Bank Of Maharashtra vs Vijay Kumar Resolution Professionalâ” ...

[Arising out of an Impugned Order dated 07th June, 2022 passed in CP (IB) No. 415(PB)/2019 by the Adjudicating Authority (National Company Law Tribunal, Special Bench, New Delhi)]

IN THE MATTER OF: Bank of Maharashtra Head Office at: 'Lokmangal', 1501, Shivajinagar Pune - 411005 Zonal Office at: Joy Tower, 1/1A, C Block Phase 2, Industrial Area Sector 62, Noida - 201301 ...Appellant

Versus

1. Vijay Kumar ("RESOLUTION PROFESSIONAL" OF SOHO INFRASTRUCTURE PRIVATE LTD.) Chopra Apartment, Flat No.264, Plot No. B, Sector - 23, Dwarka New Delhi - 110077

Also at: D-410, Pocket - 16, Sector - 7 Rohini, New Delhi - 110085 E-mail - vk_hv@yahoo.co.in; cirp.soho@gmail.com; bp@sohogroup.in

Also at: Flat No. 172, Plot No. 7C Green Tower Apartment ...Respondent No.1/ Sector 23, Dwarka, New Delhi - Resolution Professional 110077 2. Punjab National Bank K.M. Trade Tower, M3, Modipon Vihar, Sector 14, Kaushambi, Ghaziabad

Company Appeal (AT) (Ins) No. 711 of 2022 1 of 14 Uttar Pradesh - 201010 ...Respondent No.2/ Email: bo3000@pnb.co.in; Financial Creditor alpha.beeta.dk@gmail.com (CoC Member)

3. Punjab National Bank ...Respondent No.3/ ARM Branch, Mayur Vihar - II Financial Creditor New Delhi - 110091 (CoC Member)

4. Mr. Sanjay Kumar Sinha L2/20, P.I.T. Colony, Near Kendriya Vidhalaya Kankarbagh, Patna - 800020 ...Respondent No.4/ Email: Financial Creditor sanjaykumarsinha118@gmail.com (CoC Member)

5. Mr. Rakesh Kumar Singh Village - Phulawariya, Anchal Mairwa ...Respondent No.5/ Dist. Siwan, Bihar - 841243 Financial Creditor Email: rkumar72del@gmail.com (CoC Member)

6. Mr. Deepak Malhotra 11/12, Kaveri Apartment, Bander Bagicha, Frazer Road ...Respondent No.6/ Patna - 800001 Financial Creditor Email: malhotradeepak514@gmail.com (CoC Member)

7. Mrs. Shweta Malhotra 11/12, Kaveri Apartment, Bander Bagicha, Frazer Road ...Respondent No.7/ Patna - 800001 Financial Creditor Email: malhotradeepak514@gmail.com (CoC Member)

8. Ms. Archana Kapoor 81, Kaveri Apartment, Bander Bagicha, Frazer Road ...Respondent No.8/ Patna - 800001 Financial Creditor Email: deeoakkapoor40@gmail.com (CoC Member)

9. Mr. Deepak Kapoor 81, Kaveri Apartment, Bander Bagicha, Frazer Road ...Respondent No.9/ Patna - 800001 Financial Creditor Email: deeoakkapoor40@gmail.com (CoC Member)

10. Ms. Tony Batra Flat No. 2B, Jayant Jyoti Apartment

Company Appeal (AT) (Ins) No. 711 of 2022 2 of 14 Riding Road Sheikhpura ...Respondent No.10/ Patna - 800014 Financial Creditor Email: malhotradeepak514@gmail.com (CoC Member)

11. Ms. Chanchal Batra Flat No. 2B, Jayant Jyoti Apartment Riding Road Sheikhpura ...Respondent No.11/ Patna - 800014 Financial Creditor Email: malhotradeepak514@gmail.com (CoC Member)

