Mr. Anoop Kumar Srivastava Directors ... vs Mr. Naveen Bhatnagar & Anr

Anoop Kumar Srivastava ...Appellants Versus Neerav Bhatnagar ...Respondents

Present:

For Appellant : Mr. Abhijeet Sinha Sr. Advocate with Ms. Khyati Jain, Mr. Diwaker Lohia, Ms. Heena Kochar, Advocates.

For Respondent : Mr. Rajat Sinha, Advocate for R1/Homebuyers.

Mr. Sunil Fernandes Sr. Advocate with Mr. Anuj Chauhan, Mr. Hritik Mehta, Ms. Rajshree Chaudhary, Ms. Diksha Dadu, Ms. Jeba Boktiar Mondal and Ms. Khyati Khemka, Advocates for IRP.

Mr. P.K. Dubey, Sr. Advocate with Mr. Hardeep Sachdeva, Mr. Ravi Bhasin, Mr. Abhyudai Singh, Mr. Raghav Chadha, Mr. Mukund Rawat, Mr. Kushank Sindhu and Mr. Benjamin Vanlalvena, Advocates for Eka Life Ltd.

Mr. Ashim Sood and Mr. Shahan Ulla, Advocates for R4 (ABFL).

Mr. Adarsh Srivastava, Mr. Rachit Mittal and Mr. Parish Mishra, Advocates for Noida Authority. ORDER

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

Present is an application filed under Section 60(5) of Insolvency and

Bankruptcy Code 2016 ('IBC' in short) by the Applicant-Eka Life Ltd seeking

replacement of the Interim Resolution Professional of Sequel Buildcon Private

Limited-Corporate Debtor undergoing Corporate Insolvency Resolution Process.

2. The salient facts of the present matter which are relevant to be noticed are

as outlined below:

 The Corporate Debtor-Sequel Buildcon Pvt Ltd was admitted into

Corporate Insolvency Resolution Process ("CIRP" in short) on 16.06.2023

by the Adjudicating Authority, following which Shri Amar Pal was

appointed as the Interim Resolution Professional ("IRP" in short).

 On 07.07.2023, this Appellate Tribunal passed an order staying the

constitution of the Committee of Creditors ("CoC" in short).

 On 25.07.2023, this Tribunal took cognisance of a Memorandum of

Undertaking ("MoU" in short) dated 12.07.2023 entered between the

home-buyers and M/s EKA Life Ltd. ("EKA" in short) in terms of which

EKA was to act as the Strategic Financier and Project Partner in the

Reverse CIRP of the Corporate Debtor.

Page 2 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023  The salient directions of this Tribunal in its order dated 25.07.2023 were

that the IRP shall ensure that construction is carried out as per MoU and

Status Report be submitted by them after eight weeks. The erstwhile

promoters were directed to cooperate with the IRP and arrange to disburse

interim finance amount of Rs 75 Cr. through EKA or through their own

sources over a period of 6-9 months as per Clause 3A of the MoU. In case

of breach of the MoU by the erstwhile promoters, the IRP and/or the home-

buyers were given the liberty to seek termination of Reverse CIRP.

 On 16.10.2023, this Tribunal noted that EKA had also deposited Rs 20

Cr. by Bank Draft dated 14.09.2023. The said order reiterated that all

stakeholders were to take steps to act in accordance with the earlier

directions issued on 25.07.2023 and the construction of the project

needed to be proceeded with further. It was further directed that the IRP

with the assistance of the erstwhile promoter to take steps for renewal of

registration of the project and obtain all other necessary permission to

start construction which may be completed within 30 days.

 On 16.02.2024, this Tribunal took note of the Status Report filed by IRP

which indicated that the promoters and the IRP had submitted

applications before Noida and UP-RERA for obtaining necessary

permissions besides seeking Environmental Clearance. The IRP also

submitted in the same report that it expected that necessary approvals

may be received within one month and thereafter construction shall

commence in full swing.

Page 3 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023  On 16.07.2024, it was brought to the knowledge of this Tribunal by the

IRP that Environmental Clearance had been granted on 27.05.2024 and

that map validation was under the consideration of the Competent

Authority.

