Lotus Auto Engineering Limited vs Dinkar T. Venkatasubramaniam & Ors & Ors

[Arising out of order dated 03.08.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench, Chandigarh) in IA Nos.170/2021 & 74/2022 in CP (IB) No.42/Chd/Hry/2017]

IN THE MATTER OF: Lotus Auto Engineering Ltd. ...Appellant Versus Dinkar T. Venkatasubramaniam & Ors. ...Respondents

Present: For Appellant : Mr. Krishnendu Dutta, Sr. Advocate with Mr. NPS Chawla, Mr. Sandeep Bajaj, Mr. Vipul Jai, Ms. Vrinda Mishra, Mr. Sujoy Datta, Mr. Surekh Kant Baxy and Ms. Mahima Shekhawat, Advocates.

For Respondents : Mr. Sumant Batra, Mr. Sanjay Bhatt, Mr. Sarthak Bhandari and Ms. Riya Kaur Arora, Advocates for R-1.

Mr. Sunil Fernandes, Sr. Advocate with Mr. Siddhant Kant, Mr. Charu Bansal and Ms. Tanya Chib, Advocate for AMC.

WITH

Company Appeal (AT) (Insolvency) No. 1357 of 2023

[Arising out of order dated 03.08.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench, Chandigarh) in IA Nos.170/2021 & 74/2022 in CP (IB) No.42/Chd/Hry/2017]

IN THE MATTER OF: Lotus Auto Engineering Ltd. ...Appellant Versus Dinkar T. Venkatasubramaniam & Ors. ...Respondents

Present: For Appellant : Mr. Krishnendu Dutta, Sr. Advocate with Mr. NPS Chawla, Mr. Sandeep Bajaj, Mr. Vipul Jai, Ms. Vrinda Mishra, Mr. Sujoy Datta, Mr. Surekh Kant Baxy and Ms. Mahima Shekhawat, Advocates.

For Respondents : Mr. Sumant Batra, Mr. Sanjay Bhatt, Mr. Sarthak Bhandari and Ms. Riya Kaur Arora, Advocates for R-1.

Mr. Sunil Fernandes Sr. Advocate with Mr. Siddhant Kant, Mr. Charu Bansal and Ms. Tanya Chib, Advocate for AMC.

JUDGMENT

ASHOK BHUSHAN, J.

These two appeals have been filed challenging the order dated

03.08.2023 passed by the adjudicating authority (National Company Law

Tribunal, Chandigarh Bench, Chandigarh) rejecting I.A. No.170/2021 & I.A.

No.74/2022 filed by the appellant. Comp. App. (AT) (Ins.) No.1356/2023 has

been filed challenging the order passed in I.A. No.170/2021 & Comp. App.

(AT) (Ins.) No.1357/2023 has been filed challenging the order passed in I.A.

No.74/2022.

2. Both the appeals raise common question of facts and law and have been

heard together and are being decided by this common judgement.

3. Brief facts of the case necessary to be noticed for deciding the appeals

are:

i. The appellant, Lotus Auto Engineering Limited (for short the 'Lotus')

has been the group company of Amtech Auto Limited (AAL) being

holding company of the appellant. There was another group company

known Castex Technologies Ltd. (CTL). AAL and its two group

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 2 of 23 companies, Lotus and CTL were engaged in the business of

manufacturing of automotive parts.

ii. The business transaction between AAL, CTL and Lotus were carried in

a way that as and when AAL received order for manufacture of any auto

parts, it would order Lotus to carry out machining/mechanically

components of the parts. Lotus would in turn order CTL to undertake

iron casting (automotive components to Lotus). The end product was

supplied to AAL which in turn sold the end part to automotive

customer, out of advance receipt from customer, AAL paid Lotus for

machining work, Lotus would in turn pay CTL for casting word.

iii. Corporate Insolvency Resolution Process (CIRP) against holding

company AAL was initiated vide order dated 24.07.2017, thereafter,

CIRP initiated in respect of CTL by order dated 12.12.2017. CIRP

against the Lotus, the appellant was initiated vide order dated

07.08.2018.

iv. On 01.08.2020, liquidation proceedings were initiated against the Lotus

by the adjudicating authority. Resolution plan in CIRP of AAL was

approved by the Committee of Creditors (CoC) on 09.07.2020.

v. After approval of the plan in the CIRP of AAL, appellant filed I.A.