12. Mr. Neeraj Sinha Flat No. 304, Block-A Durga Apartment Mahesh Nagar Road No.1 ...Respondent No.12/ Patna - 800024 Financial Creditor Email: nsinha.cse@gmail.com (CoC Member)

13. Mr. Pankaj Kishore Saran Flat No. 404, 4th Floor Prem Kunj, Infront of Loyla High School Bank of Baroda Lane ...Respondent No.13/ Near Kurji More, Patna - 800014 Financial Creditor Email: rahulfrontline@gmail.com (CoC Member)

14. Ms. Sunita Saran Flat No. 404, 4th Floor Prem Kunj, Infront of Loyla High School Bank of Baroda Lane ...Respondent No.14/ Near Kurji More, Patna - 800014 Financial Creditor Email: rahulfrontline@gmail.com (CoC Member)

15. Mr. Rabindra Prasad Flat No. A-103, 1st Floor Prashray Appt., Ara Garden Road Jagdeo Path, Bailey Road ...Respondent No.15/ Patna - 800014 Financial Creditor Email: rohit.v.srivastava@gmai.com (Coc Member)

16. Savitri Upadhyay Flat No. 508, Soho Nirmala ...Respondent No.16/ Danapur, Patna Financial Creditor Email: sanjay_upadhya@yahoo.com (CoC Member)

17. Ajay Kumar Pandey ...Respondent No.17/ F/2, A-13, Ali Nagar Colony Financial Creditor Post - Anishabad, Patna - 800002 (CoC Member)

Company Appeal (AT) (Ins) No. 711 of 2022 3 of 14 Present: For Appellant : Mr. Nishant Arora, Advocate

For Respondent : Mr. Virender Ganda, Sr. Advocate Mr. Om Prakash Sharma, Mr. Vijay Ahuja, Mr. Ayandeb Mitra and Ms. Siddhi Khambayat for RP. Ms. Raveena, Proxy Adv. for Ms. Anju Jain for R-1.

ORDER

[26th September, 2022]

(Per Hon'ble Mr. Justice M. Satyanarayana Murthy)

This Appeal, under Section 61 of Insolvency and Bankruptcy Code,

2016 (hereinafter referred as 'IBC'), is filed challenging the order passed by

National Company Law Tribunal, Special Bench, New Delhi (hereinafter

referred as 'Adjudicating Authority') in Company Petition (IB) No.

415(PB)/2019 dated 07.06.2022 whereby the claim of the Resolution

Professional for payment of fee, is accepted.

2. The parties to the appeal preferred as arrayed before the NCLT, Delhi

for convenience. The Resolution Professional is appointed by the impugned

order dated 07.06.2022 to complete the Corporate Insolvency Resolution

Process (hereinafter referred as 'CIRP'), accordingly he constituted CoC and

conducted 4 Meetings of Committee of Creditors (hereinafter referred as

'CoC') incurring expenses, besides engaging an advocate on payment of fee.

But the same has not been paid to the Insolvency Resolution Professional

though the remuneration and expenses were approved by CoC but he died

Company Appeal (AT) (Ins) No. 711 of 2022 4 of 14 before the completion of process. The main contention of the Respondents

before the Adjudicating Authority was that he was having only 25.54% of

voting right being creditor and cannot be compelled to pay half of the share

of remuneration and expenses and that he is not liable to pay the legal

expenses which was not approved by the CoC and agreed to pay the fee

payable to Resolution Professional and other expenses approved by CoC.

3. The Adjudicating Authority passed the order after recording

contentions and mostly on the submission made by Ms. Anju Jain that fee

payable to the legal heirs of the deceased Resolution Professional was

approved by National Company Law Appellate Tribunal (hereinafter referred

as 'NCLAT') without recording independent reason. The Respondent before

the Adjudicating Authority Appellant herein questioning the same on the

ground that no such order of approval of the remuneration payable to the

legal heirs of deceased Resolution Professional was passed by the NCLAT

and that the Appellant is liable to pay remuneration and expenses approved

by CoC, proportionate to his voting right of 25.54%. Apart from that the fee

payable to advocate is not approved by CoC thereby not liable to pay the fee

allegedly paid by RP to advocate, requested to pass an appropriate order.

