In the matter of Yashasvi Yarns Ltd.
- CitationIA-118 & 222(AHM)2023 in C.P.(IB)-209(AHM)2021
Ratio decidendi
The rule this decision rests on
Where the Committee of Creditors has, in exercise of the discretion conferred on it by Regulation 34B(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, resolved not to approve performance-linked incentive fees for the resolution professional, the power to grant such incentive being discretionary and not mandatory, the Adjudicating Authority will not interfere with that commercial decision nor direct payment of the incentive, since the decision regarding payment of incentive, which creates a financial liability of the corporate debtor, falls within the commercial wisdom of the Committee of Creditors. The power to approve a matter under the Regulation carries with it the power to refuse it, so that a Committee of Creditors which has been empowered to approve incentive fees may equally decline to do so. Where the Committee of Creditors has applied its mind to the question, the Adjudicating Authority will not substitute its own view; it would require the Committee to take the decision afresh only if it appeared that the Committee had not applied its mind to the matter at all.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
PRESENT: For the Applicant : Mr. Arjun Sheth, Advocate for the RP Mr. Ravindra Kumar Goyal, RP present in person For the Respondent : Mr. Devang Nanavati, Sr. Advocate along with Ms. Aishwarya Reddy & Ms. Vinamra Agrawal, Advocates for the Respondent in IA/222(AHM)2023
ORDER
IA/222(AHM)2023 The plea espoused in the captioned application is for grant of incentive to the RP. Ld. Counsel appearing for the applicant submitted that it is general practice that the IRP/RP takes years together to complete the CIRP, thus, when the RP in the present case could complete the process within eight months, i.e. 240 days, he is entitled to incentive. The claim is founded on Regulation 34 (B) (4) of IBBI (IRCP Regulations), 2016. The plea of the Ld. Counsel for the applicant is that in terms of the Regulation the applicant is entitled to incentive. On the other hand, Ld. Counsel appearing for the CoC submitted that the Regulation is not mandatory but it reserves discretion to committee of creditors to allow performance based the incentive fees and in the present case the CoC has already exercised its discretion in its meeting dated 01.12.2022. He could draw our attention to the relevant excerpt of the minutes of meeting of the CoC dated 01.12.2022, which is read thus:- “RESOLVED THAT, the committee of creditor is be and hereby decided to approve performance-linked incentive fees for value maximization as per Clause 4 of Schedule-II, under Regulation 34B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016”
Name of the Stake SHARE % SHARE FOR AGAINST ABSTAINED Holder AMONGST THOSE PRESENT State Bank of India 63.73% 63.73% √ Pegasus Assets 19.94% 19.94% √ Reconstruction Pvt. Ltd. Phoenix ARC Pvt. 7.88% 7.88% √ Ltd. Canara Bank 8.45% 8.45% √ Total 100.00% 100.00% 8.45% 91.55 0.00% Result: Resolution not approved with 91.55% voting in against.
It is stare decisis that the power to accept include the power to nix. The Regulation 34 (B) (4) (ibid) reserves discretion to CoC to grant the incentive. The CoC could exercise the same in refusing to grant incentive to the RP. We can also be not oblivious of the fact that Section 12 (1) of IBC prescribes the maximum period for completing the CIRP as 180 days. The 180 days limit is the outer limit. One could appreciate if the process could be completed before expiry of maximum period of 180 days. In the present case, the process could be completed within 240 days i.e. beyond 180 days. So it is not so that even the statutory time limit without extension could be adhered to by the RP in completing the process. Besides, as has been ruled by the Hon’ble Supreme Court in K. Sasidhar Vs. Indian Overseas Bank & Ors. it is commercial wisdom of the CoC to take decision regarding the affairs of the CD. The decision regarding payment of incentive which creates financial liability of CD certainly falls within the commercial wisdom of CoC and we would not like to interfere with the same. It could be different situation if CoC could not have applied its mind. In such situation, this Adjudicating Authority could probably require CoC to take the decision as required in terms of the Regulation. Once the CoC has already taken the decision and has nixed to pay any incentive to applicant, we are not inclined to interfere with the decision of CoC or to issue any positive direction regarding payment of incentive to the applicant. The application is accordingly dismissed. List IA/118(AHM)2023 on 13.06.2023
-SD- -SD- KAUSHALENDRA KUMAR SINGH ASHOK KUMAR BHARDWAJ MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Sudha
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