 On 12.08.2024, this Tribunal took note that one home-buyer had

expressed concern regarding structural stability of the project.

 On 16.10.2024, EKA filed present IA No. 7159 of 2024 before this Tribunal

raising serious allegations against the functioning of the IRP and praying

for replacement of IRP of the Corporate Debtor and to appoint any suitable

IRP.

3. Making his submissions, the Ld. Sr. Counsel for the Applicant while giving

a background of the present matter stated that after the Corporate Debtor was

admitted into CIRP, an MoU dated 12.07.2023 was signed between EKA and the

Homebuyers which MoU provided that EKA was to arrange and disburse interim

finance amount of Rs 75 Cr. and that construction was to be carried out under

the supervision of the IRP with the co-operation of the suspended promoter.

While EKA had already infused an amount of Rs 25 Cr. towards construction of

the project, the IRP on his part had failed to secure the necessary approvals

which were a condition precedent for further infusion of funds by EKA.

4. It was further asserted that keeping in view their status as a strategic

project partner and a key financier of the project, the Applicant was entitled to

raise questions on the conduct/ misconduct of the IRP in the selection process

of the consultants.

Page 4 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023

5. It was pointed out that the IRP was related to the Law Firm-Centrik

Legalistic LLP ("CLL" in short) which had filed the CIRP petition of the Corporate

Debtor before the Adjudicating Authority. It was added that IRP had formerly

served as a Designated Partner in that Law Firm and continued to be still

affiliated with CLL. This ongoing and subsisting relationship between the IRP

and CLL provided a substratum to their clear conflict of interest which was a

violation of the Code of Conduct of insolvency professionals. It was added that

the selection process of the Project Management Consultant ("PMC" in short)

was manipulated by the IRP to enable the appointment of a related party as the

PMC. It was also submitted that the IRP had appointed yet another related party

as the Legal Consultant ("LC" in short) in a similar manner without following

the due process. Moreover, the fees payable to the Consultants was exorbitant.

Releasing such hefty fees to the consultants was prejudicial to the interests of

the Corporate Debtor keeping in view the financially stressed condition of the

Corporate Debtor.

6. It was vehemently contended that the IRP had deliberately failed to

disclose his association with the PMC, LC as well as CLL. Being related parties,

non-disclosure of such association amounted to violation of the Code of Conduct

for Insolvency Professionals. This proximate nexus between the IRP, PMC, LC

and CLL attracted the provisions of Section 5(24A)(h) read with Regulation

7(2)(h) of IBBI (Insolvency Professionals) Regulation, 2016 ("CIRP (IP)

Regulations" in Short) read with Clauses 1, 3, 3A, 8B, 8C, 14, 23B, 23C of the

Code of Conduct as contained in First Schedule and Sections 208(2)(a) and (e)

of IBC.

Page 5 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023

7. It was also contended by the Applicant that the IRP was trying to mislead

this Tribunal by creating a wrong impression that the Applicant having failed to

infuse Rs 75 Cr. within the prescribed time line has filed this application to

wriggle out of providing the balance funds. It was forcefully argued that they had

already infused Rs 25 Cr. which fact has not been disputed by the IRP thus

proving their bonafide. Neither have they reneged on their assurance to provide

the interim finance in full. Without disputing the fact that a time period of 6-9

months was provided to them by this Tribunal to infuse the funds, it was

submitted that the IRP was unjustly insisting on the Applicant to infuse the

balance of Rs 55 Cr at a time when they themselves had failed on their part to

secure the conditions precedent/requisite approvals which this Tribunal had

mandated them to provide. The time line of 6-9 months cannot be read in an

isolated manner as it was contingent on fulfilment of all four condition

precedents, which obligation has not yet been fully discharged by the IRP.