4. Whereas, the Learned Senior Counsel Mr. Virender Ganda submits

that the fee payable and the expenses incurred by deceased Resolution

Professional was approved by CoC in 1st, 2nd and 4th CoC meetings and the

Appellant herein, the Respondent before the Adjudicating Authority is liable

Company Appeal (AT) (Ins) No. 711 of 2022 5 of 14 to pay the fee to the legal heirs consequent upon death of Resolution

Professional but not paid till date and requested to pass an appropriate

order.

5. Admittedly, Resolution Professional was appointed to complete CIRP

and held fourth CoC meeting and incurred certain expenses and died in the

month of September, 2021 before completion of resolution process. During

his tenure, fourth CoC meetings were held, but in three meetings i.e. in 1st,

2nd and 4th CoC meetings the expenses incurred by the erstwhile deceased

Resolution Professional was approved the remuneration and expenses in

different meetings noted as follows.

6. The 1st CoC meeting dated 15.11.2019 and the expenses in Item No.

4, remuneration and expenses incurred by Interim Resolution Professional

were dealt with and approved the same is extracted hereunder:

"Item - 04 To ratify and approve the remuneration and expenses incurred by the Interim Resolution Professional till the date of the meeting.

The Chairman placed before the members a list of expenses incurred from the date of appointment till the date of first meeting of the Committee of Creditors, the details of which is as under:

Sr. Particulars Amount (Rs) No. 1. Fees of Interim Resolution 1,00,000 Professional during the first month of resolution process (excluding

Company Appeal (AT) (Ins) No. 711 of 2022 6 of 14 applicable taxes, if any)

2. Travelling expenses of Interim 15,000 Resolution Professional and other team members 3. Office staff salary, printing, 10,000 stationery and other office expenses 4. Public Announcements 58,800

5. Preparation of demand drafts and 6,020 other expenses for filing of applications with the Hon'ble NCLT, Principal Bench and New Delhi Bench 6. Lawyers' fee for preparation, filing 1,69,000 of applications with NCLT, Principal Bench and New Delhi Bench and appearances before the Hon'ble Tribunal. 7. Cost of conducting Meeting of 1,357 Committee of Creditors Total expenses (in Rs.) 3,60,177

The matter was discussed and the Chairman informed the committee that the CIRP expenses as described above from the date of commencement of the CIRP process (including the fee of IRP for the period) till the date of the first meeting total up to Rs.3,60,177/-. He further informed the members that the IRP has received Rs.2,00,000 from the applicant M/s Unimax International in accordance with the order of the Hon'ble NCLT dated 30.09.2019 which needs to be reimbursed to him by the

Company Appeal (AT) (Ins) No. 711 of 2022 7 of 14 IRP upon approval of the expenses by the Committee and receipt of funds by the IRP.

The Chairman requested the members to ratify the said expenses. The members after considering the same ratified the expenses unanimously."

7. In the 2nd CoC meeting dated 15.02.2020 the remuneration and

expenses incurred by the Resolution Professional till date of meeting was

shown as item No. 6 and approved the same is extracted hereunder:

"Item - 06 To ratify and approve the remuneration and expenses incurred by the Resolution Professional till the date of the meeting.

