Dushyant Dave Erstwhile Resolution ... vs Gospell Digital Technology Co. Ltd. & ...

(Arising against the impugned order dated 04.03.2024 passed by the Hon'ble National Company Law Tribunal, Mumbai Bench-I in I.A. 503 of 2024 in C.P. (IB) No.137/MB/2023)

IN THE MATTER OF:

Dushyant Dave, Erstwhile Resolution Professional M/s Altius Digital Pvt. Ltd. Add: 1101, Dalamal Towers, Nariman Point Mumbai, Maharashtra-400021. ...Appellant Email: dushyant.dave@decoderesolvency.com

Versus

Gospell Digital Technology Co. Ltd. Add: 802, Filix Commercial Complex Opp Asian Paints, LBS Marg, Bhandup West, Mumbai, Maharashtra-400078 China Add: Gospell Industrial Park,,Guanshandong ...Respondent No. 1

Street, Chenzou City, Suxian District-423000.

M/s Asha Apartments Pvt. Ltd.

Add: 14C, Maharshi Debendra Road, Kolkata, West Bengal-700007. ...Respondent No. 2 Email: mondalpradipoffice@googlemail.com

Insolvency and Bankruptcy Board of India Through its Executive Director Jithesh John Add: 2nd Floor, Jeevan Vihar Building, Parliament Street, ...Respondent No. 3 New Delhi, 110001 Email: jithesh@gov.in

Present:

For Appellant: Mr. Nakul Mohta, Mr. Ayush Kashyap, Mr. Videh Vaish, Mr. Lalit Mohan, Ms. Megha Jain, Advocates. For Respondents: Mr. Sandeep Bajaj, Mr. Mayank Biyani, Mr. Sharath Sampath, Ms. Kavya Singh, Advocates.

Cont'd..../ -2-

J U D G M EN T (27th September, 2024)

INDEVAR PANDEY, MEMBER (T)

This appeal arises from the order dated 04.03.2024, passed by the National

Company Law Tribunal, Mumbai Bench-I, the Adjudicating Authority (in short

'AA'), in response to the application titled Gospell Digital Technologies Private

Limited, vs. Dushyant Dave & Anr., bearing IA No. 503/2024 in CP (IB)

No.137/MB/2023. Gospell Digital Technologies Private Limited is the

Operational Creditor (in short 'OC') of M/s Altius Digital Private Limited, the

Corporate Debtor (in short 'CD'), which is undergoing Corporate Insolvency

Resolution Process (in short 'CIRP'). The appeal has been filed by Dushyant

Dave, the erstwhile Interim Resolution Professional (in short 'IRP') of the CD,

under Section 61(1) of the Insolvency and Bankruptcy Code, 2016, (in short

'Code'), against the impugned order of AA, vide which Shri Dave was removed as

IRP and Shri Arun Kisanlal Bagadia was appointed as IRP.

2. The appellant has challenged the impugned judgment on the grounds that

it is unreasoned, arbitrary, and biased, having improperly disregarded the

commercial wisdom of the Committee of Creditors (in short 'CoC'). The AA's

interference with CoC decisions and unwarranted remarks that tarnish the

appellant's professional reputation are also contested. The appeal questions the

legal validity of removing the appellant as the IRP.

Company Appeal (AT) (Ins.) No. 656 of 2024 -3-

3. The brief facts of the case are as follows:

(i) The Respondent No.1 in the present case, Gospell Digital Technology

Co. Ltd. (OC) filed a petition u/S 9 of the Code against M/s Altius Digital

Private Limited (CD). M/s Altius Digital Private Limited, was admitted

in CIRP on December 19, 2023. The Appellant, Shri Dushyant Dave,

was appointed as the IRP from a list provided by the Insolvency and

Bankruptcy Board of India (in short 'IBBI').

(ii) The IRP issued a public announcement on December 23, 2023, inviting

creditors of the Corporate Debtor to submit their claims by January 4,

2024. On January 2, 2024, Gospell Digital Technology Co. Ltd.

submitted its claim totaling Rs.144,85,99,458.13. This claim was

verified and subsequently admitted by the IRP on 11th January 2024

establishing Gospell Digital as the pre-dominant Operational Creditor.

On the same day, IRP also verified and admitted the claim of another

Operational Creditor M/s Babosa Corporation of Rs.1,07,289/-.

(iii) On January 5, 2024, M/s Asha Apartments Pvt. Ltd./Respondent

No.2 submitted an incomplete claim, asserting itself as a financial

creditor of the Corporate Debtor. However, the submission lacked the

necessary documentation, prompting the IRP to request additional

documents for proper verification.

(iv) The IRP filed the list of creditors and a report certifying the formation

of the CoC with the AA on January 12, 2024. The CoC was composed

solely of operational creditors, with Gospell Digital Technology Co. Ltd.

Company Appeal (AT) (Ins.) No. 656 of 2024 -4-

holding 99.99% voting rights in proportion to its admitted claim. The

first CoC meeting was held on January 19, 2024, where the agenda

included confirmation of Dushyant Dave as the Resolution Professional

(in short 'RP') and ratifying the appointment of the Insolvency

Professional Entity (in short 'IPE'). CoC did not ratify the appointment

of IRP as RP, the appointment of IPE was also not ratified. The CoC

further requested for e-voting to decide on Dave's appointment. During

the e-voting process, conducted from January 23 to 25, 2024, Gospell

Digital again voted against Dave's confirmation as RP and against the

ratification of the IPE's appointment.

(v) On January 24, 2024, Respondent No.2 updated and submitted its

claim in proper form, and the IRP immediately accepted it as the sole

financial creditor. On January 25, 2024, Respondent No.2 was

inducted into the CoC with 100% voting rights by the IRP. In the second

CoC meeting held on January 30, 2024, Asha Apartments Pvt. Ltd., as

the sole financial creditor, confirmed Dushyant Dave as the RP with

100% of the vote. However, the resolution to approve the fees for the

IPE was not passed, and the RP was instructed to renegotiate the terms

of the fees.