8. It was submitted that the Applicant had sought replacement of IRP in the

right earnest to ensure that funds infused by them is not misused or diverted by

IRP to its related parties instead of using it for running the Corporate Debtor as

a going concern. With a view to prevent further manipulations and frauds by the

IRP and to ensure timely development of the project and in the interests of

justice, it has been prayed to replace the IRP. In the present case, when the IRP

has clearly violated the Code of Conduct and failed to act impartially in the

discharge of their duties there is sufficient ground for his replacement. It was

also submitted that this Tribunal possesses requisite powers under Rule 11 of

NCLAT Rules, 2016 to take appropriate action including replacement of IRP. Page 6 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023

9. Rebutting the contentions advanced by the Applicant, Ld. Sr. Counsel for

the IRP submitted the IRP meets all eligibility criteria as prescribed under IBC

as well as qualifications and experience prescribed in Regulations 4 and 5 of the

CIRP (IP) Regulations, 2016. The purported nexus between the IRP and CLL as

alleged by the Applicant is an unnecessarily hyped-up exaggeration. It was

vehemently contended that in any case the IRP is not answerable to the

Applicant since he is merely an interim financer and not even a CoC Member. It

was also clarified that the name of IRP had been proposed by the Home-buyers

who were the proponents of the Section 7 application and not by the CLL.

Moreover, Clause 8B, 8C and 8D of the Code of Conduct of Insolvency

Professionals provide that the disclosure requirement is triggered in case of

relationships "at any time" or "during three years preceding the appointment".

It was stated that the allegations of the Applicant that the IRP was a partner of

CLL was a factum which dated back to a period well before three years preceding

his appointment. The date of appointment of IRP is 16.06.2023. The IRP had

already resigned as partner of CLL on 02.12.2019 which was four years prior to

the commencement of CIRP and hence there was no question of conflict of

interest. It was pointed out that the IRP was not a partner or director of the CLL

and that the partners and directors of the IRP were also independent of the CLL.

It was also pointed out that the IRP had appointed the PMC and LC by following

the due process after circulating EOI and invitation of quotes. Moreover, their

appointments and their fee arrangements were formalised after informing both

the Promoters and the Applicant. Hence, the Applicant is raising frivolous

complaints against the IRP at this belated stage to simply overcome their

Page 7 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 inability to deposit the interim finance corpus in its entirety within the permitted

period of 6-9 months which had already elapsed. As regards the mention of non-

fulfilment of the two conditions on their part, it was clarified that this was

occasioned by pending litigation before the Hon'ble Allahabad High Court on

account of which RERA registration was yet to be obtained. Pending RERA

registration, the sale of unsold inventory could not have been permitted by the

IRP. It is also contended that while the Applicant has mentioned about Master

Agreement 19.09.2023, it has deliberately chosen not to mention the orders of

this Tribunal dated 25.07.2023 and 16.10.2023 which has an overriding effect

on the Master Agreement and mandated completion of fund infusion by EKA-

Applicant within a stringent time-line.

10. It was vehemently contended that IBC does not allow any intervenor to

seek removal of IRP/RP and such powers vest exclusively with the CoC. If the

present Applicant is permitted to approach the Adjudicating Authority or this

Tribunal for removal of IRP, the special procedure as contemplated under

Section 27 of IBC for removal of IRP will be rendered otiose. It was also pointed

out that Section 22(2) of IBC provides that the IRP's appointment has to be first

confirmed by the CoC during its first meeting with 66% of voting. Since, there is

a stay on the constitution of CoC, the confirmation of appointment of IRP by CoC

has not taken place. It was therefore urged that this Tribunal may permit the

IRP to constitute the CoC and convene a meeting with the limited agenda of

confirmation of IRP as RP. It was submitted that in the proposed CoC meeting,

both the Applicant and the IRP could be present to make their submissions

Page 8 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 before the CoC before the CoC casts its vote either confirming or not confirming

the IRP.

11. We have duly considered the arguments advanced by the Learned Counsel

for both the parties and perused the records carefully. The short question before

us is whether the conduct of the IRP in the given factual matrix gives adequate

reason to believe that there was a breach of the Code of Conduct of Insolvency

Professionals by IRP warranting his removal and replacement by another IRP.

