India Resurgence Arc Pvt. Ltd vs Rohit J. Vora

Company Appeal (AT)(Insolvency) No. 100 of 2023

[Arising out of order dated 06.12.2022 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench Court-III in IA No.1312/2022 in CP(IB) No.4065/MB/2018]

IN THE MATTER OF:

India Resurgence ARC Pvt. Ltd. 3rd Floor, Unit 304, Piramal Tower, Peninsula Corporate Park, Lower Parel, Mumbai - 400013 ...Appellant

Versus

Rohit J. Vora, Erstwhile Resolution Professional of Jogma Laminates Industry (P) Ltd. 1103, Raj Sunflower Royal Complex, Eksar Road, Borivali (West), Mumbai-400092 ...Respondent

Present:

For Appellant: Mr. Kaushik Mishra, Advocate

For Respondent: Mr. Partho Sarkar, Advocate

With

Company Appeal (AT)(Insolvency) No. 104 of 2023

IN THE MATTER OF:

Rohit J. Vora, Erstwhile Resolution Professional of Jogma Laminates Industry (P) Ltd. 1103, Raj Sunflower Royal Complex, Eksar Road, Borivali (West), Mumbai-400092 ...Appellant

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

1 Versus

Religare Finvest Ltd. (India Resurgence ARC Pvt. Ltd.) 13 to 116, 1st Floor, B-Wing, Building Pride, Silicon Plaza, Next to Chaturshringi Temple, S. No.106A/2A/7, Senapati Bapat Road, Pune -411016 ...Respondent No.1

Dena Bank (Bank of Baroda) WHC Road, Near Times of India Bldg., Dharampeth - 440010 ...Respondent No.2

Star Orechem International Pvt. Ltd. Amrata Manor, Bungalow No.1, 1st Floor, Opposite Axis Bank, Rabindranath Tagore Road, Civil Lines, Nagpur - 440001 ...Respondent No.3

Zumberlal Bharat & Sons HUF 64/65, East Wardhawan Nagar, Nagpur - 440008 ...Respondent No.4

Poddar Telecom Private Limited Tirupati Balaji Roadlines (India) 88, Jaideo Apartment, Chapru Nagar, Central Avenue, Nagpur - 440008 ...Respondent No.5 Ujwala Bharut 64/65, East Wardhawan Nagar, Nagpur - 440008 ...Respondent No.6

Present:

For Appellant: Mr. Partho Sarkar, Advocate

For Respondent: Mr. Kaushik Mishra, Advocate

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

2 JUDGMENT

[Per: Barun Mitra, Member (Technical)]

These two appeals filed under Section 61 of Insolvency and Bankruptcy

Code, 2016 ("IBC" in short) arises out of the common order dated 06.12.2022

(hereinafter referred to as "Impugned Order") passed by the Adjudicating

Authority (National Company Law Tribunal, Mumbai Bench Court-III) in IA

No.1312/2022 of CP(IB) No. 4065/MB/2018 wherein the Adjudicating Authority

has directed the Committee of Creditors ("CoC" in short) for payment of fees to the

Resolution Professional ("RP" in short) of Rs.1 lakh per month + GST from

01.09.2019 to 24.04.2022 along with other actual expenses incurred by him on

production of bills.

2. The relevant facts which are necessary for deciding the two appeals are as

follows:

 Section 7 application had been admitted against the Corporate Debtor on

25.04.2019 for initiation of Corporate Insolvency Resolution Process

("CIRP" in short).

 After collating claims of the creditors, the CoC was constituted on which

Religare Finvest became a member. The Religare Finvest had 69.02% of

voting share and was the majority Financial Creditor. In terms of voting

share, the next largest Financial Creditor was Dena Bank with 29.34% vote

share as recorded in minutes of first CoC meeting. Later, India Resurgence

Arc Pvt Ltd became a member on 24.12.2021 after replacing Religare

Finvest as the predecessor in interest following a deed of assignment in their

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

3 favour. For convenience, this party will be referred to as Religare Finvest in

this matter.

 The Interim Resolution Professional appointed to conduct the CIRP was

later appointed as the RP with monthly remuneration of Rs.3.75 lakhs plus

GST as approved in the 1st CoC meeting.

 The 3rd CoC meeting on 18.07.2019 decided to remove the RP subject to his

continuance until replacement by a new person. However, the RP continued

to function since no application was filed for change of RP.

 In the 4th CoC meeting held on 26.08.2019, the RP raised the issue of non-

payment of his fees and expenses to the tune of Rs. 23,57,635/- and the

non-contribution of fees by any CoC member. The CoC decided to go for

liquidation of the Corporate Debtor and have a liquidator of own choice after

changing the RP.