No.170/2021 through its liquidator in the CIRP of AAL, praying for

direction to pay CIRP cost with certain other reliefs.

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 3 of 23 vi. The resolution plan of AAL came to be implemented on 08.12.2021.

Resolution plan in respect of CTL was also approved and implemented

on 21.02.2022

vii. On 09.06.2021, Lotus was sold as a going concern in liquidation

process.

viii. I.A. No.74/2022 was filed by Lotus in the CIRP of AAL seeking status

quo with regard to implementation operation, execution and approved

resolution plan of the corporate debtor, AAL.

ix. The aforesaid two IAs filed by the appellant were opposed by the

Resolution Professional (RP)/Respondent No.1 and the monitoring

committee of AAL.

x. Adjudicating Authority by the impugned order rejected both I.A.

No.170/2021 & I.A. No.74/2022, aggrieved by which order, these two

appeals have been filed.

4. We have heard learned Sr. counsel Mr. Krishnendu Dutta appearing for

the appellant as well as learned counsel Mr Sumant Batra appearing for the

RP and learned Sr. counsel Mr. Sunil Fernandes appearing for the monitoring

committee of AAL.

5. Learned Sr. counsel Mr. Krishnendu Dutta appearing for the appellant

submits that AAL with its group companies, Lotus and CTL were carrying out

business of manufacture of automotive parts. Orders from customers were

received by AAL. Lotus, appellant in turn did the machining work of the

casting supply by CTL, the final product after machining then sold to AAL and

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 4 of 23 AAL sells to the ultimate customers. AAL used to make payment to Lotus

against their supplies to AAL, similarly, Lotus used to make the payment to

CTL against their supplies to Lotus. All companies were separate legal entities

but collectively called as AAL group companies. In the CIRP of AAL, Lotus

filed a pre-CIRP claim of ₹23.12 crore and by I.A. No.170/2023, it claimed

receivables as CIRP cost to the extent of ₹22.95 crore (reduced to ₹18.98 crore

as on date). It is submitted that during the CIRP period of the AAL, under the

direction of the RP of AAL, appellant continued with supplies to the AAL,

receivables of which is ₹22.95 crore which was liable to be paid to the

appellant as CIRP cost, which amount need to be paid in priority as per

Section 53 of the Insolvency and Bankruptcy Code, 2016 (for short the Code

or the IBC). RP in its reply has disputed the quantum of ₹22.95 crore,

however, admitted that amount due to appellant is ₹8.7 crore. The

outstanding amount payable for supplies made by Lotus to the AAL, during

CIRP of the AAL has to be classified as CIRP cost as payable in priority. The

CIRP cost of AAL was recorded and ratified in the Minutes of the Meeting of

CoC of AAL dated 22.08.2017 and 22.11.2017 as well as 18.02.2019. The

business model which was continuing prior to CIRP between AAL group

continued after CIRP of the AAL to keep the AAL as a going concern. When

the RP of the AAL continued the business model and received the supplies

from appellant during CIRP period, the said cost was payable as CIRP cost.

The RP of AAL as well as CTL was the same person i.e., R-1 Dinkar T.

Venkatasubramaniam. After three months of initiation of CIRP of AAL, RP of

AAL started directly paying the payment to CTL instead of payment through

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 5 of 23 appellant, which was objected on behalf of the appellant. It is submitted that

any amount payable to CTL from appellant could not have been set off with

the amounts payable to the appellant. Appellant being not part of the CoC of

the AAL was not aware as to whether RP of the AAL is getting cost of the

appellant approved as CIRP cost or not. No payment other than CIRP cost

can be incurred during the CIRP. Appellant sought declaration of CIRP cost

due to non-release of payment to appellant by RP after the approval of the

resolution plan of the AAL on 09.07.2020. Adjudicating authority committed

error in taking the view that by approval of the plan of the AAL by order dated

09.07.2020, all the claims shall stand extinguished in view of the judgement

of the Hon'ble Supreme Court in 'Ghanashyam Mishra and Sons Pvt. Ltd.,

Through the Authorized Signatory' Vs. 'Edelweiss Asset Reconstruction

Company Limited through the Director and Ors.', [(2021) 9 SCC 657],

which decision of the adjudicating authority is erroneous. Judgement of

'Ghanashyam Mishra and Sons Pvt. Ltd.' (supra) was relevant for claims

which are part of the resolution plan or has not been filed in the CIRP, but

CIRP cost, which is payable during the period can always be raised before the

adjudicating authority after approval of the plan in event of non-payment of

CIRP cost. During the CIRP of the AAL, Lotus was paid about ₹170 crore.