(vi) Gospell Digital/ Respondent No.1 on February 6, 2024, filed an

Interlocutory Application No. 503/2024 before the AA, challenging the

decisions made in the second CoC meeting and seeking Shri Dave's

removal as RP. Respondent No.1 questioned IRP's impartiality,

Company Appeal (AT) (Ins.) No. 656 of 2024 -5-

particularly regarding the verification of Asha Apartments Pvt. Ltd./

Respondent No.2 claim, which had fundamentally altered the CoC's

composition, pushing out operational creditor Gospell

Digital/Respondent No.1 from the CoC. On February 20, 2024, the AA

directed the Appellant Gospell Digital to implead Asha Apartments Pvt.

Ltd. as a respondent in the case. After hearing arguments from both

parties, the tribunal ruled on March 4, 2024, in favor of Gospell Digital.

The tribunal expressed concerns about Dushyant Dave's impartiality

in handling Asha Apartments Pvt. Ltd.'s claim and their inclusion in

the CoC. The AA found that the resolutions passed in the second CoC

meeting, including Dave's confirmation as RP and the appointment of

Decode Resolvency International Pvt. Ltd. as the support entity, were

questionable. It set aside these resolutions and appointed Mr. Arun

Kisanlal Bagadia as the new RP, with a monthly fee of Rs. 2,00,000/-

plus GST, effective from March 11, 2024. The Appellant was directed to

hand over all records and documents to the incoming RP.

(vii) The impugned order passed by the AA on March 4, 2024, addressed

multiple concerns raised against the IRP. The AA found that the IRP

had acted in a manner that compromised the integrity of the CIRP

process. Specifically, the AA highlighted his handling of the inclusion

of M/s Asha Apartments Pvt. Ltd. as a financial creditor, which

significantly altered the composition of the Committee of Creditors

(CoC).

Company Appeal (AT) (Ins.) No. 656 of 2024 -6-

(viii) The AA observed that the verification of Asha Apartments' claim was

premature and flawed, as the claim was still under review at the time

of its inclusion in the CoC. Despite this, Shri Dave proceeded to update

the list of creditors, giving Asha Apartments 100% voting rights in the

CoC. This decision was made without the due diligence expected of an

RP and was deemed to be against the principles of natural justice.

(ix) Furthermore, the AA criticized Dave for conducting the second CoC

meeting on January 30, 2024, under these questionable

circumstances, where decisions were made based on the new CoC

composition, leading to his confirmation as the RP. AA found these

actions to be prejudiced and concluded that Dave had failed to maintain

the impartiality required of his position, raising doubts about his ability

to effectively manage the CIRP.

4. As a result, AA ordered the replacement of Dushyant Dave with Arun

Kisanlal Bagadia as the new RP, emphasizing the need for impartial and diligent

conduct in the administration of insolvency proceedings. The tribunal also set

aside the resolutions passed in the second CoC meeting, underlining the

significance of these procedural lapses in undermining the CIRP process. The

relevant Paras 22, 23, 24 and 25 of the order dated 04.03.2024 are reproduced

below:

22) 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

Company Appeal (AT) (Ins.) No. 656 of 2024 -7-

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.

23) 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.

24) 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

Company Appeal (AT) (Ins.) No. 656 of 2024 -8-

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 reconstitution 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.

25) 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

Company Appeal (AT) (Ins.) No. 656 of 2024 -9-

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.

Submissions of the Appellant

5. Counsel for the Appellant argued that the AA's interference with the CoC's

commercial wisdom is both unjust and beyond the tribunal's jurisdiction. He

asserts that his appointment as RP was confirmed with 100% voting approval by

the sole financial creditor, Asha Apartments Pvt. Ltd., in the second CoC

meeting. According to him, the tribunal's intervention in the commercial

decisions of the CoC violates established legal principles, that protect the CoC's

discretion in such matters. Furthermore, he contends that the tribunal's

judgment is unreasoned and biased, and its remarks have unjustly damaged his

professional reputation. He also points out that the tribunal did not have

adequate grounds to question his impartiality or his verification of Asha

Apartments Pvt. Ltd.'s claim, which was conducted in accordance with the law.

6. The counsel for the appellant submitted that there were significant

procedural lapses by the respondent in the present case under the Insolvency

and Bankruptcy Code (IBC), citing Edelweiss Asset Reconstruction Co. Ltd. v.

Mohit Goyal, 2022 SCC OnLine NCLAT 4609. The appellant argued that such

lapses are not merely procedural but are fundamental errors that impact the

overall validity of the proceedings.

Company Appeal (AT) (Ins.) No. 656 of 2024 -10-

7. The counsel for the appellant further contends that their right to a fair

hearing was violated. He supported his argument by referring to State Bank of

India v. Ajai Kumar Srivastava, (2021) 2 SCC 612. The appellant draws on this

judgment to assert that the principles of natural justice were breached, as they

were not afforded a sufficient opportunity to present their case.

8. The appellant further highlighted the respondents' failure to meet their

contractual obligations. In this regard he cited Katra Realtors (P) Ltd. v. Rajesh

Ramnani, 2024 SCC OnLine NCLAT 302. The appellant draws a parallel between

the respondents' actions and the contractual failures observed in the aforesaid

case. By doing so, he emphasized that the respondents' breach of contract is a

pivotal issue that justifies their claims and supports their position in the dispute.

9. The appellant further highlighted the lack of transparency and due

diligence in the management of stressed assets by the respondents, citing

Stressed Assets Stabilization Fund v. Piyush Periwal, 2024 SCC OnLine NCLAT

185. This judgment is used to support the claim that the respondents did not

fulfill their legal obligations regarding the management of such assets. The

appellant argues that this lack of due diligence is a significant factor that

undermines the respondents' legal standing and further strengthens the

appellant's case.