The Chairman placed before the members a list of expenses incurred from the date of appointment first meeting of the Committee of Creditors till the date of second meeting of the Committee of Creditors, the details of which is as under:

Sr. Particulars Amount (Rs) No. 1. Fees of Resolution Professional 2,81,379 from 01.11.2019 till the date of second meeting (excluding applicable taxes, if any) 2. E-voting expenses 11,800 3. Preparation of demand drafts and 6,050 other expenses for filing of applications with the Hon'ble NCLT, Principal Bench and New Delhi Bench

Company Appeal (AT) (Ins) No. 711 of 2022 8 of 14 4. Lawyers' fee for preparation, filing 4,33,500 of applications, affidavits with NCLT, Principal bench, New Delhi Bench and Hon'ble Appellate Tribunal and appearances before the Hon'ble NCLT, Principal Bench and New Delhi Bench and Appellate Tribunal. 5. Cost of conducting of the second 765 Meeting of Committee of Creditors. Total expenses (in Rs.) 7,33,494

The matter was discussed and the Chairman informed the committee that the CIRP expenses as described above from the date of first meeting of the Committee of Creditors till the date of the second meeting total up to Rs.7,33,494/-.

The Chairman requested the members to ratify the said expenses and the members after considering the same ratified the expenses."

8. Similarly, in the 2nd CoC meeting dated 17.03.2020 the minutes of the

previous meetings were approved in Item No. 3 while ratifying and approved

remuneration and expenses incurred by Resolution Professional from the

date of 1st CoC meeting till date of this meeting. Item No. 6 is extracted

hereinunder:

"Item - 06 To ratify and approve the remuneration and expenses incurred by the Resolution Professional from the date of second meeting till the date of this meeting.

Company Appeal (AT) (Ins) No. 711 of 2022 9 of 14 The Chairman placed before the members a list of expenses incurred from the date of second meeting of the Committee of Creditors till the date of this meeting, the details of which is as under:

Sr. CIRP process cost Amounts (Rs) No. 1. Fees of Resolution Professional 82,492 from 16.02.2019 till the date of this meeting (excluding applicable taxes, if any)

2. Preparation of demand drafts for 1,010 filing of applications with the Hon'ble NCLT 3. Lawyers' fee for appearances 3,68,500 before the Hon'ble NCLT, Principal Bench and New Delhi Bench and Appellate Tribunal. 4. Electricity expenses 58,734

5. Meeting expenses, stamp paper, 5,000 notary, speed post expenses Total (in Rs.) 5,15,736

The members took tone of the same and ratified the expenses."

9. Thus, the total amount to be paid to erstwhile RP is Rs. 16,09,402/-

(Rupees sixteen lakhs nine thousand four hundred and two only) (Rs.

3,60,177/- + Rs. 7,33,494/- + Rs.5,15,736/-), approved in the CoC

meetings held on viz., 1st, 2nd and 4th as shown in the earlier paragraphs.

Company Appeal (AT) (Ins) No. 711 of 2022 10 of 14

10. Respondent before the Adjudicating Authority and the Appellant

herein is bound to pay the expenses and remuneration approved by CoC in

terms of judgment of this Tribunal in State Bank of India Vs. SKC Retails

Ltd Through IRP & Anr. in Company Appeal (AT) (Insolvency) No. 08 & 43

of 2018 at Para No.10 which is to the following effect:

"10. As per Regulation 33, the applicant means the person who files the application under Section 7 or 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "I&B Code") who generally proposes the name of the 'interim resolution professional'. Such applicant negotiates the fee to be charged and paid to the interim resolution professional. As per the provision aforesaid, the Adjudicating Authority is required to fix the expenses where the applicant has not fixed expenses under sub-regulation (1) of Regulation 33. In such case, the applicant, who has filed the application under Section 7 or 9 of the I & B Code, is required to bear the expenses which is to be reimbursed by the committee of creditors to the extent the Committee of Creditors ratifies the same."

11. According to Regulation 25, an Insolvency Professional must provide

services for remuneration which is charged in a transparent manner, is a

reasonable reflection of the work necessarily and properly undertaken, and

is not inconsistent with the applicable regulations. Sections 25A, 26 and 27

are the relevant Regulations, which deal with the remuneration, cost of

Insolvency Professional. Whereas, Regulation 33 of the IBBI (Insolvency

Corporate Persons) Regulations, 2016 specify the Resolution Process Cost.