When the amount was being paid to the Lotus during the CIRP, there was no

need of filing any application before NCLT earlier. When the resolution plan

was approved and cost were crystallised, which were not remitted to Lotus by

the AAL, Lotus issued letters seeking payment of outstanding dues to the RP.

RP vide its email dated 24.09.2020 has intimated that amount due is only

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 6 of 23 ₹8.47 crore. The resolution plan of the AAL was implemented on 08.12.2021,

whereas the application I.A. No.170/2021 was filed on 25.11.2020 much prior

to the implementation of the plan. Impugned order does not deal with any of

the issues raised by the respondent and the application has been erroneously

dismissed, relying on the judgement of the Hon'ble Supreme Court in

'Ghanshyam Mishra and Sons Pvt. Ltd.' (supra). In any view of the matter,

RP having admitted the outstanding dues of ₹8.7 crore is required to make

payment of the admitted CIRP dues.

6. Learned counsel Mr. Sumant Batra appearing for the RP refuting the

submissions of the appellant submits that amount of ₹18.98 crore as claimed

by the appellant as CIRP cost has never been approved by the CoC of the AAL.

It is submitted that for any expense to become CIRP cost, approval of the CoC

is required as per provisions of the IBC and regulation. What was approved

by the CoC in its meeting referred by the appellant are related party

transactions. Approval of related party transaction during the CIRP is

required by Section 28(1)(f) of the IBC. The cost which is claimed by the

appellant as CIRP cost having never been approved by the CoC, there is no

right in the appellant to claim its CIRP cost nor there is any obligation to pay

the said amount of CIRP cost. Related party transaction continued during

CIRP to keep the corporate debtor as a going concern, but related party

transaction could not give any expense as CIRP cost, when the same has never

been approved by the CoC. There was amount of more than ₹14.81 crore

receivables from appellant to CTL. The amount of ₹8.47 crore which was

referred to in the email dated 24.09.2020 by the RP of AAL, it was mentioned

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 7 of 23 that the said amount is on account of stock in transit or order

quarantine/warehouse inventory/rejection as overdue collections yet to be

received from customers. The balance amount would get paid to the Lotus as

and when AAL received the final payment from customers after inspection of

parts manufacture and if found good in order as per the business practice

followed for decades. The claim of AAL towards pre-CIRP dues were admitted.

No payments having been proposed to the related party, the said dues were

extinguished after approval of the plan of the AAL. None of the amounts

claimed by the appellant as CIRP cost were either placed before the CoC for

approval in any of the CoC meeting, nor CoC approved at any time, the said

expenses as CIRP cost. The amounts were disputed and the said amounts

were never considered as part of the CIRP cost as the same was a separate

arrangement altogether, in which amounts were paid to Lotus only after they

received by customers and the customers paid only after the delivered goods

were in order. Lotus objection to set off is contrary to settled law. There were

mutual dealing and reciprocal obligation between the parties, adjustment by

set off is legally permissible and does not violate the scheme of the Code.

Resolution plan process of AAL was carried out under the supervision of the

Hon'ble Supreme Court and the resolution plan submitted by DBI was also

implemented in time bound manner as directed by the Hon'ble Supreme Court

vide its order dated 01.12.2021. The appellant at the time when the

resolution plan was pending approval never raised any claim of CIRP cost and

the applications were filed subsequent to approval of the plan of the AAL.

Applications were filed only in 20.11.2020 which came to be listed on March

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 8 of 23 2021, whereas the resolution plan of AAL stood fully implemented on

08.12.2021.