10. Furthermore, the appellant points to the failure of the respondents to

adhere to strict legal standards required of government bodies, referencing Hari

Narayan Tewari v. Cantonment Board, Ramgarh Cantonment, 2024 SCC OnLine

SC 1643. This case illustrates the respondents' non-compliance with established

Company Appeal (AT) (Ins.) No. 656 of 2024 -11-

legal norms, which the appellant argues weakens their case and demonstrates a

disregard for necessary legal protocols.

11. Lastly, the appellant cites Joginder Singh & Anr v. Surinder Singh (Dead)

By LRs & Ors, 1995 Supp (4) SCC 413 to show that the respondents overlooked

crucial legal principles regarding property rights and inheritance. This judgment

is presented to reinforce the appellant's position by demonstrating that the

respondents' actions are inconsistent with established legal precedents in similar

disputes.

12. In light of the above, the Appellant has prayed this Appellate Tribunal to:

a. Allow the present Appeal;

b. Set aside the Impugned order dated 04.03.2024 and appoint the

Appellant as the RP of the CD as per the voting in the 2nd CoC meeting;

and/or

c. Pass any other/further order/s as deemed fit and proper in the facts and

circumstances of the present matter.

Submissions of the Respondents

13. In his reply the counsel for the Respondent No. 1/ Gospell Digital

Technology Company Ltd. stated that the Appellant's initial plea sought to

overturn this order and to be reinstated as the Resolution Professional (RP) based

on the outcomes of the Second Committee of Creditors (CoC) Meeting. However,

during the hearing on August 1, 2024, the Appellant shifted his stance, focusing

Company Appeal (AT) (Ins.) No. 656 of 2024 -12-

on expunging specific remarks made about his conduct by the AA, rather than

pursuing reappointment.

14. The counsel further stated that the Respondent No. 1 filed a Company

Petition (IB) No. 137/MB/ 2023 under Section 9 of the code against the

Corporate Debtor on December 14, 2022 in NCLT, Mumbai. The notice in the

petition was issued on February 17, 2023. A Loan Agreement for Rs. 2 crores

were executed on April 15, 2023, by the Corporate Debtor in favour of M/s Asha

Apartments/Respondent No.2 after the issuance of notice under Section 9 of the

Code. Over the next six months, Respondent No. 2 disbursed Rs. 1.15 Crore to

the Corporate Debtor.

15. The counsel for Respondent No. 1 further submitted that he had informed

the Appellant during CoC's meetings that Respondent No. 2 had been declared

an accommodation entry operator by the Hon'ble Gujarat High Court. The bank

statements of Respondent No. 2 showed Rs.32,618/- on 05.04.2023. On

10.05.2023 an amount of Rs. 21 lakhs was deposited in the account of

Respondent No.2 and the same was instantly transferred to the account of CD.

16. The counsel further stated that the Loan Agreement required the

Corporate Debtor to pay 18% annual interest on the principal, plus an additional

2% for late payments, but no payments were made.

17. The counsel stated that on October 4, 2023, the NCLT reserved its order

on the Company Petition (IB) No. 137 (MB) of 2023 for initiating CIRP proceedings

against the CD. It is seen, that immediately thereafter, a Deed of Hypothecation

Company Appeal (AT) (Ins.) No. 656 of 2024 -13-

was executed on October 12, 2023, by Mr. BK Sancheti Director of CD in favour

of Respondent No. 2. The CIRP petition was admitted on December 19, 2023,

and Mr. Dushyant Dave was appointed as IRP. A public announcement was

made on December 23, 2023, setting a deadline for claim submissions as

January 4, 2024.

18. Counsel for Respondent No. 1 submitted that he has filed a claim for

Rs.144 Crore on January 2, 2024. On 10.01.2024 the appellant sought certain

additional documents from R-1 for verification of its claim. Subsequently, the

claim was verified and admitted by the appellant. The Appellant filed the

Certification for Constitution of the CoC and List of Creditors on January 12,

2024, before the AA. The first CoC meeting was thereafter scheduled for

19.01.2024 with e-voting scheduled to commence from 20.01.2024 at 12 P.M.

and to conclude on 22.01.2024 at 12 P.M.

19. During the First CoC Meeting, voting was initially conducted by show of

hands. The Appellant subsequently decided to switch to e-voting without

providing the link in a timely manner. Respondent No. 1 voted against the

Appellant's appointment as RP and also against support entity proposed by the

appellant. On January 24, 2024, Respondent No. 1 requested a second CoC

meeting to appoint a new RP.

20. The counsel submitted that the Respondent No.2 filed Form-C dated

03.01.2024 claiming a sum of Rs. 1.24 crore (approx.) which was received by the

appellant on 24.01.2024. On January 25, 2024, the Appellant reconstituted the

Company Appeal (AT) (Ins.) No. 656 of 2024 -14-

CoC, excluding Respondent No. 1, and scheduled the Second CoC Meeting for

January 30, 2024. In this meeting, Respondent No. 2, with 100% voting rights,

approved the Appellant's reappointment as RP, but did not approve the proposal

for the support entity's fees. The counsel further stated that Respondent No. 2's

claim, received on January 24, 2024, was admitted on February 3, 2024,

following the Second CoC Meeting. The aforesaid exercise of the appellant was in

direct contravention of Regulations 13 & 17 of the CIRP Regulations, which

provides that CoC can be constituted only after due verification and admission

of the claims received.

21. The counsel for Respondent No.1 submitted that the Appellant, thereafter

circulated the Minutes of the second CoC Meeting held on 30.01.2024, wherein

the Appellant admitted that it was in the process of verifying the claims of the

alleged Financial Creditor i.e., Respondent No.2 and surprisingly the claims of

the Respondent No.1 were also placed under verification. It is pertinent to

mention herein that the Respondent No.2 was given 100% voting share, despite

its claims still being under verification.