12. Before we come to our analysis and findings, it may be useful to take note

of the important statutory provisions and relevant regulations framed

thereunder. Regulation 3(1) and the explanatory clause of the IBBI (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 lays down that the

RP must not have any conflict of interest or business relationship with the

corporate debtor, its promoters, or any other stakeholders. Regulation 7(2)(h) of

the IBBI (Insolvency Professionals) Regulations, 2016 provides that insolvency

professionals must adhere to a Code of Conduct specified in the First Schedule

to these regulations for avoiding conflicts of interest and maintaining

independence. It is pertinent to mention that the relevant provisions of the Code

of Conduct are reproduced below:

"1. An insolvency professional must maintain integrity by being honest, straightforward, and forthright in all professional relationships."

"3. An insolvency professional must act with objectivity in its professional dealings by ensuring that his decisions are made without the presence of any bias, conflict of interest, coercion, or undue influence of any party, whether directly connected to the insolvency proceedings or not."

"3A. An insolvency professional must disclose the details of any conflict of interests to the stakeholders, whenever he comes across such conflict of interest during an assignment."

Page 9 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 "8B. An insolvency professional shall disclose its relationship, if any, with the corporate debtor, other professionals engaged by it, financial creditors, interim finance providers, and prospective resolution applicants to the insolvency professional agency of which he is a member, within the time specified hereunder...

Explanation- For the purpose of clause 8-B and 8-C above, 'relationship' shall mean any one or more of the following four kinds of relationships at any time or during the three years preceding the appointment of other professionals......"

"8C. An insolvency professional shall ensure disclosure of the relationship, if any, of the other professionals engaged by it with itself, the corporate debtor, the financial creditor, the interim finance provider, if any, and the prospective resolution applicant, to the insolvency professional agency of which he is a member, within the time specified as under......"

"14. An insolvency professional must not act with mala fide or be negligent while performing its functions and duties under the Code."

"23-B An insolvency professional shall not engage or appoint any of his relatives or related parties, for or in connection with any work relating to any of his assignment."

"23-C An insolvency professional shall not provide any service for or in connection with the assignment which is being undertaken by any of his relatives or related parties."

13. It is the case of the Appellant that M/s AMS Consult which had been

appointed as the PMC by the IRP was responsible for the critical aspects of the

construction work but the PMC was not discharging its obligations properly. The

Applicant expressed apprehension of the risks entailed in having an

inexperienced PMC team as it could lead to unsafe construction. Highlighting

the shortcomings in the performance of the PMC, it was stated by the Applicant

that the PMC had put in place a team of two engineers of junior level who lacked

the requisite level of experience in the handling execution of large-scale housing

projects.

14. We cannot be oblivious of the fact that it was as much the responsibility

of the Applicant as a strategic project partner to ensure the structural stability Page 10 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 of the project. In this backdrop, when the Applicant is acting as a strategic

partner in the project and therefore responsible for ensuring the safety of the

building and answerable to the home-buyers on this count, it was but natural

that they desired that the PMC should be competent enough to provide quality

consultancy. Since the PMC was responsible for oversight of the quality of the

construction, we do not find anything unusual or arbitrary on the part of the

Applicant to be assured of the professional competence of the engineering team

deployed by the PMC for this purpose and for insisting that the IRP ought to

have selected a PMC with proper professional credentials. That the home-buyers

had started raising their concern on the structural stability of the project cannot

be denied as this was also brought to the knowledge of this Tribunal on

12.08.2024. Irrespective of whether such concerns were expressed by a single

home-buyer or multiple home-buyers, it becomes a material factor that cannot

be side-stepped once such a concern had been expressed.