7. Learned Sr. counsel appearing for the R-2 submitted that R-2 is only

Asset Monitoring Committee of AAL. The monitoring committee was

constituted with respect to AAL under the resolution plan in order to manage

and supervise the process of monetisation or sale of the asset and Asset

Monitoring Committee was constituted. No relief is maintainable against the

R-2, which was constituted for a limited purpose of managing and supervising

the process of monetisation. The tenure of AMC has also come to an end and

DBI has been vested with the responsibility. The CIRP cost has already been

dealt with under the resolution plan duly approved by the CoC. Neither the

plan approval or order of adjudicating authority has been challenged, hence

the CIRP cost as was contemplated in the plan has frozen and cannot be

questioned. The application filed by the appellant as well as this appeal is an

attempt by appellant to delay.

8. We have considered the submissions of the counsel for the parties and

perused the records.

9. Learned counsel for the parties have placed reliance on various

judgements of this Tribunal and the Hon'ble Supreme Court, which we shall

refer to hereinafter while considering the submissions in detail.

10. Both the applications i.e., I.A. No.170/2021 & I.A. No.74/2022 were

filed in the C.P. (IB) No.42/Chd/Hry/2017, which was CIRP proceeding

initiated against AAL. CIRP against AAL commenced on 24.07.2017. It is an

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 9 of 23 admitted fact that Lotus is a group company of AAL. AAL was carrying out

business of manufacture of automotive parts along with its group companies,

Lotus and CTL. It is admitted fact that even after CIRP commencement the

AAL was run as a going concern and for that purpose, the business model

which was being followed by AAL in collaboration with its group companies

Lotus and the CTL 32. It is an admitted fact that in the CIRP of the AAL,

appellant has filed its claim of pre-CIRP dues of ₹23 crore. Resolution plan of

AAL which was approved on 09.07.2020 having not proposed any payment to

related parties, the claim of appellant of pre-CIRP dues extinguished. It is an

admitted fact that during CIRP of the AAL, appellant continued its supply to

the AAL and during the CIRP period of AAL, RP of AAL has made payment to

the appellant to the tune of ₹170 crore. In the resolution plan approved of the

AAL on 09.07.2020, CIRP cost as is being claimed by the appellant being not

part of the plan. Since the appellant did not receive any payment towards its

outstanding dues, the appellant filed the I.A. No.170/2021. It is useful to

notice the prayers made in the I.A. No.170/2021. In the application I.A.

No.170/2021, appellant pleaded that during CIRP of the AAL, appellant

continued its supply to the AAL. Total amount recoverable by the appellant

from AAL was stated to be ₹46.07 crore, out of which ₹23.12 crore was dues

against claim filed in the CIRP of the corporate debtor and ₹22.95 crore dues

during CIRP of the corporate debtor being CIRP cost. Appellant has referred

to various email/communication to the RP of AAL claiming that outstanding

amount be treated as CIRP cost. Appellant has also raised objection to the

debit notes issued by RP. Appellant also claims to have made payment of

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 10 of 23 ₹1.95 crore to CTL which has been duly made CIRP cost. Reference to the

email dated 24.09.2020 issued by the RP of AAL was made where RP admitted

an amount of ₹8.47 crore dues and not ₹22.95 crore as claimed by the

appellant. Further, the claim of the monitoring committee of AAL that Lotus

owes a net amount of ₹8.33 crore to CTL was also mentioned as

communicated by the RP. Appellant pleaded that respondents are trying to

violate the provisions of Section 53 by not making payment of CIRP cost to

the appellant, whereas, they are making direct payment to the CTL. In the

application, following prayers were made:

"a) Allow the present Application;

b) Pass urgent directions declaring that the difference in the claim filed amount and the current outstanding amount (being due in lieu of the goods supplied by Lotus Auto Limited after the commencement of CIRP of Amtek Auto Limited) be considered as the CIRP Costs of the Corporate Debtor;

c) Pass urgent directions restraining the Respondent Nos. 1 and 2 from making any direct payments to Castex Technologies Limited on behalf of Lotus Auto Engineering Limited out of the CIRP Costs of the Corporate Debtor due towards Lotus Auto Engineering Limited;

d) Pass urgent directions restraining the netting of dues between the Corporate Debtor and Castex Technologies Limited w.r.t. Lotus Auto Engineering Limited;

e) Pass urgent directions directing the Respondents to provide information to the Applicant regarding the treatment of the Claim filed by the Applicant on behalf of Lotus Auto, under the Resolution Plan approved for the Corporate Debtor;

f) Pass such other or further orders in favour of the Applicant as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case."

