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Judgment
The present Interlocutory Application has been filed by the Applicant, Gospell Digital Technology against Respondents seeking the following reliefs:
i. quash and set aside the resolution passed/decisions taken in the 2nd Committee of Creditors Meeting of the Corporate Debtor convened on 30th January 2024;
ii.pass an order directing Respondent No. 1 and any other person/s from acting in furtherance of the decisions taken in the 2nd Committee of Creditors Meeting of the Corporate Debtor on 30th January 2024; and if it is found that Respondent No. 1 and any other person/shave acted in furtherance of such decision, order and direct that status quo ante as it existed prior to the decisions be restored forthwith; iii. pass an order and direction injunctioning Respondent No. 1 from convening COC meetings of the Corporate Debtor; iv. pass an order removing Respondent No. 1 as the Interim Resolution Professional of the Corporate Debtor, with immediate effect, and appointing such other person as an Interim Resolution Professional as this Hon'ble Tribunal may deem fit and proper and further direct Respondent No. 1 to take all such steps as are necessary to facilitate the transfer of roles and duties to such newly appointed Interim Resolution Professional, including handing over of all assets, records documents etc.;
v.pass an order and direction directing Respondent No.2 to inquire into the misconduct, negligence and defiance of the Code and Regulations by Respondent No. 1 and submit a report to this Hon'ble Tribunal in a timebound manner; vi. pending the hearing and final disposal of the present Application, stay the effect, implementation and operation of the decisions taken in the 2nd Committee of Creditors Meeting of the Corporate Debtor held on 30th January 2024;
vii.interim and ad-interim reliefs in terms of prayer clauses (ii) to (vi) above; viii. order costs and compensatory costs; and ix. such other and further reliefs, as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case.
The Company Petition bearing CP (IB) No. 137 of 2023, under section 9 of the Code was allowed by this Bench on 19.12.2023 admitting the Corporate Debtor into Corporate Insolvency Resolution Process (CIRP) and the Respondent No. 1 was appointed as the Interim Resolution Professional of the Corporate Debtor out of the Insolvency Professionals listed in the Panel provided by IBBI.
Pursuant thereto, Respondent No. 1 had issued a public announcement in terms of Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations") on 23.12.2023 and the last date for submission of claims was fixed as 04.01.2024. On 02.01.2024, the Applicant herein had filed its claim with Respondent No. 1 for a sum of Rs. 144,85,99,458.13 as on the Insolvency Commencement Date i.e. 19.12.2023. On 14.01.2024, Respondent No.2 had circulated the Notice for the First Meeting of the Committee of Creditors that was to be convened on 19.01.2024 along with the agendas for the meeting.
In the said notice and notes to agenda, it was represented by Respondent No. 1 that " ... Accordingly, the IRP in discharge of his duty has verified the claims under Regulation 13 of CIRP Regulations " and that "... Thus, in pursuance of his duty under Regulation 17 has filed the report for formation of CoC and the list of creditors with the Hon'ble National Company Law".
Applicant has participated in the First CoC meeting convened on 19.01.2024. During the course of the First CoC meeting, the Respondent No. 1 had proposed to vote by show of hands in order to save the CIRP Cost. Accordingly, in the larger interest of the CIRP, the Applicant had agreed to vote by show of hands. Pertinently, the Applicant having 99.99% voting rights had voted against the confirmation of the appointment of Respondent No. 1 as the Resolution Professional of the Corporate Debtor. The Applicant had further voted against the ratification of the appointment of the support entity which was appointed by Respondent No.1.
Further, it is submitted that after the conclusion of the First CoC meeting, the Applicant had received a call from Ms. Samira Nakhasi, who is a representative of the support entity. Over the call, Ms. Nakhasi had informed the Applicant that the voting for the First CoC meeting shall be done through e-voting. The voting in the First CoC meeting was concluded during the course of the said meeting by the show of hands. It is further submitted that the Respondent No.1 circumvented the said voting and opted for e-voting for the First CoC meeting.
