has also been submitted that while furnishing the details of CIRP expenses to the Adjudicating Authority, it was clarified that the fees for valuation of assets and advocate expenses for filing PUFE transactions had not been incurred as the exercise was still pending. Be that as it may, the Appellant cannot deny that the expenses on account of the above tasks was submitted by the IRP to the Adjudicating Authority which is clearly recorded in Column 5 of the table of expenses at para 14 of the impugned order. In all fairness, the said column does mention however that CoC had ratified the expenses though many of these tasks were pending.

The IRP while providing the list of expenses to the Adjudicating Authority ought to have filtered the list only in respect of completed items where fees/expenses had become payable rather than perfunctorily send the list of expenses by including items which had not been initiated or lying incomplete. It also remains unexplained as to why the IRP was in such a tearing hurry to get the fees ratified in the CoC meetings. This tendency on the part of the IRP to include such uninitiated and incomplete works in the items of expenses which were not on the anvil makes us believe that there was an underlying intent to inflate the volume of expenses. Needless to add, the IRP is an officer of the Court and is expected to safeguard and ensure the prospects of revival of a dying Corporate Debtor and not overburden it by charging arbitrary and exorbitant fees and expenses.

While examining the factors behind disallowing of non-essential expenses by the Adjudicating Authority, we find that the reasons assigned by the Adjudicating Authority has been the absence of records and the non-handing over of the assets by the suspended management to the IRP. The reasons ascribed by the Adjudicating Authority are cogent and weighty because in the absence of the requisite documents/details/records, it could not have been expected for such an exercise to have been undertaken in the right earnest. We therefore find that the exclusion of these expenses by the Adjudicating Authority was done after due and proper application of mind which was only fair and reasonable. Further when CIRP withdrawal application had already been filed, the IRP had no exceptional responsibility or any exigency looming large before him. Nor was he faced with any complexity that required fast tracking of the CIRP process. We, therefore, do not find any convincing ground to disagree with the Adjudicating Authority to have categorized certain activities as non-essential and disallowing those expenses.

The second major finding returned by the Adjudicating Authority in paragraph 15 of the impugned order is that the Appellant was continuing with CIRP without actively pursuing the CIRP withdrawal application and that this was not in sync with the spirit of the IBC. We find that the Appellant has not denied the CIRP withdrawal application filed by himself vide IA No.510/2021 and that the suspended management had also filed a withdrawal application vide IA No.527/2021. Undisputedly, both these IAs were filed before constitution of the CoC. The Appellant was also aware that the suspended management of the Corporate Debtor had filed another IA No.591/2021 before the Adjudicating Authority seeking stay on CIRP of the Corporate Debtor.

Contesting the above finding of the Adjudicating Authority that the Appellant was lukewarm in following up the matter before the Adjudicating Authority, we notice that the Appellant in his written submissions has stated that though he was pursuing the withdrawal applications as well as the stay application and appeared before the Adjudicating Authority on several occasions, no substantive orders were passed by the Adjudicating Authority. Hence his bonafide in pursuing the matter before the Adjudicating Authority cannot be questioned. In support of his contention, the Appellant has relied on the decision of this Tribunal in Madhusudan Sharma vs. J.D. Aneja Edibles Pvt. Ltd. in CA(AT)(Ins) No.764 of 2019 (“Madhusudan” in short) wherein the presence of Resolution Professional in the court during hearings was seen as sufficient effort in pursuing the case.

The applicability of the judgment of this Tribunal in Madhusudan supra has to be tested against the facts of the present case. That the withdrawal and stay application were heard several times is an admitted fact. However, there is nothing on record in the interim orders to show that the Appellant had been successful in demonstrating before the court the conundrum confronting him in the conduct of CIRP. The Appellant has taken the pretext that the Adjudicating Authority had made an oral observation during the hearings that it would not pass any interim order on the stay as may be seen at page 5 of Appeal Paper Book. In the first place, the Appellant having adverted to an oral observation made by the Court, the authenticity of which is not verifiable as it is not substantiated by the records, we are thus not impressed by this defence. For the sake of argument, even if we accept this contention, it is nevertheless an admission of failure on the part of the Resolution Professional. Had the Appellant persuasively pressed the matter before the Adjudicating Authority rather than merely registering his presence, the Appellant would have been able to engage the attention of the Adjudicating Authority to the special circumstances warranting an expeditious decision on the withdrawal and stay applications. Hence we are inclined to hold that the Madhusudan decision cannot come to aid of the Appellant. Instead, we are of the considered view that the Adjudicating Authority has rightly noted that the Appellant took advantage of the situation and mechanically pulled on with the CIRP process and kept on getting his expenses ratified from time to time by trumping up of the need to adhere to CIRP timelines.

This brings us to the last issue raised by the Adjudicating Authority in paragraph 15 where the conduct of the IRP has been strongly disapproved for not having actively pursued the matter before the Adjudicating Authority and for unnecessarily adding to the costs by carrying out non-essential activities. The Appellant has contended that there was no basis for the Adjudicating Authority to have passed deprecatory remarks on his conduct and prayed that the adverse remarks should be expunged. The Appellant has submitted that he is academically highly qualified and possesses rich experience having handled several CIRP/liquidation related assignments and unless these adverse remarks get expunged, it would jeopardize his professional career. We do not wish to make any observations on the academic qualification or experience claimed by the Appellant. In the same breath, we hold that academic qualifications and past experience cannot absolve the Resolution Professional of his conduct which has been found to be unprofessional by the Adjudicating Authority for reasons well-articulated in the impugned order.

For the foregoing reasons, we find the application devoid of merit and do not find any reason to interfere with the findings of the Adjudicating Authority as recorded in paragraphs 14 and 15 of the impugned order dated 30.05.2022. The application is dismissed. No order as to costs.