 The CoC in the 5th meeting held on 17.10.2019 had decided not to extend

the time-limit for CIRP and not to approve Form G or invite EOI.

 Meantime, the RP had filed MA No. 3399/2019 on 16.10.2019 for payment

of his fees and expenses amounting to Rs.24,25,143/- till 31.08.2019. This

was allowed by the Adjudicating Authority on 10.11.2022. In this MA, the

RP had also raised the issue of Religare Finvest not cooperating in CIRP and

pushing the Corporate Debtor into liquidation.

 The RP had also filed an application MA No. 3668/2019 on 11.11.2019

before the Adjudicating Authority seeking liquidation of the Corporate

Debtor which was allowed on 16.11.2022. Directions were also sought for

release of fees of RP from 31.08.2019 to 01.11.2019 being Rs.12,63,393/-.

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

4  IA No.2755/2021 was filed by the RP to allow the suspended management

of the Corporate Debtor to submit their resolution plan; to direct the CoC

to pay outstanding CIRP cost and debar CoC member from participation in

CoC if it failed to contribute its share of CIRP cost. This application was

dismissed by the Adjudicating Authority with liberty to file a fresh

application after liquidation order is passed.

 IA No.1312/2022 was filed on 10.05.2022 by the RP claiming fees and other

expenses from 25.04.2019 to 24.12.2022. The Adjudicating Authority vide

impugned order on 06.12.2022 directed the CoC to pay the fees of the RP

from 01.09.2019 to 24.04.2022 of Rs.1 lakh plus GST per month along with

actual expenses against production of bills.

 Aggrieved by this impugned order both these appeals have been filed.

Religare in CA(AT) Ins No.100/2023 has assailed the order on the ground

that the Adjudicating Authority wrongly recorded their consent of having

agreed to the payment of fees to the RP from 01.09.2019 to 24.04.2022.

The RP has filed CA(AT) Ins No.104/2023 challenging the impugned order

for having reduced their fees and for making disparaging remarks on his

professional conduct.

CA(AT) Ins No.100/2023

3. The Learned Counsel for the Appellant/Religare Finvest vehemently

contended that it had never consented to payment of fees of the RP beyond

31.08.2019. It was submitted that when the RP had filed MA No.3399/2019

seeking payment of fees and expenses till 31.08.2019, the Appellant had agreed

to the same so as not to prolong litigation. However, the consent was with the

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

5 caveat of allowing fees and expenses only for the period till 31.08.2019. However,

the Adjudicating Authority misconstrued that consent by recording in the present

impugned order that the consent was till 24.04.2022.

4. Attention was adverted to the fact that in the impugned order, the

Adjudicating Authority has correctly noted that the RP had failed to perform his

duty and acted prejudicially to the interests of the Corporate Debtor by joining

hands with the suspended management. Besides committing grave dereliction of

duty, it was argued that the RP had caused harm to the Corporate Debtor by

handing over the control of its assets to the erstwhile management. Under such

circumstances, it was contended that the RP did not deserve payment of fees as

the same had been sought solely for his personal benefit and not for making any

contribution to the CIRP process. In any case, it was emphasized that the RP

could not have performed much work during the period after August 2019 on

account of outbreak of Covid pandemic. Quite apart from the fact that no

substantial work had been done by the RP, keeping in view the fact that the

Corporate Debtor was not capable of revival, the order of the Adjudicating

Authority to continue paying such hefty fees was not justified. It has also been

submitted that the Adjudicating Authority had lost sight of the fact that the RP

had already been paid Rs.24,25,143/- following the orders dated 10.11.2022.

Since then, the RP had not performed any work and therefore it is not justified to

pay any further amount for the period 01.09.2019 onwards.

CA(AT) Ins No.104/2023

5. The Learned Counsel for the Appellant/RP has submitted that the CoC in

its first meeting had ratified the fees of the RP of Rs. 3.75 lakhs p.m. plus GST.

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

6 The RP was therefore rightfully entitled to claim the same amount to be paid as

his fees. While admitting that the CoC in its third meeting had decided to replace

the RP, it was also asserted that the CoC did not move any application for his

substitution and had resolved to pay the RP till the date of his demitting office. It

was therefore contended by the RP that the CoC having further decided to

continue on with him until the joining of the replacement RP, he remains entitled

to his fees and expenses. However, since no fees was paid to him from 25.04.2019

onwards, he was compelled to file an I.A No.1312 on 10.05.2022. It has been

submitted that the reduction of his fees by the impugned order from Rs.3.75 lakhs

per month as approved earlier by the CoC, to Rs.1 lakh per month is unjustified

and be set aside.