22. The counsel further stated that the Claim of the Respondent No.2, alleged

Financial Creditor, was admitted by the Appellant only on 03.02.2024 i.e. after

the conclusion of the 2nd COC Meeting on 30.01.2024. The Respondent No. 1

sent email dated 03.02.2024 objecting to the illegalities committed by the

Appellant as well as complaining about the conduct of the Appellant.

Company Appeal (AT) (Ins.) No. 656 of 2024 -15-

23. The Respondent No.1 stated that the Appellant acting in a high-handed

manner only to get himself reappointed, after being voted out in the 1st COC

meeting. That various proceedings have been initiated against the Appellant

before the IBBI during his previous assignments.

24. The Respondent No. 1 further stated that Respondent No.2/Asha

Apartments had preferred an independent appeal bearing CA (AT) (INS.) No. 915

of 2024, against the impugned order, which was disposed of on May 9, 2024.

The coordinate bench of this Tribunal did not find any fault with AA's order in

the present matter. The Appellant in the present case was impleaded as

Respondent No. 2 in the aforesaid proceedings.

25. In light of the above, the Respondent No.1 contended that the impugned

order is devoid of any error and that the remarks made by the AA should not be

expunged. It is prayed that the current appeal be dismissed with exemplary costs

in favour of Respondent No. 1.

26. The counsel for Respondent No.2 did not make any submission nor did

he file any written submission.

Analysis and Findings

27. We have heard the counsels in detail and examined the records submitted

by the parties.

Company Appeal (AT) (Ins.) No. 656 of 2024 -16-

28. The date wise sequence of events in this case in very crucial to understand

the actions by various parties and their legal implications. The sequence of

various events is as follows:

Date Event 14.12.2022 The Respondent No. 1 Gospell Digital Technologies

Co. Ltd. files the Section 9 Company Petition (IB) No. 137 (MB) of 2023 against the CD for Rs. 144 Crores.

17.02.2023 Notice issued in the petition.

15.04.2023 Loan agreement for Rs. 2 crores signed between CD and Asha Apartments/ Respondent No. 2.

04.10.2023 NCLT reserves its order in the aforesaid company petition.

12.10.2023 Deed of hypothecation signed between CD and Respondent No. 2.

19.12.2023 NCLT allows the CIRP Petition and the appellant appointed as IRP.

23.12.2023 Public announcement for claim submission, last date fixed as 04.01.2024.

02.01.2024 Respondent No. 1 files a claim for Rs. 144 crores as Operational Creditor.

11.01.2024 Respondent No.2 files an incomplete claim to IRP. 12.01.2024 Appellant admits the claim of Respondent No. 1 and files the certification for constitution of CoC and list of creditors before AA.

19.01.2024 First CoC meeting wherein confirmation of appointment of appellant and the Insolvency Professional Entity was put to vote.

23.01.2024 The e-voting link was shared Gospell Digital voted against the appellant as the RP and also against the ratification of the support entity's appointment 24.01.2024 Respondent No.2 submitted an updated claim through Form C. 25.01.2024 Updated list of creditors, which included the Respondent No.2 was filed by the IRP before the Tribunal wherein the claim of Respondent No. 2 was admitted and CoC was constituted with Respondent No. 2 as sole member.

30.01.2024 Second CoC meeting was held with Respondent No. 2 as the Sole Financial Creditor with 100% voting rights. CoC approved the resolution appointing appellant as the RP.

Company Appeal (AT) (Ins.) No. 656 of 2024 -17-

29. We observe that following the issuance of notice by the Adjudicating

Authority (AA) in the CIRP petition on 17.02.2023, the Corporate Debtor (CD)

executed a loan agreement with Respondent No. 2 on 15.04.2023, wherein

Respondent No. 2 was designated as a Financial Creditor to infuse funds into

the CD. However, at that time, no assets of the CD were hypothecated in favor of

Respondent No. 2.

30. Further, it is noted that the AA reserved its order on the CIRP petition on

04.10.2023, and immediately thereafter, a deed of hypothecation was executed

between the CD and Respondent No. 2 on 12.10.2023.

31. Upon admission of the CIRP petition and the subsequent appointment of

the Interim Resolution Professional (IRP) by the AA, the IRP filed a report on

12.01.2024, concerning the constitution of the Committee of Creditors (CoC) to

AA. The relevant paras 3,4, and 5 of the same are reproduced below:

"3. As on January 04, 2024 the IRP has received the following claims that

have been verified in accordance with the Code and the rules and

regulations made thereunder:

S. Name of Address of Creditor Category Amount No. Creditor of creditor claimed (INR) 1 Gospell Gospell Industrial Operational 1,44,85,99,458 Digital Park, Guanshandong Creditor TechnologiesStreet, Chenzhou City, Co. Ltd.. Suxian District, Hunan, China - 423 000. 2 M/s Babosa Building No. A3, Unit Operational 1,07,289 Corporation No. 101, Babosa creditor Industrial Park,

Company Appeal (AT) (Ins.) No. 656 of 2024 -18-

Saravali Village , Bhiwandi- 421 302 Total 1,44,87,06,747

It is pertinent to note that, the present Composition of CoC has been

arrived at in accordance with the list of creditors.

4. In view of the above, the undersigned has constituted the Committee of

Creditors comprising of the creditors as mentioned above based on the

information available as on date with the IRP in accordance with Section

21(1) of the Code. Accordingly, in compliance with Regulation 17 of CIRP

Regulations, the undersigned has called for the first meeting of the

Committee of Creditors on January 19, 2024.

5. In view of the above and in compliance with Regulation 17(1) of the

CIRP Regulations, the undersigned certifies the constitution of the

Committee of Creditors in compliance with Regulation 17 of CIRP

Regulations."

(Emphasis supplied)

32. The appellant's filing before the AA clearly shows that by 04.01.2024, the

deadline for submission of claims, only two creditors had submitted their claims,

both of which were verified and admitted by the appellant (IRP).

