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Judgment
Order pronounced via separate order regarding fees of IRP.
This IA stands disposed.
Per: Bench
Under consideration is an Interlocutory Application filed by Mr. Gopikrishna Byadigera (in short “Applicant/Interim Resolution Professional”) under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (in short IB Code, 2016) read with rule 11 of the National company Law Tribunal Rules, 2016 for seeking directions to the Respondents :-
To make payment of Rs.9,56,630/- immediately to the Applicant being IRP fee and the expenses incurred by the IRP till date.
To make the payment of Rs.20,000/- immediately towards appointment of a qualified Chartered Accountant for one month as a professional appointed under Section 30 of the Code.
Brief facts leading to filing of the instant application , as averred by the Applicant, are as under:-
The Applicant was appointed as IRP by this Adjudicating Authority vide it's order dated 05.09.2019 and he had provided his services as IRP/ IRP continuing as RP for about 3 ½ months from 5th March 2019 to 19th June 2019 when a new RP appointed at the instance of CoC had taken over.
That on 19.06.2019, RP reported at Corporate Debtor's office and on the same day IRP handed over the assignment to RP.
That the COC approved IRP fee of Rs.4,00,000/- per month as one of the agenda items in their first COC meeting dated 18.04.2019 and in accordance with the said resolution, the total amount that needs to be paid to the Applicant herein towards his professional fee and expenses incurred is Rs.17,65,193/- against which only a sum of Rs.7,88,563/- was paid and the balance amount remaining to be paid is Rs.9,76,630/-.
However, the Respondents have denied to pay this balance amount on unreasonable, flimsy, false and insubstantial grounds.
That it was a legitimate continuation of services and that the demand for the IRP's fee during the period of responsibility by the Applicant is legally tenable.
That according to Regulation 33, the Financial Creditor is bound to make the payment of IRP fee and other expenses to the extent ratified by COC.
That the Applicant performed the duty of IRP and constituted the Committee of Creditors with Respondents Nos. 2 to 14 herein as Members thereof and thereafter continued to function even beyond 30 days with the designation of Interim Resolution Professional and he performed the CIRP activities till the formal handing over of the assignment to the RP/Respondent on 19.06.2019.
That the COC approved payment of Rs.4,00,000/- per month as IRP fee as one of the agenda items in the first COC meeting dated 18.04.2019 and thus it acquires the sanctity of an agreement. It cannot be amended/modified without the consent of all parties involved.
That the meeting could not be conducted on 18.04.2019 as one of the members could not attend the meeting and all the members decided to go for e-voting and the E-voting was conducted from 23.04.2019 to 24.04.2019 the minutes along with results on e-voting were shared on 25.04.2021 with COC and the Adjudicating Authority.
The following matters were decided in the first meeting of COC:-
Resolved and agreed to replace the IRP with 89% voting.
Resolved and agreed to payment of a professional fee of Rs.4,00,000/- per month + Travelling expenses of Rs.30,000/- per month + Clerical expenses of Rs.20,000/- per month by 77% voting.
Rejected for appointment of Chartered Accountant for a fee of Rs.20,000/- to assist the IRP during CIRP process by 53%.
That the claims received from 272 operational creditors and 18 financial creditors, were all verified and collated by the Applicant and the CoC was constituted with R2 to R14 herein as Members thereof.
Since Corporate Debtor was a going concern, the Applicant also managed its day to day activities as IRP/RP for about 3 ½ months.
That the Applicant diligently performed all his duties both as IRP and IRP with the powers of RP from the 40th day of admission of application till the handing over the process to the RP on 19.06.2020.
That the Applicant as IRP has processed claims worth more than Rs.4495 crores from 14 banks/financial creditors, 203 employees and 70 operational creditors, in addition to full responsibility of monitoring the projects under the corporate debtor to keep it as a going concern.
That while the legitimate and duly ratified IRP fees is being denied to the Applicant, the CoC has agreed to pay Rs.2 lakhs per month to the RP in his name and another Rs.8 lakhs per month to M/s Sumedha Management Solutions Pvt Ltd in which Mr. Anup Kumar Singh, the RP is a member and whole time Director. Thus, it is intentionally being shown that the fee paid to the RP is only Rs.2,00,000/- per month and being compared with the total fee agreed to be paid to the IRP @Rs.4,00,000/- per month.
Reiterating the above, learned counsel for the Applicant prayed to pass an order directing the COC to pay the pending IRP fee and expenses amounting to Rs.9,76,630/- along with interest and payment of exemplary damages.
Learned counsel for the Respondent No.1 filed counter inter-alia stating that the allegations made by the Applicant are denied except those that are specifically admitted hereunder:
That in spite of the First Meeting of the COC being held on 18th April, 2019, the erstwhile IRP has failed to prepare the minutes of the meeting and has also failed to provide a reason for the same.