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 11 of 23

11. In the I.A. No.170/2021, the appellant vide its letter dated 27.10.2020

sent to the RP, AAL has given detail of its payment of supplies made by

appellant during CIRP of AAL totalling to ₹22.95 crore. Application I.A.

No.170/2021 was replied by the RP of the AAL refuting the claim. It was

stated that in the resolution plan of the AAL, which was approved, approved

resolution plan provided that "related party, operational creditor shall be paid

NIL amount". Rejoinder was also filed by the appellant to the application

reiterating its claim. We also need to notice the subsequent application

I.A.74/2022, which was filed by the appellant, by which application certain

reliefs were prayed pending final disposal of I.A. No.170/2021. Prayers made

in I.A. No.74/2022, are as follows:

"a) That pending final disposal of IA No. 170/2021 in CP No. 42/Chd/Hry/2017 titled Engineering Limited v Lotus Auto Dinkar. T Venkatsubramaniam & Ors. by this Hon'ble Tribunal, grant a status-quo on the implementation of the Resolution Plan of Respondent no. 3 and 4 in respect of the Corporate Debtor, OR IN THE ALTERNATIVE;

b) The Hon'ble Tribunal may kindly be pleased to direct the Respondents to preserve an amount of Rs. 22.95 Crores claimed as CIRP Costs due towards Applicant from the Corporate Debtor in an interest bearing Escrow Account till the final disposal of IA No. 170/2021 in CP No. 42/Chd/Hry/2017 titled Lotus Auto Engineering Limited v. Dinkar. T. Venkatsubramaniam & Ors.

c) The Hon'ble Tribunal may kindly be pleased to pass such other and further orders as it may deem fit in the facts and circumstances of the case."

12. The claim of the appellant in its application I.A. No.170/2021 was

payment of its supplies made to the AAL as CIRP cost. CIRP cost is defined

in Section 5(13) of the IBC, which is as follows:

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 12 of 23 "5. Definitions.-

In this Part, unless the context otherwise requires,--

(13) "insolvency resolution process costs" means--

(a) the amount of any interim finance and the costs incurred in raising such finance;

(b) the fees payable to any person acting as a resolution professional;

(c) any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern;

(d) any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and

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

13. As per the above definition any cost incurred by the RP in running the

business of the corporate debtor as a going concern is insolvency resolution

process cost. Regulation 31 of the Insolvency & Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons), Regulations 2016, (for

short the CIRP Regulations, 2016) defines insolvency resolution process cost,

which regulation is 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 3[sub-regulation (8)] of regulation 16A;

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

[(ac) fee payable to facilitator under clause (c) of sub-

regulation (1) of regulation 16C.

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 13 of 23

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

(ba) fee payable to the Board under regulation 31A;

(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."

14. Regulation 34 of the CIRP Regulations, 2016 defines resolution

professional costs. Regulation 34 of the CIRP Regulations, 2016, is as follows:

"34. Resolution professional costs.- The committee shall fix the expenses to be incurred on or by the resolution professional and the expenses1 shall constitute insolvency resolution process costs.

[Explanation. - For the purposes of this regulation, "expenses" include the fee to be paid to the resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the resolution professional.]"

15. Regulation 34 of the CIRP Regulations, 2016, thus entitled the

committee to fix the expenses to be incurred on or by the RP, which expenses

shall constitute resolution process cost. As per definition of the Regulation

31 of the CIRP Regulations, 2016, any cost directly related to the CIRP and

approved by the committee is insolvency resolution process cost, thus

approval of the CoC is necessary for payment of insolvency resolution process

cost.