Company Appeal (AT) (Ins) No. 711 of 2022 11 of 14 Regulation 31 specifies the Insolvency Regulation Process costs, which are

as follows:

"31. Insolvency resolution process costs. - "Insolvency resolution process costs" under section 5(13)(e) shall mean -

(a) Amounts due to suppliers of essential goods and services under regulation 32;

[(aa) fee payable to authorised representative under [sub-regulation (8)] of regulation 16-A;

(ab) out of pocket expenses of authorised representative for discharge of his functions under [section 25-A];]

(b) Amounts due to a person whose rights are prejudicially affected on account of the moratorium imposed under section 14(1)(d);

(c) Expenses incurred on or by the interim resolution professional to the extent ratified under regulation 33;

(d) Expenses incurred on or by the resolution professional fixed under regulation 34; and

(e) Other costs directly relating to the corporate insolvency resolution process and approved by the committee."

12. A conjoint reading of Regulation 25A, 26 and 27 of the IBBI

(Insolvency Resolution Process for Corporate Persons) Regulations, 2016

and Regulation 31 of the IBBI (Insolvency Resolution Process for Corporate

Persons) Regulations, 2016, the expenses incurred under the different heads

covered by Regulation 31 of IBBI (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016 shall be paid by the creditors.

Company Appeal (AT) (Ins) No. 711 of 2022 12 of 14 Insolvency Process cost is defined under Section 5(13)(e) which runs as

follows:

"5(13)(e) Insolvency resolution process costs" means-

(e) any other costs as may be specified by the Board;"

13. In the instant case, the cost incurred by erstwhile RP and

remuneration payable to him was approved by CoC in the CoC meetings, the

total amount payable is Rs. 16,09,402/-, thus, the legal heirs of deceased

RP are entitled to claim the remuneration payable to erstwhile RP and cost

incurred by him, approved in CoC meetings.

14. One of the major contentions of the Appellant herein is that the

Appellant is having only 25.54% voting share and liable to pay its share of

costs. As per provisions of the Act, the Respondent before the Adjudicating

Authority Appellant herein, the creditors have to bear the cost of resolution

process and remuneration payable to the Resolution Professional in

proportionate to voting share, but the Adjudicating Authority directed the

creditors to pay 50% of the cost payable to erstwhile RP. Therefore, the

direction to the extent of payment of remuneration equally by the creditors

is contrary to the provisions of 'IBC' and relevant Regulations.

15. During the argument, the Learned Counsel for the Appellant herein,

agreed to pay the cost and remuneration approved in CoC meeting

proportionate to its voting share while denying liability to pay legal expenses

paid to the advocate. Admittedly, the fee payable to advocate was not

approved or ratified to CoC meetings. In view of the judgment in Bharat Company Appeal (AT) (Ins) No. 711 of 2022 13 of 14 Hotels Ltd. Vs. Tapan Chakraborty in Company Appeal (AT)

(Insolvency) No. 1074 of 2022, the Appellant is not liable to pay its share

of fee of advocate, since it was not ratified or approved in the CoC meetings,

in view of the principle laid down in the judgment. Hence, the direction

issued by the Adjudicating Authority to pay the legal expenses i.e. fee paid

to the advocate is erroneous and the same is hereby set aside.

16. Apart from the above conclusion, we are of the view that direction to

pay equally with other creditor is erroneous, since, the Respondent before

the Adjudicating Authority is having 25.54% voting share and therefore

liable to pay the expenses in proportionate to the voting share of Appellant

herein and before the Adjudicating Authority. Accordingly, the order of the

Adjudicating Authority is modified to this extent indicated above.

17. The Appeal is allowed in part modifying the order directing the

Appellant to pay remuneration and cost of resolution process approved in

CoC meeting i.e. Rs. 16,09,407/- proportionate to its voting share.

[Justice M. Satyanarayana Murthy] Member (Judicial)

[Barun Mitra] Member (Technical)

pks

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