That the discussion pertaining to the fees of the Interim Resolution Professional (“IRP”) was held in the 4th CoC meeting dated 18.10.19 in the agenda item 2, among other matters. Although the members of the COC had decided in the first meeting of the COC held on 18th April, 2019 that the IRP shall be replaced by a different Resolution Professional, and the order of appointment of the RP was passed by this Adjudicating Authority on 04.06.2019, the erstwhile IRP failed to handover the charge to the Respondent No.1 herein until 19.06.2019. The erstwhile IRP has provided no explanation for such a delay.
That erstwhile IRP Mr. Gopinath Bydigera had lodged a complaint with PG Portal (Government of India) regarding recovery of his fees as the Interim Resolution Professional in the matter of Indu Projects Limited and consequently Bank of India had received an email from the said government department. Bank of India thereafter replied to the PG Portal, Government of India as under:
“In any NCLT admitted account the Resolution Professional and the Committee of Creditors will decide on all matters pertaining to Company including payments to IRP/RP. We Bank of India, the TRA bank acted upon in any payment matters including IRP payment as per RP/COC decisions. You were aware that in first COC meeting dated 18.04.2019 members have voted in favour of changing of IRP i.e. yourselves and appoint a new Resolution Professional. The new RP was appointed on 12.06.2019 by Adjudicating Authority has conducted the 2nd COC meeting on 02.07.2019, in which the COC members deliberated in detail on various items and one of the agenda items was pending payment to IRP and their decision was minuted as under:-
“Further to state the COC decided to pay INR 1 Lac as full and final payment against the IRP’s pending bill of Fee claimed Rs.9,33,330/- and travelling bill of INR 56,630/-. The members deliberated that the First COC minutes was not prepared properly by the IRP and hence could not be approved by the COC as changes cannot be done.” Accordingly, we have paid Rs.1.00 lakhs to you as per the decision of COC as your full and final payment and earlier also we paid on 17.05.2019 Rs.4.00 lakhs. Hence from M/s Indu Project Limited presently no dues are pending as your payments are settled and paid as per the 2nd COC minutes.” Reiterating above, counsel for R1 prayed to dismiss the Application.
Learned counsel for the Respondent No.2 to 13 filed counter inter-alia stating that the allegations made by the Applicant are denied except those that are specifically admitted hereunder:
That the First Meeting of the COC was scheduled to be held on 04th April, 2019. However, as the Applicant herein had met with an accident, the same was postponed and was held on 18th April, 2019. The Code provides for a timeline of one month within which the first COC meeting is to be conducted and that the same was not followed by the Applicant.
That the members of the COC had, in the First meeting of the COC, decided to replace the erstwhile IRP with a new Resolution Professional, as the erstwhile Interim Resolution Professional had no professional or technical support to continue his duties as a Resolution professional.
That the minutes of the meeting was not prepared by the Applicant until 25th April, 2019 which was one week after the meeting.
That the Applicant's request for payment of fee for the period commencing from 05 April 2019 to 22 April 2019 at the rate of Rs.4,00,000/- (Rupees Four Lakhs only) and travelling bills at actuals were approved by the COC.
That the Adjudicating Authority had passed an order of appointment of the new Resolution Professional on 17th May 2019. The COC had paid the dues of the erstwhile IRP for one month. However, some of the members of the COC had objected to the fee payable to the erstwhile IRP and the issue was kept pending until the second meeting of the COC. In the second meeting of the COC held on 02 July 2019 the COC had passed a resolution to pay Rs.1,00,000/- (Rupees One Lakh only) as full and final settlement to the erstwhile IRP.
That the erstwhile IRP had filed the Minutes of the First Meeting of COC with this Adjudicating Authority. However, this Adjudicating Authority had directed the IRP to submit revised Minutes, after making certain changes. But the erstwhile IRP has not responded. Therefore, the COC had filed an Application before this Adjudicating Authority for replacement of the IRP by a new RP, which was approved by this Adjudicating Authority vide its order dated 04 June, 2019.
That the erstwhile IRP failed to conduct the First Meeting of the COC according to the schedule prescribed under the Code, failed to prepare the minutes of the First Meeting of the COC and also failed to prepare the Information Memorandum, as required under the Code.
That the COC members had resolved to replace the erstwhile IRP with a different RP in the First Meeting of the COC and that the erstwhile IRP had not made any progress with respect to the CIRP process until 19 June 2019 when the entire process was handed over to the RP. The IRP provided inadequate and incomplete data and that the documents listed therein were not provided, which clearly shows that IRP has not performed his duties.
That COC members were not satisfied with the performance of erstwhile IRP and wanted to review his fees accordingly and suggested reduction of IRP fees.
That the COC unanimously decided the full and final payment of Rs.1,00,000/- (Rupees One Lakh Only) to the IRP.
That as per the Minutes of the Third meeting of COC dated 02.08.2019 the COC agreed to a fee of Rs.2,00,000/- (Rupees Two Lakhs Only) per month for the Resolution Professional.
That in view of the same, the IRP with limited work cannot get paid two times the fee of the RP.