As per the Notice and Agenda dated 14.01.2024, the e-voting was to commence on 20.01.2024 at 12 p.m. and the same was to conclude on 22.01.2024 at 12 p.m. However, till 23.01.2024, the Applicant did not receive the link for e-voting. There was not even a communication from the office of Respondent No. 1, explaining the reason for the delay in sharing the link for e-voting.
On 23.01.2024, a request was made on behalf of the Applicant to Mr. Nilesh Mishra (representative of Respondent No.1) to share the link for e-voting. It was only after the said request that the link for e-voting was shared. In the e-voting, the Applicant voted against the confirmation of the appointment of Respondent no. 1 as the Resolution Professional of the Corporate Debtor. The Applicant further voted against the ratification of the appointment of the support entity, which was appointed by Respondent No. 1.
During the course of the First CoC meeting, Respondent No. 1 had informed that one Asha Apartments Private Limited, had filed its claim with Respondent No. 1 as a financial creditor on 05.01.2024 and that such claim is under verification. Respondent No.1 had further stated that the details with respect to the same would be provided once the verification is completed by Respondent No. 1.
Respondent No. 1 has stated that he had completed the verification of claims of the Applicant and one M/s. Babosa Corporation, being the two Operational Creditors of the Corporate Debtor on 11.01.2024. Further, it is stated by Respondent No. 1 that he had filed the List of Creditors and the Report certifying the constitution of the CoC with this Tribunal on 13.01.2024 as per Regulation 17 of the CIRP Regulations. Further, the voting share was as follows- (i) Applicant having 99.99% share; and (ii) M/s. Babosa Corporation having 0.01% share.
In the 1st COC meeting, it was orally requested on behalf of the Applicant to convene the 2nd COC meeting in the week commencing from 22.01.2024, in order to save the time of the CIRP and to appoint the Resolution Professional and the support entity. Pertinently, in the First CoC meeting, Respondent No.1 had agreed to convene the Second CoC meeting in the week commencing from 22.01.2024. However, there was an inordinate and an unexplained delay in the e-voting of the First CoC meeting as well as in convening the Second CoC meeting. Accordingly, the Applicant vide its email dated 24.01.2024, recorded the facts and requested Respondent No. 1 to forthwith convene the Second CoC meeting of the Corporate Debtor. Vide email dated 24.01.2024, the Applicant had also forwarded to Respondent No. 1 the consent of Mr. Arun Bagaria, Insolvency Professional in Form AA to act as the Resolution Professional of the Corporate Debtor. Thereafter, under the cover of its email dated 30.01.2024, the Applicant had also forwarded the profile of M/s. Bagaria & Co. LLP, to act as the proposed support entity of the Corporate Debtor and provide support services to the proposed Resolution Professional, Mr. Arun Bagaria.
Applicant had also recorded that Mr. Arun Bagaria and M/s. Bagaria & Co. LLP would be charging a cumulative fee of Rs. 4,00,000/- plus GST for their services as against the fees of Respondent No.1 of Rs. 3,00,000/- plus GST and his support entity of Rs. 7,50,000/- plus GST.
In the First CoC meeting, one of the agenda items was to ratify the cost incurred by Respondent No.1. However, prior to the First CoC meeting, Respondent No.1 had not provided to the Applicant and/or to the other member of the CoC with the requisite documents in support of the said cost purportedly incurred by Respondent No.1.
Accordingly, the Applicant had called upon Respondent No.1 to provide the documents before ratifying the cost incurred by Respondent No.1. However, despite the request made by the Applicant, Respondent No.1 failed to provide the said documents to the Applicant on or before 23.01.2024, when the Applicant had voted electronically. Since Respondent No.1 had failed to provide the documents as sought by the Applicant, the Applicant by exercising its majority voting rights, did not consent to the agendas except to the agenda convening COC at short duration.
Surprisingly, despite having verified and admitted the claim of the Applicant as an Operational Creditor, on 24.01.2024, the Respondent No. 1 had addressed an email to the Advocates for the Applicant calling upon the Applicant to submit further documents for the purposes of verification of the claim of the Applicant. The Applicant did not Reply to the said Email in view of the fact that its claim has stood admitted and verified in view of its inclusion in the COC.