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 14 of 23

16. Before proceeding further, we need to consider one submission of the

appellant challenging the order of the adjudicating authority that adjudicating

authority committed an error rejecting the application, relying on the

judgement of the Hon'ble Supreme Court in 'Ghanshyam Mishra and Sons

Pvt. Ltd. (supra) for rejecting the application. Adjudicating Authority in the

impugned order in paragraph 15 has relied on the judgement of the Hon'ble

Supreme Court in 'Ghanshyam Mishra and Sons Pvt. Ltd.' (supra), where

adjudicating Authority made following observations:

"15. It is trite law that in view of the catena of judgments of the Hon'ble Apex Court, especially in the case of Ghansyam Mishra and Sons Private Limited (Supra), Committee of Creditors of Essar Steel India Limited (Supra) and Prashant Properties (Supra) and others, the appellant-operational creditor cannot seek intervention by this Adjudicating Authority after the approval of the resolution plan of the corporate debtor.

We, therefore, do not wish to go into the merits of the case, which in any case cannot be entertained post- approval of the resolution plan."

17. There can be no dispute to the proposition laid down by the Hon'ble

Supreme Court in 'Ghanshyam Mishra and Sons Pvt. Ltd.' (supra), that

after approval of the resolution plan an operational creditor cannot seek

intervention of the adjudicating authority, the said proposition fully applies

with regard to any claim of an operational creditor, which is dealt in the

resolution plan. In the present case, appellant has filed pre-CIRP claim of

₹23.12 crore with regard to which NIL payment was proposed in the resolution

plan, which had become final. In the present case, in the application I.A.

170/2021, claim of the appellant was not for pre-CIRP cost rather it was for

cost incurred by the appellant after commencement of the CIRP by making

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 15 of 23 supplies to the corporate debtor who was being run as a going concern. Adjudicating authority in the impugned order has in detail noted submission

of the appellant as well as the RP in detail, but had not gone into the merits

of the submissions, relying on the judgement of the Hon'ble Supreme Court

in 'Ghanshyam Mishra and Sons Pvt. Ltd.' (supra). Judgement of the

Hon'ble Supreme Court in 'Ghanshyam Mishra and Sons Pvt. Ltd.' (supra),

provide extinguishment of all claims which have been dealt in the resolution

plan, any claim which ought to have been filed in CIRP and has not been filed

shall also stand extinguished, but present was a case where claim was

regarding the supplies made during CIRP. A resolution plan may include

details of all CIRP cost incurred and in a case where resolution plan contains

details of CIRP cost also which is payable by resolution applicant that shall

also become final and cannot be questioned. In the present case, there are

nothing on record to indicate as to whether resolution plan dealt with all CIRP

cost or not. Adjudicating authority, although have not proceeded to examine

contention on the merits, but in these appeals, both the parties having made

elaborate submissions of the respective claims, we proceed to examine the

claims on merits to give finality to the issues raised.

18. Learned counsel for the appellant has relied on the judgement of the

Hon'ble Supreme Court in 'Alok Kaushik' Vs. 'Bhuvaneswari Ramanathan

& Ors.' reported in [Civil Appeal No.4065/2020], where Hon'ble Supreme

Court had occasion to consider insolvency resolution process cost. Hon'ble

Supreme Court in the above case has held that adjudicating authority is

sufficiently empowered under Section 60(5)(c) of the IBC to make

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 16 of 23 determination of the amount which is payable as part of CIRP cost. In

paragraph 19 of the judgement, following was laid down:

"19. Though the CIRP was set aside later, the claim of the appellant as registered valuer related to the period when he was discharging his functions as a registered valuer appointed as an incident of the CIRP. The NCLT would have been justified in exercising its jurisdiction under Section 60(5)(c) of the IBC and, in exercise of our jurisdiction under Article 142 of the Constitution, we accordingly order and direct that in a situation such as the present case, the Adjudicating Authority is sufficiently empowered under Section 60(5)(c) of the IBC to make a determination of the amount which is payable to an expert valuer as an intrinsic part of the CIRP costs. Regulation 34 of the IRP Regulations defines 'insolvency resolution process cost' to include the fees of other professionals appointed by the RP. Whether any work has been done as claimed and if so, the nature of the work done by the valuer is something which need not detain this Court, since it is purely a factual matter to be assessed by the Adjudicating Authority."

