Kotak Commodity Services Private Limited vs Cheema Spintex Limited

Per: Subrata Kumar Dash, Member (Technical)

The IAs No.510/2021, 527/2021, 591/2021 and 605/2021 are taken up together as they are inter-connected and the decision in IA No.510/2021 will automatically have a bearing on the rest of aforementioned applications.

The present application has been filed by the Interim Resolution Professional i.e. Sh. Alok Kaushik of M/s Cheema Spintex Limited (Corporate Debtor) under Section 12A of the Code read with Regulation 30A of the IBBI Regulations, 2016.

It is prayed by the applicant to approve the withdrawal of the application bearing CP (IB) No.352/Chd/CHD/2018 titled as Kotak Commodity Services Private Limited and Kotak Ginning & Pressing Industries Versus M/s Cheema Spintex Limited, filed under Section 9 of the IBC, 2016 and was admitted by this Tribunal by order dated 06.10.2021; the IRP may be discharged from the duties of the Interim Resolution Professional; the Suspended Board of Directors may kindly be restored; and the applicant be directed to deposit an amount with the IRP towards the actual expenses incurred by the IRP till the date of approval of this application by the Adjudicating Authority.

The brief facts as stated in the application is that the CIRP was initiated against the Corporate Debtor i.e. M/s Cheema Spintex Limited on 06.10.2021 and moratorium under Section 14 of the IBC, 2016 was declared and the applicant was appointed as Interim Resolution Professional. As per order dated 06.10.2021, the corporate debtor has defaulted in payment of Rs.1,42,04,251/-. The public announcement in Form A was made on 09.10.2021 in “Financial Express” (English) and “Jansatta” (Hindi) and last date for submission of claims was 21.10.2021. The CoC has not yet been constituted in this matter.

In connection with this IA, submissions have been made in Diary No.01290/01 dated 28.10.2021 through Sh. Jagdeep Singh, Senior Manager on behalf of Punjab National Bank (erstwhile Oriental Bank of Commerce) who is the Financial Creditor of the Corporate Debtor. It is stated that Interim Resolution Professional took the necessary steps and published Form A in the newspaper dated 09.10.2021. Apart from the present Financial Creditor, Corporate Debtor also owns debt to two other financial institutes namely, State Bank of India and IDBI Bank. The present financial creditor-PNB has filed CP (IB) No.137/Chd/CHD/2019 under Section 7 of the IBC, 2016 seeking initiation of CIRP against the Corporate Debtor which was disposed of on 20.10.2021. As per the order dated 20.10.2021, the present financial creditor-PNB was directed to file its claim to the IRP. Accordingly, the claim amounting to ₹14,17,10,882.66/-on 21.10.2021 in Form C was filed. It is prayed that the present application filed under Section 12A of the IBC, 2016 read with Regulation 30A of the IBBI (Insolvency and Bankruptcy Resolution Process for Corporate Persons) Regulations, 2016 may kindly be dismissed as the IBC proceedings are proceeding in rem and the claim of all the creditors are to be settled.

The following judicial decisions have been filed by Applicant-Mr. Hardayal Singh Cheema, Managing Director on the Suspended Board of Corporate Debtor in IA No.527/2021 filed by Diary No.01307/4 dated 15.02.2022 regarding the issue of withdrawal of CIRP proceedings. The same issue is being discussed the references are mentioned below:-

In the composite written submission filed in IA No.510/2021 and 527/2021 by Diary No.01307/7 dated 05.04.2022 which is taken up for reference as the issues are interlinked. It has been stated that the mandate of Regulation 30A of the IBBI (Insolvency and Bankruptcy Resolution Process for Corporate Persons) Regulations, 2016 is very clear, and the provisions applicable in the present case are as under:-

As the same is under discussion, the decision of the Hon’ble NCLAT on 07.01.2022 in Ashish Ispat Pvt. Ltd. Ors. Vs. Primuss Pipes & Tubes Ltd. and Ors. cited as MANU/NL/0024/2022. The facts of the said case were similar to the present case, where some financial creditors who were members of the Committee of Creditors, were opposing the withdrawal of the CIRP. The Hon’ble NCLAT held that on account of the fact that the application had been filed prior to the constitution of the CoC, there was no requirement to obtain the consent of the members of the CoC, and allowed the closure of the CIRP process. It held as under:

Further reliance has been placed on another judgment of the Hon’ble NCLAT in Anuj Tejpal vs. Rakesh Yadav & Anr., dated 07.07.2021 in IA No.815 of 2021 in Company Appeal (AT) (Ins.) No.298 of 2021, wherein multiple applications had been filed by various objectors to the withdrawal of the CIRP, and yet the Hon’ble NCLAT permitted the withdrawal on account of the settlement arrived at between the Corporate Debtor and Operational Creditor.

We have heard the learned counsels for the applicant and for the Punjab National Bank and perused the records carefully.

The issue that before us for consideration in the present application is whether withdrawal of CIRP on account of settlement arrived at between the corporate debtor and operational creditor under Section 12A of the IBC, 2016 is permissible in a case where multiple applications are filed by various other creditors (objectors) to the withdrawal of the CIRP and allowability of the withdrawal of application bearing CP (IB) No.352/Chd/CHD/2018 and that of the allowance and expenses incurred in the CIRP proceedings by the Interim Resolution Professional for payment.