33. During the first CoC meeting, the IRP disclosed that on 05.01.2024, he

received a claim from Asha Apartments, asserting its position as a Financial

Creditor of the Corporate Debtor, and that the verification of the claim was still

Company Appeal (AT) (Ins.) No. 656 of 2024 -19-

ongoing. This information was not included in the report submitted to the AA

regarding the constitution of the CoC. However, in his submission in appeal it is

stated that an incomplete claim from Asha Apartments was recorded as having

been received on 11.01.2024.

34. It is further observed from the appellant's petition that the claim of

Respondent No. 2, in Form-C, was received by the IRP on 24.01.2024. The claim

was verified on the same day and on 25.01.2024, the Appellant filed an I.A with

AA for reconstitution of CoC. It is also noted that M/s Asha Apartments Pvt. Ltd.

was inducted as the sole Financial Creditor, with 100% voting rights in the CoC,

by the appellant acting as the IRP, despite the fact that he had already been

voted out as the IRP of the CD by the then-existing CoC. The appellant failed to

mention before AA that he has already been voted out by the CoC.

35. We note that despite the differing dates reflected in various documents, it

is evident that the claim of Asha Apartments/Respondent No. 2 was received

after the stipulated deadline for the submission of creditor claims.

36. On 25.01.2024 the appellant filed an I.A. with the AA, wherein he informed

the Tribunal that based on further claims, he has reconstituted the Committee

of Creditors. The relevant paragraphs from the I.A. are reproduced below:

"2. The Applicant in discharge of his duties made a public

announcement as per Regulation 6 of Insolvency and Bankruptcy Board

of India (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016 ("CIRP Regulations") intimating the public in general

Company Appeal (AT) (Ins.) No. 656 of 2024 -20-

and the creditors of the Corporate Debtor in particular of the initiation of

Corporate Insolvency Resolution Process ("CIRP") and inviting claims

from the creditors of the Corporate Debtor. The same was published on

December 23, 2023 in Free Press Journal (English) and Navashakti

(Marathi). The last date for submission of claims was on January 04,

2024.

3. The Applicants submits that as on January 04, 2024 he had received

claims form two Operational Creditors being, Gospell Digital

Technologies Co. Limited and M/s Babosa Corporation. The Applicant in

discharge of his duties under Regulation 1 7 of CIRP Regulations had

filed the Report of constitution of the Committee of Creditors and list of

creditors on January 12, 2024 bearing filing no 2709138078742022.

Accordingly, the Applicant convened the First (1 st) Meeting of the

Committee of Creditors on January 19, 2024.

4. The Applicant submits that he, thereafter, received a claim under

Claim form C of CIRP Regulations from a Financial Creditor, Asha

Apartments Private Limited, on January 24, 2024. In pursuance of the

said receipt, the Applicant verified the said claim and ascertained that

the claim was valid and thus, was accepted. In light of the developments

the Applicant submits that as on January 25, 2024 he has received the

following claims that have been verified in accordance with the Code

and the rules and regulations made thereunder:

Company Appeal (AT) (Ins.) No. 656 of 2024 -21-

S. Name of Address of Category of Amount claimed No. Creditor Creditor creditor (INR) 1 Asha 14-C, Maharishi Financial 1,24, 15,987.95 Apartments Debendra Road, Creditor Private Kolkata, West Limited Bengal- 700007 2 Gospell Gospell Industrial Operational 1,44,85,99,458.00 Digital Park, Creditor TechnologiesGuanshandong Co. Limited Street, Chenzhou City, Suxian District, Hunan, China - 423 000. 3 M/s Babosa Building No. A3, Unit Operational 1,07,289.00 Corporation No. 101, Babosa Creditor Industrial Park, Saravali Village, Bhiwandi- 421 302.

Total 146, 11,22, 734. 95

It is pertinent to note that, the present Reconstitution of CoC has been

arrived at in accordance with the updated list of creditors also filed

herewith.

5. In view of the above, the undersigned has reconstituted the

Committee of Creditors comprising of the creditors as mentioned above

based on the information available as on date with the IRP in

accordance with Section 21 (1) of the Code. In view of the above and in

compliance with Regulation 1 7 (1) of the CIRP Regulations, the

undersigned certifies the reconstitution of the Committee of Creditors in

compliance with Regulation 17 of CIRP Regulations."

37. It is observed from the aforesaid petition of appellant that the claim of

Respondent No. 2 in Form-C was received by IRP on 24.01.2024. It is also seen

Company Appeal (AT) (Ins.) No. 656 of 2024 -22-

that M/s Asha Apartments Pvt. Ltd. was inducted as Sole Financial Creditor with

100% voting rights in the Committee of Creditors by the appellant as IRP at a

stage when he was already voted out as IRP of the CD by the existing CoC. At no

point the appellant informed the AA about the fact that first CoC has not

approved his proposal for ratification as RP, rather they have voted him out.

38. We now examine the minutes of the second CoC meeting held on

30.01.2024. Agenda item No. B refers to the revised list of creditors and change

in the constitution of the CoC the relevant extracts of the minutes of the second

CoC meeting are extracted below:

"B. To take note of the revised list of creditors and change in constitution

of the COC (refer slide no. 6)

1. The IRP stated that in accordance with Regulation 6 of CIRP

Regulations had published Form A, intimating the public at large and

the creditors of the Corporate Debtor in particular of initiation of CIRP

against and Corporate Debtor and inviting claims from the Creditor of

the Corporate Debtor. The last date for the submission of claims as per

Form A was January 04, 2024.

2. The IRP on January 24, 2024 received a claim under claim Form C

from a Financial Creditor, Asha Apartments Private Limited.