19. The RP has categorically submitted before us that the CIRP cost as is

being claimed by the appellant was never placed before the CoC nor ever

approved by the CoC. The issue which need consideration before us is as to

whether the CIRP cost, which is claimed by the appellant in I.A. No.170/2021

was approved by the CoC or not.

20. Appellant in support of its contention that the CIRP cost claimed by the

appellant was recorded and ratified in the Minutes of the Meeting of CoC held

on 22.08.2017, 22.11.2017 and 18.02.2019 which Minutes have been

brought on the record which need consideration. The convenience

compilation has been filed by the appellant where the extract of the 1st

Meeting held on 22.08.2017, 4th Meeting held on 22.11.2017 and 13th Meeting

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 17 of 23 held on 18.02.2019 has been brought on the record. (All the above minutes

are also part of the appeal paper book).

21. Learned counsel for the appellant has relied on the item No. 3 of the 1st

CoC Meeting which contains ratification of related party transaction from

25.07.2017 to 17.08.2017. Item No. 3 of the Minutes is as follows:

"3. Ratification of Related Party Transactions from 25 July to 17 August 2017: A quick view on the buying and selling Transactions being carried out and certain payments made to related parties since his appointment was provided to the Participants. The complexity in the related party structure and the mechanism for monitoring the Transaction was explained. To ensure the operations on a Going concern basis and given the time constraint, the evaluation of Transactions on arms length could not be determined. However the IRP had made due comparisons of the price and volume of transactions, prior and post the CIRP process. The IRP further informed the lenders that due to the specialized and unique nature of parts produced by the Amtek Group there were certain challenges in benchmarking related party transactions with market prices. Further, the Transactions during the CIRP period are backed by an undertaking from the related party whereby any differential pricing, if discovered later would be recovered from the related party.

Currency: INR Relationship Opening (A) (B) (C) (D) (E= Cr balance Purch Paym Sal Collecti A+B+C+D) Party Name as at ases ents es ons Transact 25 July ion 2017* during the period ARGL Associates -76 -16 6 1 -3 -11 Castex Associates 0 -10 5 4 - -1 Technologies limited Metalyst Associates 32 -4 5 - -4 -2 Forgings Limited AC LIMITED Associates 18 - - 6 -5 1

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 18 of 23 SMI AMTEK Joint Venture 1 - 1 - - 1 CRANKSHAFTS P. LTD.

Amtek Joint Venture 3 - 0 - - 0 Powertrain Limited Lotus Auto -23 -6 5 - -2 -2 Engineering Limited Amzen Step down -4 -3 - 0 - -3 Machines Pvt Ltd Amzen Subsidiary 3 - - - - - Technologies Pvt Ltd Inderprastha Subsidiary 0 -5 3 - - -2 Engines Pvt. ltd. OCL Iron & 19 -2 1 0 - -1 Steel Limited Stride Auto Subsidiary 1 -0 - - - -0 parts Pvt Ltd. Fenece Auto Subsidiary 6 - - - - - Limited Indiglobal Directorship -17 -1 1 - 0 1 Tradelinks P. of KMP Ltd. Total -38 -46 28 11 -13 -20

The ratification of the Related Party Transactions is sought by electronic voting by members. Dinkar assured that an analysis of the arms length nature of the transaction would be presented within a month."

22. Similarly, in the 2nd Meeting held on 22.11.2017, the related party

transactions from 25.07.2017 to 31.10.2017 were noted, which is as follows:

"RELATED PARTY TRANSACTIONS FROM 25 JULY 2017 TILL 31 OCTOBER 2017 The Chairman presented the list of Related Party Transactions carried out during the period beginning 25July, 2017 to 31 October, 2017. He explained that these transactions are trade related and thus imperative to maintain the Company as a going- concern. As provided under the IBC Code, the same is put before the CoC Members as a voting item.

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 19 of 23 One of the CoC Member questioned if any challenges are being faced by AAL on account of disruptions as 3 other Group Companies are also lined up for the CIRP Process. The Chairman explained that continuous attempts to work with the managements of the Related Party is being made to identify problems, if any, that may be faced so that AAL is not impacted adversely. He mentioned that the disbursal of Interim Finance is soon expected and with the funds going to suppliers (including RPT) it would help in maintaining continuous supply from them."