6. The RP has contended that he was discharging all his responsibilities

appropriately. All steps had been taken to protect the assets of the Corporate

Debtor for which purpose a person had also been appointed to supervise the

assets. The RP has also contended that the impugned order contains certain

deprecatory remarks about his professional conduct which deserves to be

expunged. It has been vehemently contented that it was the conduct of Religare

Finvest which was putting hindrances to the conduct of CIRP and pushing the

Corporate Debtor into liquidation.

7. We have duly considered the arguments advanced by the respective

Appellant in both the appeals and perused the records carefully. From the

contentions raised by the concerned Appellants in their respective appeals, we

find that the common thread is that they have both assailed the impugned order

but by challenging it on different grounds and in doing so they have assumed

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

7 adversarial position against each other. That being so, we will collectively take up

both the appeals and for this purpose outline the issues which need our

consideration. The first issue for our consideration is whether the RP's fee and

expenses is payable till 24.04.2022, and if so, whether reduction of fees to Rs.1

lakh per month was justified and tenable. The second issue for our consideration

is whether in the given facts and circumstances, the adverse remarks made on

the professional conduct of RP by the Adjudicating Authority is sustainable.

8. At the outset, we feel it necessary to extract relevant portions of the

impugned order which constitute the basis of both these appeals:

"4. The only contention of Mr. Partho Sarkar, counsel appearing for the RP is that even though the COC has resolved to replace the RP with Mr. Rajat Naidu in the third COC meeting held on 18.07.2019, no such application was filed by the COC for change of RP and therefore the present RP is entitled for the agreed fee till the RP was discharged through an order of this tribunal. In the present application, the RP is claiming an amount @ 3.75 lacs per month both for himself and his team besides expenses in a sum of Rs. 1,68,60,372/- without doing any work. The RP cannot claim fee by taking advantage of the inaction of the COC in filing an application for his replacement nor on certain observations made in MA 3399/2019 as the above MA was filed for fee and expenses during the active period of CIRP. This Bench made certain observations in M.A. 3399/2019 since the COC is objecting for payment of fee and expenses of the team of RP even during the active CIRP period which was the lis in M.A 3399/2019. The Applicant cannot claim the same amount for subsequent period even without considering Covid circumstances etc. by taking advantage of certain observations in M.A. 3399/2019.

5. It is also pertinent to observe here that the Resolution Professional has already claimed his fee and expenses till 31.08.2019 in the earlier M.A. 3399/2019 and in the present I.A. 1312/2022, he claimed fee and expenses from 24.04.2019 to 24.04.2022 under Exhibit 'A' of the present application. The Resolution Professional has already claimed the expenses of Rs. 1,50,000/- for preferring M.A. 3399/2019 which was allowed by this Bench. Surprisingly, he claimed another 7,95,407/- towards legal fee and expenses for moving the present I.A. for the same relief of payment of fee. It is an admitted fact that human life was completely paralyzed, business

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

8 activities, production, transport everything has come to standstill all over globe due to COVID-19 pandemic from 25.03.2020 till the end of 2021 due to three waves of COVID. This tribunal is unable to understand how the RP can claim fee not only for himself but also his team for the COVID period more so by creating a tussle between the COC and himself with regard to way forward of the CIRP process. This bench also observes that the RP having filed an application for liquidation orally opposed for passing an order of liquidation contending that the Corporate Debtor is viable for resolution. The major COC member is alleging that the RP has handed over interim custody of the Corporate Debtor to the members of the suspended board which is not denied by RP. This Bench has taken a very serious note about the conduct as well as the way of charging fee by RP without doing any work.

6. Therefore, for the aforesaid reasons, this bench is of the considered opinion that the RP is merely entitled for his fee of Rs. 1,00,000/-+GST per month from 01.09.2019 to 24.04.2022 as fairly agreed by M/s Relegere Finvest Ltd who is a major COC member along with actual expenses like valuation expenses etc. incurred by Resolution Professional for protecting the property against production of bills till the property is handed over to liquidator as certified by COC. The COC is also at liberty to approve any other expenses incurred by RP as it deems fit without being influenced by any of the above observations made in this order. The CoC is hereby directed to act accordingly."

(Emphasis supplied)

9. This brings us to the first issue of deciding whether the decision of the

Adjudicating Authority to allow payment of fees to the RP for the period

01.09.2019 till 24.04.2022 is sustainable in the face of the contention raised by

the major Financial Creditor on the CoC - Religare Finvest that it had not given

any such consent.