Accordingly, the IRP accepted the claim and filed for an updated list of

creditors and reconstitution of the COC with Hon'ble NCLT on January

25, 2024. The financial creditor could produce the copy of the charge

Company Appeal (AT) (Ins.) No. 656 of 2024 -23-

created on the assets of the CD in the MCA records as well as the

transfer of the funds to the CD account in the bank statement of the

financial creditor.

3. The IRP in compliance with Regulation 12 and 13 of CIRP Regulations

is under the process of verifying the claims received by him. Mentioned

below are the details of the said claims as received by IRP and their

treatment thereof:

(Emphasis supplied)

S. Name of Type of Date of Amount claimed Status of No Creditor Creditor receipt of (INR) claim claim 1 Asha Financial 24.01.2024 1,24,15,987/- Under Apartments verification Private Limited 2 Gospell Digital Operational 02.01.2024 1,44,85,99,458/- Under Technologies Co. verification Limited 3 M/s Babosa Operational 05.01.2024 1,07,289/- Under Corporation verification Total 146,11,22, 734/-

4. Accordingly, the voting share of the COC has been modified as

mentioned hereinbelow:

S. No. Name of Creditor Type of Voting share Creditor 1 Asha Apartments Financial 100% Private Limited 2 Gospell Digital Operational Not applicable Technologies Co. Limited 3 M/s Babosa Operational Not applicable Corporation Total 100%

Company Appeal (AT) (Ins.) No. 656 of 2024 -24-

39. We observe that the appellant had submitted before AA on 25.01.2024 that

the claim of Respondent No. 2 as Financial Creditor has been duly verified and

admitted, whereas in the minutes of the second CoC meeting held on

30.01.2024, it is shown that the claims of Asha Apartment Pvt. Ltd./ Respondent

No. 2. Gospell Digital Technology Co. Ltd./ Respondent No. 1 and M/s Babosa

Corporation (OC) were still under verification by the IRP. Inspite of this the IRP

reconstituted the CoC.

40. We reach at following conclusions regarding the conduct of appellant (IRP)

in the issue of reconstitution of CoC:

(i) The claim of Asha Apartments/ Respondent No. 2 was received after

04.01.2024 the last date of submission of claims by creditors of the CD.

There are two dates mentioned by appellant in his submission before us

i.e. 05.01.2024 and 11.01.2024. The aforesaid claim was defective.

(ii) The claim in Form-C was submitted by Respondent No. 2 on 24.01.2024.

(iii) The claims of Gospell Digital Technology Co. Ltd./ Respondent No. 1 and

M/s Babosa Corporation as Operational Creditors were received in time

and admitted by the IRP as per his own affidavit before AA on 12.01.2024.

(iv) On 25.01.2024, in an application before the AA, the Appellant stated that

he has received another claim of Financial Creditor M/s Asha Apartment,

the same has been examined and verified and its in order, Accordingly, all

three claims were found in order and have been duly admitted. He further

Company Appeal (AT) (Ins.) No. 656 of 2024 -25-

stated that CoC has accordingly been reconstituted with M/s Asha

Apartments/ Respondent No. 2 as a Sole Financial Creditor with 100%

voting share.

(v) According to the minutes of the second CoC meeting held on January 30,

2024, the IRP stated that all three claims were under verification. Despite

this, the CoC was reconstituted with Asha Apartments as the sole financial

creditor with 100% voting share. The agenda items that were previously

rejected during the first CoC meeting, which pertained to the removal of

the IRP and the Insolvency Professional Entity (IPE), were reintroduced in

the second CoC meeting. With the support of Respondent No. 2, now the

sole member of the CoC, the IRP secured his own reappointment.

(Emphasis supplied)

41. The discussion in previous paras shows that the actions of the appellant

IRP are not bona fide in the present matter. He has been very biased in his

approach in this matter, particularly after the first CoC meeting where a decision

was taken to remove him and appoint a new RP. Prima facie he seems to be guilty

of perjury as he has stated before AA on record that the claim of Asha Apartments

has been accepted by him on 25.01.2024 and accordingly he has reconstituted

the CoC. Whereas in the minutes of the second CoC held on 30.01.2024, he has

stated that the claims of all three creditors are under 'verification' category. It

should be mentioned that the claim of Respondent No.1 was admitted and

informed by him to AA on 12.01.2024 itself. This clearly suggests that the

Company Appeal (AT) (Ins.) No. 656 of 2024 -26-

Respondent No.2 was introduced as the Financial Creditor, without proper

verification to ensure that the Committee of Creditors consisted solely of financial

creditor who would appoint the IRP as RP and further allow him to conduct the

CIRP process in tandem with the newly introduced sole member of CoC.

42. This position is further confirmed in second meeting of CoC when the new

CoC comprising solely of Respondent No.2/Asha Apartments, confirms the

appointment of Appellant as RP.

43. The repeated attempts to confirm himself as the RP, after being rejected

by the CoC, contravenes the provisions of Section 22 of The Code. This is seen

as an abuse of his position as IRP to influence the CoC in his favor and maintain

control over the insolvency resolution process, disregarding the CoC's

commercial wisdom.

44. When there are no financial creditors, the CoC should be constituted with

operational creditors as per Regulation 16 of IBBI (CIRP) Regulations, 2016.

Initially, the CoC included only operational creditors, with Gospell Digital

Technology Co. Ltd. holding a 99.99% voting share. The inclusion of Asha

Apartments, without proper verification, violated the CIRP regulation and

effectively removed Respondent No.1/Operational Creditor from CoC with a

claim of Rs. 145 Crore approx. by the Financial Creditor, who had provided a

loan of Rs. 1.24 crore in the CoC.

45. The appellant has referred to several Judgment of Hon'ble Supreme Court

and this Tribunal to support their argument. These are discussed here:

Company Appeal (AT) (Ins.) No. 656 of 2024 -27-

(i) The appellant has cited Edelweiss Asset Reconstruction Co. Ltd. v.