Heard Ld. Counsel for the Parties and perused the material available on record.
The dispute in the present Interlocutory Application pertains to induction of Asha Apartments Pvt. Ltd. in the capacity of Financial Creditor which disqualified the Operational Creditors, one of which is the Applicant from being Member of the Committee of Creditors. The Applicant has stated that induction of Asha Apartments Pvt. Ltd. took place even when their claim was under verification. It was further emphasized that the amount of said Financial Debt came into existence after this Tribunal had Reserved the orders in CP (IB) 137 of 2023 and the said Company is stated to be accommodation entry provider by the Hon’ble Ahmedabad High Court in the writ proceedings for setting aside notice, initiating of the re-assessment proceedings, issued by the Income Tax Department. Ld. Counsel drew our attention to the decision of the Hon’ble NCLAT in the case of Jayanta Banerjee...Vs...Shashi Agrawal and Ors. Company (AT) (INS) No. 348/2020 to contend that the Creditors whose Claim is under verification cannot be inducted in the CoC meeting.
Per contra the Counsel for the Respondent submitted that the claim of the Financial Creditor i.e. Asha Apartment Pvt. Ltd. was received before the First CoC meeting and this fact is clearly stated in the list of claims filed before this Tribunal.
It is the case of the Applicant that the Resolution Professional had proposed the Resolution for confirming himself as Resolution Professional and approving his Fees as well as for appointment of Insolvency Professional Entity as support, which were voted out by the then CoC in the E-voting taken place on 23.01.2024 to 25.01.2024 and this triggered the Respondent No. 1 to induct Asha Apartments Pvt. Ltd. as Financial Creditor so as to oust the Applicant, a Operational Creditor, from the CoC. Needless to say, the initial CoC consisted of only Operational Creditors and after induction of Asha Apartments Pvt. Ltd., the CoC comprise of only Asha Apartments Pvt Ltd as a sole Member.
The Applicant drew our attention to the Agenda Items of 3rd CoC Meeting stated to have taken place on 12.02.2024 to consider the appointment of Valuer, transaction auditor and support entity M/s Decode Resolvency International Pvt. Ltd., IPE.
The Applicant also drew our attention to the agenda Item of Second CoC Meeting, where at the Resolutions for Appointment of Respondent No. 1 as Resolution Professional and support entity were taken up. We note that at the Second CoC meeting the Applicant was also present and the Respondent No. 1 informed CoC that the proposal from the Applicant suggesting name of the Insolvency Professional Mr. Arun Kisanlal Bagadia, has been received. We further note that the Applicant objected to the inclusion of Asha Apartment Pvt. Ltd. as Financial Creditor in CoC with 100% voting Share.
It may not be out of place to note that the Resolution appointing the Respondent No. 1 was put to vote by show of hands despite the Resolution to appoint him as the Resolution Professional was already voted out in the First CoC meeting. Needless to say, the Respondent No. 1 continued as IRP as no RP was appointed in that meeting. Further, the Resolution to appoint M/s Decode Resolvency International Pvt. Ltd., IPE as support entity was put to vote despite the Resolution to appoint them as support entity was already voted out in the First CoC meeting.
It is not in dispute that the 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 re-constitution of CoC is in itself 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 with him in the physical and electro format to the incumbent Resolution Professional.
The incoming Resolution Professional shall take final decision on the claim submitted by Asha Apartments Pvt. Ltd. within Thirty (30) days and re-constitute the CoC, if required. Till such time, the CoC as constituted initially shall function and take decisions. The business carried out at 3rd CoC meeting, if any, shall not be given effect to, if any. The incumbent Resolution Professional shall pay the fees of the Outgoing IRP at the rate of Rs. 2,00,000/- per month plus out of pocket expenses after verification thereof if not already approved by the CoC.
With the aforesaid observations and directions, the Interlocutory Application bearing IA No. 503 of 2024, is disposed of as Partly Allowed.