15. On the manner of appointment of the consultants, it is the case of the

Applicant that both the PMC and LC had been appointed without following the

due process. The EOI/Tender/Bidding process details and the evaluation of the

various offers received with regard to appointment of PMC and LC were not

provided by the IRP to the Applicant inspite of several requests. The IRP also

failed to provide a copy of the contract executed with the PMC. Information

sought regarding the credential/experience statement and profile of the PMC

alongwith details of key personnel were also not shared. It was also pointed out

that the IRP had deliberately supressed the credentials and profile of the PMC

and LC as it would have clearly exposed their conflict of interest in selecting and Page 11 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 appointing the consultants. It was also alleged that AMS Consultants-PMC was

the last entity to submit their bid in response to the EOI and was appointed as

the PMC basis their fee quote being the lowest. Their experience and professional

credentials were not factored in by the IRP in their selection as PMC. A similar

pattern of manipulation of the EOI process took place in the appointment of

Pinnacle Law Chambers as the LC of the IRP. Pinnacle Law Chambers which got

finally picked up as LC was again the last entity to have submitted their bid and

the sole criteria for appointment was again the lowest fee quoted without

factoring in other professional credentials.

16. When we look at the manner of selection, we cannot be unmindful of the

fact that there seems to be strange pattern in the manner in which the successful

consultants were selected. In both the cases of PMC and LC, the consultants

which got selected were the last ones to have filed their bids and the quotes of

the last to bid somehow turned out to be the lowest. Still more curiously, the

address of PMC and LC was also the same i.e. Office No. 2401, 24 th Floor,

Corenthum Iconic Tower, Sector-62, Noida and only subsequently the address

of the LC changed to Faridabad. What is more surprising and inexplicable is that

on the one hand CLL had appointed the same IRP to conduct the resolution

process for various entities and on the other hand, the IRP had appointed the

same PMC and LC in the CIRP of the other firms also. It is too much of a strange

coincidence for the same PMC and LC to succeed in the bid process conducted

by the IRP in the CIRP of other entities. The allegation of manipulation in the

selection process thus cannot be ruled out altogether.

Page 12 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023

17. Keeping in mind the status of Applicant as a strategic project partner and

a key financier of the project, it does stand to reason for them to have raised

questions on the manner of selection of consultants followed by the IRP when

they were not satisfied with the quality of services rendered. From material on

record, we notice that the Applicant had issued letters to the IRP to clarify the

manner in which these consultants were appointed including details of their

credentials, professional profile, work experience, man power and HR structure

etc. The stone-walling of such relevant information by the IRP does create room

for suspicion on the conduct of the IRP of trying to conceal/supress relevant and

necessary facts. The apprehensions of the Applicant with regard to the manner

of appointment of the consultants ought to have been allayed by the IRP rather

than create a shroud of opacity.

18. Given this backdrop, the reluctance on the part of IRP to share information

on the bidding process and professional profiles of the consultants creates in

our mind an iota of doubt on the fairness and transparency of the selection

process adopted by the IRP and lends credence to the allegation made by the

Applicant of manipulation by the IRP of the EOI process so as to enable the

appointment of related parties.

19. It is also the case of the Appellant that the IRP was related to the Law

Firm, CLL which had filed the CIRP petition of the Corporate Debtor before the

Adjudicating Authority. As proof of their proximity, it was submitted by the

Applicant that the CLL had filed four other CIRP petitions and in all of them the

present IRP was nominated to conduct the CIRP process. Prima-facie, we are not

much impressed by this assertion of the Applicant since in terms of the statutory Page 13 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 provisions of the IBC, the appointment of IRP is the prerogative of the

Operational Creditor or Financial Creditor or Corporate Debtor subject to

approval of the Adjudicating Authority. Hence it would be a little too far-fetched

to believe that CLL had a role to play in the selection of IRP in the other entities

undergoing CIRP.

20. We now proceed to dwell upon another set of allegations raised by the

Applicant to substantiate that there was continuing and subsisting professional

association and monetary dealings between the IRP and CLL. It was contended

that IRP had formerly served as a Designated Partner in CLL and continued to

remain affiliated with CLL by virtue of having close association with Shri Prit

Pal, the current Designated Partner of CLL. The IRP held that it was

misconceived on the part of the Applicant to make this allegation since the IRP's

association with CLL had terminated more than 3 years back. Since the Code

of Conduct stipulated making disclosure of related parties only to a period of

upto 3 years preceding the appointment of the insolvency professional, there was

no need on the part of IRP to have disclosed such information.