Mohit Goyal, 2022 SCC OnLine NCLAT 4609, where this Tribunal

upheld the Committee of Creditors' (CoC) decision to reject a Rs. 600

crore resolution plan, emphasizing non-interference in commercial

wisdom. The ratio of the Judgment (supra) does not apply to the present

case as it focuses on the IRP's conduct in CIRP proceedings where there

are serious questions about impartiality and fairness of IRP leading to

the replacement of IRP by NCLT. The impugned order has nothing to

do with commercial wisdom of CoC, rather it's about impartiality and

fairness in conduct of CIRP process, which is squarely within the

domain of NCLT.

(ii) The Judgment of Hon'ble Supreme Court in SBI v. Ajai Kumar

Srivastava, (2021) 2 SCC 612, is again identical to Edelweiss (supra)

and relates to approval of resolution plan and the powers of CoC

regarding the same.

(iii) The Judgment of this Tribunal in the Stressed Assets Stabilization

Fund v. Piyush Periwal, 2024 SCC OnLine NCLAT 185, involved the

CoC retaining the RP with a majority vote, wherein a request was made

by Operational Creditor to remove the RP due to his inefficiency. This

Tribunal upheld the decision of CoC to retain the RP stating that unless

there is a conflict of interest or evidence of misconduct, the CoC's

decision to retain the RP should not be interfered with. In the present

Company Appeal (AT) (Ins.) No. 656 of 2024 -28-

case the misconduct of IRP and questions about his impartiality and

fairness in conduct of CIRP are the issue. Therefore, the ratio laid down

by the Judgment (supra) does not apply in the present case.

(iv) In Katra Realtors (P) Ltd. v. Rajesh Ramnani, 2024 SCC OnLine

NCLAT 302 decided by this Tribunal, the focus was on procedural

compliance in CoC meetings, and it was CoC's conduct which was in

question. The present case on the other hand deals with the IRP's

conduct in CIRP proceedings.

(v) The Judgment of Hon'ble SC in Hari Narayan Tewari v. Cantonment

Board, Ramgarh Cantonment, 2024 SCC OnLine SC 1643, pertains

to natural justice in administrative law, and does not relate to the IBC.

(vi) Lastly, the Judgment of Hon'ble SC, Joginder Singh & Anr v. Surinder

Singh (Dead) By LRs & Ors, 1995 Supp (4) SCC 413, relates to

inheritance law and is not relevant to present matter.

46. On the other hand, we have seen the precedent set by this Tribunal in

Jayanta Banerjee v. Shashi Agrawal and Ors., Company Appeal (AT)

(Insolvency) No. 348 of 2020, wherein it was held that the creditors whose

claims are still under verification cannot be included in the Committee of

Creditors (CoC) meetings. This principle is vital for maintaining the procedural

integrity of the CIRP and ensuring the CoC is properly constituted based on

verified claims.

Company Appeal (AT) (Ins.) No. 656 of 2024 -29-

47. Based on the discussion above, we find that the conduct of the RP in the

instant CIRP proceeding seems to be premediated, biased and authoritarian in

clear violation of the core objectives and principles of the Code, which seeks to

ensure fair and transparent insolvency proceedings. The facts and

circumstances presented above clearly reveal the Appellant's abuse of authority,

demonstrating both overreach and bad faith; further compromising the integrity

and trust that is essential to the insolvency resolution process. The appellant

has not been transparent even in his submissions to AA and had hidden the fact

that CoC has decided to remove him. Keeping these in view, we find no flaw in

the decision of the AA regarding replacement of IRP and fully endorse the same.

48. Another important issue to be examined in this matter is the role of

Financial Creditor Asha Apartments who is Respondent No.2 here. The role of

Asha Apartments/ Respondent No. 2 needs scrutiny as the company provided

credit to the CD after petition for initiating CIRP was filed against the CD, which

subsequently let to it becoming the sole Financial Creditor with 100% voting

rights in CoC.

49. Asha Apartments Pvt. Ltd. entered into a loan agreement with the

Corporate Debtor on April 15, 2023. This was done after a CIRP petition was filed

against the CD by the Respondent No.1 for a claim of Rs. 145 Crore. on

14.12.2022. The notice in the matter was issued on 17.02.2023. The loan

agreement for Rs. 2 crores was signed shortly thereafter. Additionally, a Deed of

Hypothecation was executed in favor of Asha Apartments on 12.10.2023, which

Company Appeal (AT) (Ins.) No. 656 of 2024 -30-

was after the NCLT had reserved its order on the company petition on

04.10.2023. These agreements were made after insolvency proceedings had been

initiated, leading to concerns about the legitimacy of the financial debt claimed

by Asha Apartments and its subsequent participation in the CoC.

50. We also note that, the loan agreement stipulated an interest rate of 18%

per annum but it appears no payment has been made by Respondent No. 2 to

the Corporate Debtor to date.

51. It was also pointed out that the R2 company was known as entry operator

from Kolkata and its conduct has been investigated by Income Tax Authorities

in the past.

52. Our attention was invited to the judgment of the Hon'ble Gujarat High

Court in Special Civil Application No. 17786 of 2018, Navnidhi Dyeing and

Printing Mills Pvt. Ltd. vs. Assistant Commissioner of Income Tax, Circle

1(1)(2), Ahmedabad, wherein the court noted prima facie findings from the

Assessing Officer indicating that Asha Apartments Private Limited appears to be

a shell company based in Kolkata, controlled by Mr. Manoharlal Nangalia.

Mr. Nangalia admitted to providing accommodation entries through shell

companies to various beneficiaries in exchange for commission. The relevant

para 18 of the Judgment (supra) is reproduced below:

"18. In the present case, the Assessing Officer has considered the

materials on record which would, prima facie, suggest that during

the year under consideration there was a huge hike in the amount

Company Appeal (AT) (Ins.) No. 656 of 2024 -31-

of the share capital and share premium of the assessee company.