That the Applicant has also wilfully and deliberately suppressed material facts and documents and for this reason alone, the present Petition is liable to be dismissed.
Learned counsel for the Petitioner filed Rejoinder inter-alia stating that the allegations made by the Respondent are denied and further prayed to allow the application.
Heard and perused the record.
It is seen from record that in the Application filed under Section 7 of the Code, 2016, the Financial Creditor had proposed the name of another Insolvency Professional to be appointed as IRP. However, this Adjudicating Authority found that the proposed IP was already handling many cases and therefore decided to refer the issue of appointment of the IRP to the IBBI. The Applicant herein was, thereafter, appointed on the basis of IBBI's confirmation.
As per the provisions of section 16(5) of the Code, 2016, the term of the interim resolution professional so appointed shall continue till the date of appointment of the resolution professional under section 22 of the Code, 2016.
In this case, the Applicant herein was appointed as the IRP by this Adjudicating Authority upon confirmation of his name by IBBI on 05.03.2019 and the RP was appointed by this Authority only on 17.05.2019 and the RP has taken charge on 19.06.2019. Thus until 19.06.2019 the Applicant herein has conducted the business of the Corporate Debtor as a going concern and protected it's assets. As IRP he has also performed his duties including invitation and collation of all claims and constitution of the Committee of Creditors as prescribed under the Code. The Respondents have harped on the issue of non-submission of the Minutes of Meeting of the 1st CoC meeting to argue that he was found deficient in discharge of his responsibility as IRP. However, the record reveals that the IRP has also filed the Minutes of the First CoC meeting in the Registry wherein he has conveyed rejection of his appointment as RP and resolution for replacement by a new RP by the CoC, proof of which is enclosed in the rejoinder.
Another argument advanced by the Respondents is that the CoC is paying only a sum of Rs.2 lakh per month to the RP who has to facilitate the entire process of Insolvency Resolution, therefore, the IRP should not expect more than the RP.
However, this argument is flawed on two counts:
First, factually, in addition to Rs. 2 lakh as RP fee, the CoC has been paying a sum of Rs 8 lakh per month to another M/s Sumedha Management Solutions Pvt Ltd in which Mr. Anup Kumar Singh, the RP is a member and whole time Director. Thus the Respondents have tried to camouflage the actual RP fee by bifurcating the same and have suppressed this material fact while filing their counter to the instant application. ii. Secondly, it is not disputed that the CoC in their first meeting had approved IRP fee @ of Rs.4,00,000/- per month, which they subsequently and unilaterally decided to reduce drastically by resolving to pay Rs. 1,00,000/- as full and final settlement.
Regulation 33 of IBBI (CIRP) Regulations 2016, dealing with IRP cost reads as under:
"33. Costs of the interim resolution professional.
(1)The applicant shall fix the expenses to be incurred on or by the interim resolution professional. (2) The Adjudicating Authority shall fix expenses where the applicant has not fixed expenses under sub-regulation (1).
(3)The applicant shall bear the expenses which shall be reimbursed by the committee to the extent it ratifies.
(4)The amount of expenses ratified by the committee shall be treated as insolvency resolution process costs.
Explanation. - For the purposes of this regulation, “expenses” include the fee to be paid to the interim resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the interim resolution professional.”
It is pertinent to note here that for fixing the IRP cost, there has to be an agreement between the IRP and the Financial Creditor, which is ratified by the CoC under Regulation 33 and once the fee is so fixed and ratified by the CoC in its first meeting, the same takes colour of a binding agreement between the IRP and CoC within the framework of the IB Code and relevant Regulations. Therefore, any unilateral change by the CoC affecting the rights of the IRP will tantamount to breach of that agreement. In fact, in the instant case the decision to reduce the IRP's fee has been taken much after the IRP had handed over all the relevant documents etc., and the CIRP had continued for some time. The very fact that the RP was able to continue the CIRP smoothly thereafter and a Resolution Plan was approved by CoC indicates that the Applicant had discharged his duties diligently both as IRP and Deemed RP. Thus, an unilateral and drastic reduction of the IRP's fee in subsequent meetings for the services already rendered by the IRP cannot be approved.
It has not been denied by the Respondents that the IRP had continued to work as IRP/Deemed RP till the date he handed over the CIR process and the business of the Corporate Debtor as a going concern to the RP, as there cannot be a vacuum during the insolvency resolution process and therefore, this Adjudicating Authority hereby directs the CoC to pay the IRP fees and reimbursible expenses as per terms agreed and ratified in the first CoC meeting minus the amounts already paid within a week of uploading of this order and the same shall be considered as CIRP cost. Further, interest @12% per annum shall be paid by the Respondents to the applicant on the amounts due from the date of handover to RP until the date of payment.
We also exercise our powers under Rule 11 of the NCLT Rules, 2016 to direct the Respondents to pay legal cost of Rs.1 lakh to the Applicant within a week of uploading of this order for resorting to unilateral breach of terms agreed and ratified in the First CoC meeting.
With the above direction, this IA stands disposed of.