10. It is well established that the fees of the RP are required to be ratified by the

CoC. Coming to the facts of the present case, perusal of the minutes of the first

CoC meeting reveals that it had ratified the appointment of the Interim Resolution

Professional including payment of fees and in the second CoC meeting held on

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

9 14.06.2019 his appointment as RP was confirmed. It is also noticed that CoC in

its third meeting had decided to replace the RP and also decided by name the

person to be appointed. There is no quarrel over the fact that replacement of the

RP falls within the prerogative of the CoC. Be that as may, in the present case, it

is undisputed fact that the CoC even after deciding to replace the RP did not make

any endeavours for effectuating the substitution of the RP. Hence the RP

continued to remain in position. It is also an admitted fact that the third CoC had

resolved to pay the RP on the existing terms and conditions till the date of his

demitting office.

11. Given this backdrop, we may now examine the contention of Religare

Finvest that it had given consent for payment of fees of RP only up to 30.08.2019

but the Adjudicating authority had wrongly recorded their consent for the period

up to 24.04.2022. We do not find much force in their contention. Once the CoC

in the third meeting had decided to continue with the RP on the same terms and

conditions until the replacement was appointed and this decision was not

subsequently modified by the CoC, the logical corollary is that the RP was entitled

to claim fees/expenses. Any consent of Religare Finvest in this regard is

redundant and inconsequential. When the CoC had itself ratified the fees and

allowed the RP to continue to discharge the responsibilities of RP until a fresh RP

was appointed, we find no reasons to disagree with the Adjudicating Authority in

holding that the RP was well entitled to claim his fees along with actual expenses.

12. This brings us to the second related aspect as to whether the reduction of

the fees from Rs. 3.75 lakhs to Rs 1 lakh plus GST by the Adjudicating Authority

was reasonable or not. To analyse this matter, we need to first notice some

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

10 important dates. In the fourth CoC meeting held on 26.08.2019, the CoC had

already deliberated and decided to initiate liquidation proceedings as the CIRP

was not making satisfactory progress. We also notice that the RP had filed MA No.

3668/2019 on 11.11.2019 before the Adjudicating Authority seeking liquidation

of the Corporate Debtor which was allowed on 16.11.2022. From the above

chronicling of dates, it can be safely inferred that by end of August 2019, the

active CIRP proceedings had reached a dead end.

13. Present is a case where the Adjudicating Authority has scaled down the fees

from Rs 3.75 lakhs to Rs 1 lakh plus GST which has been challenged by the RP.

All that we need to see is whether the Adjudicating Authority had taken this

decision arbitrarily or whether it was a reasoned and justified decision.

14. Stating his claim for payment of full fees, the Learned counsel for the RP

has relied on the judgment of this Tribunal in Committee of Creditors vs. Sonu

Jain, Resolution Professional for Marina Projects Pvt. Ltd. and Ors. 2019

SCC OnLine NCLAT 1194. The facts are distinguishable in that it did not deal

with tenability of reduction in the fees of the RP but on whether the CoC or the

Corporate Debtor is to pay the fees in view of section 14 of the IBC. The other

judgement relied upon is Alok Kaushik vs. ASREC (India) Ltd. 2018 SCC

OnLine NCLAT 822 of this Tribunal. However, it does not assist the RP since this

judgment was again not on the reduction in the fees but whether the fees can be

paid only at the time of liquidation. Similarly the facts of the case in the judgement

of this Tribunal in Sajeve Bhushan Deora vs. Axis Bank Ltd. & Ors. 2019 SCC

OnLine NCLAT 1437 being different do not come to the aid of the RP.

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023 11

15. It has been observed by the Adjudicating Authority that it was unreasonable

for the RP to claim fees for himself and his team for the period when all work was

at a standstill due to Covid pandemic. Another reason cited is that while the RP

had already claimed legal expenses of Rs. 1,50,000/- in MA No.3399/2019, he

has claimed yet another amount of Rs.7,95,407/- in IA No.1312/2022 though

both these applications were for seeking the same relief of payment of fees. It has

also been observed that at a time when the CoC had already decided to replace

the RP, he was taking advantage of the fact that replacement application was not

filed on time before the Adjudicating Authority. Moreover, some of the actions of

the RP were not in sync with the decisions of the CoC. Hence the RP had failed

to assist in the CIRP process in a fair and objective manner in the best interest of

all stakeholders.