For a better understanding of the issues, the timelines in the present are reiterate as under:-

We have heard the learned counsels for the parties and perused the records carefully.

The facts of the case at hand are on the lines of the facts discussed in the Ashish Ispat Pvt. Ltd. (Supra) and Anuj Tejpal (Supra). Respectfully following the decision of the Hon’ble NCLAT in these cases, we hold that as the application has been filed prior to the constitution of the CoC, there is no requirement to obtain the consent of the members of the CoC and the CIRP process should be closed.

To decide on the reimbursement of expenses incurred by the IRP, this Bench in its order dated 30.03.2022 directed the IRP to file details of expenses incurred in CIRP and the same was filed by the Interim Resolution Professional by Diary No.01307/6 dated 04.04.2022 as under:

At the outset, it is noted that the Interim Resolution Professional has himself filed IA No.510/2021 only after 12 days of commencement of the CIRP but has chosen to continue with normal functions under CIRP without pursuing the IA No.510/2021 with this Adjudicating Authority. Even if it may be technically correct, it does not sync with the spirit of the Code. It is also noticed that the Directors have not handed over the records and assets to the IRP subsequent to their settlement with the Operational Creditor. This Bench, therefore, proceeds to categorize the activities for which expenses have been claimed as mentioned in Para 14 into two different categories; essential and non-essential. We are of the view that activities mentioned in Sr. No.1 to 7 of the afore-mentioned table in Para 14, consisting of expenses on account of e-voting agency, security services, publishing house, payments to advocates and transaction auditor as essential and allow the expenses incurred on those activities. The expenses relating to the valuation are disallowed because the Directors have admittedly not handed over the records and assets. Similarly, the payment to advocate for a PUFE transaction for application under preparation is disallowed because, in the absence of records, it is difficult to justify any payment for the preparation of such an application. While, we allow the expense of the IRP amounting to Rs.1,48,237/-, the payment towards his fees is restricted to Rs.2 Lakhs as we strongly disapprove his conduct in not pursuing the present application filed by himself only and unnecessarily adding to the costs by carrying out non-essential activities. In the result, the CIRP costs are allowed to the extent of Rs.8,36,001/-and the same is to be reimbursed by the corporate debtor i.e. M/s Cheema Spintex Limited.

In the circumstances, the instant IA No.510/2021 is allowed, and accordingly the main petition bearing CP (IB) No.352/Chd/CHD/2018 titled as Kotak Commodity Services Private Limited and Kotak Ginning & Pressing Industries Versus M/s Cheema Spintex Limited, filed under Section 9 of the IBC, 2016 is ordered to be dismissed as withdrawn and the Corporate Debtor is released from all the rigors of the IBC and Regulations made thereunder subject to the payment of Rs.8,36,001/- towards reimbursement of the expenses incurred by the IRP. Moratorium under Section 14 of the Code comes to an end. The Interim Resolution Professional is discharged. The Board of Directors are restored to its original position. The contention raised on behalf of Oriental Bank of Commerce (Now Punjab National Bank) is of no consequence in view of the order dated 20.10.2021. It is also clarified that this Bench by its order dated 20.10.2021 in CP (IB) No.137/Chd/CHD/2019 has granted liberty to the petitioner-financial creditor i.e. Oriental Bank of Commerce (Now Punjab National Bank) to prefer its claims to the Interim Resolution Professional with liberty to revive the petition if the earlier party has already settled the matter Accordingly, IA No.510/2021 is disposed of.

The present IA No.527/2021 has been filed by Mr. Hardyal Cheema (Managing Director on Suspended Board of Director) of the Corporate Debtor i.e. M/s Cheema Spintex Limited under Section 60(5) of the IBC, 2016 read with Rule 11 of the NCLT Rules, 2016 seeking for withdrawal and cessation of CIRP proceedings in view of settlement with the Respondent No.2 i.e. Operational Creditor namely, Kotak Commodity Services Private Limited and Kotak Ginning & Pressing Industries.

Since the order is passed in IA No.510/2021, the prayer for withdrawal and cessation of CIRP proceedings against the corporate debtor i.e. M/s Cheema Spintex Ltd. under Section 60(5) of the Code read with Rule 11 of the NCLT Rules, 2016, has already been allowed. Hence the present IA No.527/2021 is rendered infructuous and is disposed of accordingly.

The present IA No.591/2021 has been filed by Mr. Hardyal Cheema (Managing Director on Suspended Board of Director) of the Corporate Debtor i.e. M/s Cheema Spintex Limited under Section 60(5) of the IBC, 2016 read with Rule 11 of the NCLT Rules, 2016.

In the present application, the applicant is seeking stay the operation of order dated 06.10.2021 passed by this Adjudicating Authority till the order is pronounced as reserved on 28.10.2021.

In view of the order passed in IA No.510/2021, the present application IA No.591/2021 is rendered infructuous and is disposed of accordingly.

The present application has been filed by Mr. Alok Kaushik, Interim Resolution Professional of M/s Cheema Spintex Limited (Corporate Debtor) under Regulation 30 of the (Insolvency & Bankruptcy Resolution Process for Corporate Persons) Regulations, 2016.

The applicant prays that directions be issued to respondents to give necessary assistance to the applicant so that the applicant is able to take physical possession of the assets and other records of the corporate debtor as mentioned in this application.

In view of the order passed in IA No.510/2021, the present application IA No.605/2021 is rendered infructuous and is disposed of accordingly.