23. To the similar effect are the Minutes of Meeting dated 18.02.2019,

where related party transactions were approved in sub-paragraph (m), which

is as follows:

"Related Party Transactions Approval

m) Member of RP's Team explained the related party transactions to the CoC. With respect to the major spikes in Lotus Auto & Castex Technologies Limited (CTL) the CoC was further informed that it was reflective of the payment terms with the customer."

24. Learned counsel for the RP submitted that the said Minutes relied by

the appellant cannot be treated to be approval of the cost as CIRP cost rather

said was approval of related party transaction which require mandatory

approval of the CoC before taking any such transaction. Learned counsel for

the RP has relied on Section 28(1)(f) of the IBC which is as follows:

"28. Approval of committee of creditors for certain actions. -

(1) Notwithstanding anything contained in any other law for the time being in force, the resolution professional, during the corporate insolvency resolution process, shall not take any of the following actions without the prior approval of the committee of creditors namely:--

(f) undertake any related party transaction;"

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 20 of 23

25. The heading of Section 28 of the IBC reads approval of CoC for certain

actions. Under clause (f), RP is required to obtain approval of the CoC for

undertaking any related party transaction. Thus, in the present case for

carrying the corporate debtor as a going concern, when the RP was required

to undertake related party transaction, it had to sought approval of the CoC

and the approval of the CoC in the Minutes as noted above are approval of the

CoC within meaning of Section 28(1)(f). When we look into item No. 3 of

Minutes dated 22.08.2017, as extracted above, it begins with the heading

"ratification of related party transaction from 25.07.2017 to 17.08.2017". The

Minutes notices the related party structure and mechanism for monitoring

the transaction and payments made to related parties which required

approval of the CoC, hence it was claimed.

26. Learned Counsel for the RP out of the same Minutes has referred to

Minutes of item No. 4, where appointment of legal counsel of the CoC was

approved with the limit of necessary expenses. We have noticed the Minutes

of 13th CoC Meeting held on 18.02.2019 and we had already noted sub-

paragraph (m) related party transaction approval was done. The next sub-

paragraph (n) is relevant to notice which contains the heading CIRP cost.

Paragraph (n) is as follows:

"CIRP Cost:

n) Member of RP's Team presented the CIRP cost and explained that it is still within the limit of INR 70Cr as approved by the COC with Liberty's Resolution Plan.

Representative of India Opportunities enquired about the payment of Interest on Interim Finance. The member of RP team further clarified about the default on interim financing due to delay in Resolution Plan

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 21 of 23 and timely payback of the Interim Finance.

Representative from SBI & India opportunities raised a concern over success fee of process advisors based on approval of Resolution Plan by NCLT. RP's Team also informed the CoC about the budget of INR 2 crores in the estimated CIRP cost for filing and litigation of Avoidance Transactions."

27. The Minutes of the CoC itself makes it clear that when any cost is to be

approved, it has been separately dealt by the CoC like approval of the CIRP

cost and the cost of the legal counsel. The approval which is referred and

relied by the counsel for the appellant is approval of related party transaction

as mandatory required by Section 28(1)(f) and is not approval of CIRP cost as

contemplated by Regulations 31 (d) & (e) and Regulation 34 of the CIRP

Regulations, 2016.

28. Related party transaction was done between the AAL and other group

companies as per business model which was being run prior to the initiation

of CIRP, which business continued even after commencement of the CIRP.

Learned counsel for the RP has contended that RP never placed the said cost

to be approved as a CIRP cost before the CoC, since it was never contemplated

as CIRP cost.

29. We thus are satisfied that the cost which is claimed by the appellant in

I.A. 170/2021 to be paid as CIRP cost having never been placed and approved

by the CoC, the relief claimed by the appellant could not have been allowed

by the adjudicating authority. We thus are of the view that order of the

adjudicating authority rejecting the I.A. 170/2021 and I.A. 74/2022, need to

be upheld, but for the reasons as indicated above.

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 22 of 23

30. In view of our forgoing discussions and conclusions, we do not find any

merit in any of the appeals. Both the appeals are dismissed.

Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

28th January, 2026

himanshu

Comp. App. (AT) (Ins.) No. 1356 & 1357 of 2023 23 of 23