16. The above findings of the Adjudicating Authority of deficiency in the

performance of the RP are not far from truth. RP admittedly was unable to publish

Form G. Neither could Expression of Interest be invited. The RP was also unable

to elicit any successful resolution plan for the Corporate Debtor within 180 days

from the initiation of CIRP. We find that the Adjudicating Authority had also taken

notice of the fact that the RP had entered into a tussle with the CoC which put

hurdles in the progress of the CIRP. That resolution of the Corporate Debtor had

not taken place due to ongoing tussle between the Appellant and CoC is writ large.

In fact, the Adjudicating Authority while considering the liquidation application

filed vide MA 3668/2019 had been constrained to note of serious

misunderstanding between the RP and the CoC causing a deadlock in the CIRP

process leaving no option but for liquidation. Given the material on record and

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

12 the facts and circumstances in the present matter, we are therefore inclined to

agree with the finding of the Adjudicating Authority that the active CIRP period

having expired with no substantial work to be taken up further and the Covid

pandemic also having generally disrupted work, the scaling down of the fees to Rs

1 lakh was not discriminatory or unfair. The Adjudicating Authority was therefore

well within its rights in exercising its wisdom in adjudicating on the reasonability

quotient of fees payable to the RP. We find no error in the proportionate reduction

of fees/expenses as carried out by the Adjudicating Authority as the

rationalization has been done with proper application of mind.

17. Having answered the first issue, we now come to the next point for

determination as to whether the deprecatory remarks on the professional conduct

of the RP were appropriate or they deserve to be expunged.

18. It has been submitted by the Learned Counsel of the RP that several steps

had been taken by RP towards conduct of CIRP like making of public

announcement, formation of CoC, holding of CoC meetings, appointment of

security guards to protect the assets of the Corporate Debtor, appointment of

statutory auditor, physical visits to the asset site, making appearances for

hearings before the Adjudicating Authority etc. We also take cognizance of the

submission made that the RP in the CoC meetings had repeatedly raised the issue

of non-cooperation from the Corporate Debtor in securing books of accounts and

statutory registers. Further information memorandum preparation had suffered

since valuers could not be appointed on time as CoC was not confirming payment

of valuer's fees. The RP had been suffering on account of non-release of fees by

the CoC. It was vehemently contended that the derogatory remarks made against

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

13 the RP are unwarranted and that there is sufficient material on record to prove to

the contrary and hence these observations ought to be expunged.

19. While we take cognizance of the steps having been taken by the RP as

summated above, we are also mindful of the expectations from the RP in the

conduct of CIRP proceedings in the IBC framework. It is well settled that the RP

plays a pivotal role in the CIRP process and acts as the bridge of balance and

harmony between the CoC and other stakeholders including the Corporate

Debtor. As an officer of the court, the RP as the facilitator of the resolution process

is expected to conduct the CIRP process with fairness, diligence, forthrightness

and highest sense of responsibility. Judged against this backdrop, we need to find

out how the RP measured up to the occasion.

20. What stares at our face is that even after a lapse of nearly three years, the

CIRP process had failed to make any tangible headway. The insolvency resolution

was impeded because the RP often did not abide by the directions of the CoC

which is not in consonance with the IBC and the tenets of commercial wisdom of

the CoC. To cite a few illustrative instances, as borne out from the CoC meeting

minutes, we find that the RP had insisted on forensic audit though the CoC

wanted only a statutory audit. The CoC had recommended liquidation but RP had

orally opposed liquidation of the Corporate Debtor before the Adjudicating

Authority even after having filed the liquidation application. The RP had also not

acted on the suggestion of the CoC to file a petition before the Adjudicating

Authority against the suspended management for non-cooperation in submitting

statutory registers and other documents etc. The CoC was of the view that much

harm was caused to the Corporate Debtor by handing over the control of its assets

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

14 to the erstwhile management. These actions of the RP do not reflect well on his

professional conduct and cannot be countenanced. Given the attendant

circumstances we find that RP was more focused on claiming his

fees/remuneration and other expenses than discharging his responsibilities of

completing CIRP in a time bound manner. Hence, we are of the considered view

that on the whole the Adjudicating Authority has been justified in taking a serious

note of the conduct of the Resolution Professional.

21. In the result, given the sequence of events and the facts and circumstances

of the case, for the reasons discussed above, we find no reasons to interfere with

the impugned order. We find no merit in both the appeals. The appeals are

accordingly dismissed. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Place: New Delhi Date: 09.08.2023

PKM

Company Appeal (AT)(Insolvency) No.100 & 104 of 2023

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