The assessee received the amount of share capital and share

premium from the Kolkata based shell companies, namely, Prime

Vyapaar Pvt. Ltd. and Asha Apartments Pvt. Ltd. respectively. The

Assessing Officer, prima facie found, based on the materials on

record and the information received, that total share capital of

Rs.40 lakh was received during the year under consideration. On

verification of the details of the investors companies, it was found,

prima facie, that the same was controlled by one Kolkata based

accommodation entry provider, namely Manoharlal Nangalia. In a

statement recorded by the department, Manoharlal Nangalia is

said to have admitted to the fact that his main business is to

provide accommodation entries through shell companies to various

beneficiaries in lieu of commission."

53. In light of these concerns and the timing of the transactions, there are

significant doubts regarding the legitimacy of the dealings between the Corporate

Debtor and Asha Apartments Pvt. Ltd. The inclusion of Asha Apartments as a

Financial Creditor and the sole member of the Committee of Creditors (CoC)

raises serious questions about the fairness and impartiality in the CoC's

composition. This issue is particularly critical given that Respondent No. 1 has

a substantial claim of approximately Rs. 145 crores, while Asha Apartments'

claim amounts to Rs. 1.24 crores, which arose only after the CIRP proceedings

were initiated and notices were issued by AA.

Company Appeal (AT) (Ins.) No. 656 of 2024 -32-

54. We have come across several cases under IBC, wherein the Operational

Creditor with a large claim files for CIRP proceedings against CD. There are no

financial creditors at this stage. Corporate Debtor at this stage introduce friendly

entities, as Financial Creditor with a loan which is a fraction of claim of OC.

These claims are admitted by the IRP/RP as Financial Debt. Once included in

the CoC, such financial creditors become part of CoC and get voting right and in

turn manage the CIRP proceedings in collusion with IRP/RP. With the voting

power entirely concentrated in FC, the OCs receive minimal payouts during the

resolution process. By inflating or fabricating the presence of certain financial

creditors, distressed companies can tip the scales in favor of a particular

resolution plan, leaving genuine operational creditors sidelined. In more extreme

cases, these creditors are completely excluded from the recovery, despite their

legitimate and often overdue claims. This case seems to be following the same

pattern.

55. We have also seen the Judgment of a Principal Bench of this Tribunal

dated 09.05.2024 in the appeal filed by Asha Apartment Pvt. Ltd. /Respondent

No.2 wherein Company Appeal (AT) (Ins.) No. 915 of 2024 in Asha

Apartments Pvt. Ltd. vs. Gospell Digital Technology Co. Ltd. In this appeal

the same impugned order was under challenge in regard to keeping the claim of

Asha Apartments as Financial Creditor on hold till final decision of the new RP.

The relevant portions of the order in para 2 to 6 are reproduced below:

Company Appeal (AT) (Ins.) No. 656 of 2024 -33-

2. This Appeal has been filed against the order dated 04.03.2024

passed in IA No.503 of 2024. The Adjudicating Authority by

impugned order has appointed new Resolution Professional and

has issued following directions in paragraphs 24 and 25:-

"24) It is not in dispute that the claim of Asha Apartment

Pvt. Ltd. is stated to be in verification and Respondent

No. I 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 reconstitution

of CoC is in itself questionable. Accordingly, we set

aside the Resolution passed in 2nd CoC meeting

appointing the Respondent No. I 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

Company Appeal (AT) (Ins.) No. 656 of 2024 -34-

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.

25) The incoming Resolution Professional shall take

final decision on the claim submitted by Asha

Apartments Pvt. Ltd. within Thirty (30) days and

reconstitute 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."

3. Counsel for the Appellant submits that more than two months'

period was over but the claim of the Appellant was not verified.

4. Resolution Professional who appears in person submits that

the process of verification is still on since he has not received the

Company Appeal (AT) (Ins.) No. 656 of 2024 -35-

relevant records from the suspended directors of the corporate

debtor. He submits that he is in the process of filing an

application under Section 19.

5. We have no doubt that in view of the direction issued by the

Adjudicating Authority that the Appellant's claim shall be verified

as per the records of the corporate debtor. It shall be open for the

Resolution Professional to file an appropriate application and

take steps and complete the verification as directed the

Adjudicating Authority as early as possible. The Adjudicating

Authority has not made any observations in the order regarding

merits of the claim of the appellant and the Resolution

Professional shall proceed to verify the claim as per the records

available as early as possible preferably within the period of two

months.

6. The Appeal is disposed of.

56. We would therefore not like to make comments regarding the eligibility of

Asha Apartments as Financial Creditor at this stage, since a decision in the

matter is pending.

57. In conclusion, we find that the conduct of the appellant has not been

neutral and impartial in the aforesaid CIRP proceedings. He had tried to conduct

CIRP in such a manner to keep himself as RP by prematurely admitting the claim

of Respondent No.2 as Financial Creditor and reconstituting the IRP. The

Company Appeal (AT) (Ins.) No. 656 of 2024 -36-

Respondent No.2 in turn helped him by appointing him as RP. This conduct goes

against the objectives of the Code. If such conduct and collusive practices are

allowed to continue, the entire edifice of IBC would collapse. This would enable

entry of erstwhile promoters though back door in the CD.

58. We believe that the conduct of Appellant as IRP has not been neutral and

impartial. He has conducted the CIRP proceedings in violation of IBC provisions.

We therefore direct Insolvency & Bankruptcy Board of India (IBBI) to investigate

the role of Appellant in the present CIRP proceedings and take further necessary

action as per existing provisions of IBC and relevant regulations.

59. In view of the above finding, we uphold the decision of AA. The appeal is

dismissed. Pending I.As, if any, are closed. There is no order as to costs.

60. The Registry is directed to send a copy of this order to Chairperson, IBBI

for necessary action.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

sa

Company Appeal (AT) (Ins.) No. 656 of 2024