21. However, what is pertinent to note is that the IRP had

business/shareholding in companies jointly with Prit Pal Singh who is the

existing Designated Partner of CLL. Their joint shareholding is noticed in the

case of Centrik Suportiaz Foundation ('CSF" in short) and Novative Solution Pvt.

Ltd. ("NSPL" in short). In both these entities, Amar Pal, the present IRP and Prit

Pal Singh are joint shareholders. Moreover, both the IRP and Prit Pal Singh,

present Designated Partner of CLL are directors of CSF which again establishes

clear nexus between the IRP, CLL and CSF. Yet more intriguing is that as per Page 14 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 MCA website, CSF and CLL has been shown to share the same registered

address as 705, 7th Floor, Pragati Tower, 26-Rajendra Place, New Delhi. Even

the e-mail address of CSF and CLL show @centrik.in as a common domain name.

Even NSPL uses the same common domain name "Centrik.in" which domain

name was owned by the present IRP. Interestingly we notice that the website of

CLL, https://www.centrik.in also continues to show the name of the IRP in the

category of "Our Experts". The screenshot of the website of CLL has been placed

by the Applicant at Annexure-A13 which also establishes the ongoing and

subsisting relationship between the IRP and CLL. Besides association between

IRP and CLL, there is incidence of relationship between IRP and the PMC. The

sole proprietor of PMC, Shri Amandeep Saxena was a business partner of the

IRP in other business entities like Himacus Enterprises Pvt. Ltd. (HEPL). Even if

we accept the contention of the IRP that the IRP had ceased to be a shareholder

in HEPL from 24.05.2019 as is evident from the amended Articles of Association

and Memorandum of Association of HEPL, the association prior to that period is

an admitted fact. The two also had common business interest and connection in

Timber Touch India Pvt. Ltd. (TTIPL) and Triumph Concepts Pvt. Ltd. (TCPL).

These entities have also been using the common email address i.e.

info@centrik.in; support@centrik.in which are indicative that the PMC was a

related party of IRP. The domain name associated with the IRP is also used by

Amandeep Saxena, proprietor of PMC and Prit Pal Singh, Designated Partner of

CLL, which all go to corroborate IRP's relationship with all these entities at some

point of time.

Page 15 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023

22. It was contended by the Applicant that the IRP having deliberately failed

to disclose his associations with the PMC, LC as well as CLL which were related

parties tantamount to violation of the Code of Conduct for Insolvency

Professionals. There was a clear breach of fiduciary duties on the part of the IRP

besides conflict of interest in the appointment of the consultants. Hence the IRP

should be immediately replaced. Per contra, the IRP has justified non-disclosure

of its association with CLL, PMC and other related business entities on the

ground that Clauses 8B, 8C and 8D of the Code of Conduct apply only to a period

of 3 years preceding their appointment of IRP and since their association had

terminated more than 3 years back, it need not have been disclosed. We are of

the considered view that this cannot come to the rescue of the IRP since in terms

of Clause 8C of the Code of Conduct, the disclosure requirement comes into play

"at any time" when the IRP is a key managerial person, a partner of a related

party or a partner or director of the concerned company, firm or LLP. The

explanatory clause therein clearly states that the "relationship" shall means any

one or more of the following four kinds of relationships "at any time" or "during

three years preceding the appointment of IRP". The IRP was therefore obligated

in the interest of transparency to disclose and notify the stakeholders of such

relationship with CLL, PMC and LC as IRP continued to be current

shareholder/director in entities such as CSF, HEPL, TTIPL and TPCL. The IRP

has also acted in contravention of IBBI Circular No. IP/005/2018 dated

16.01.2018 on "Disclosures by Insolvency Professionals and other Professionals

appointed by Insolvency Professionals conducting Resolution Processes". This

circular defines "relationship" to include where insolvency professional or the

Page 16 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 other professionals are a shareholder, Director, Key Managerial Personnel or

partner of the related parties. IRP has violated the Code of Conduct and in the

process failed to act impartially in the discharge of its duties.

23. This brings us to the contention of the IRP that only when they informed

the Applicant about the expiry of the time-line for balance fund infusion that the

Applicant raised the issue of conflict of interest. Thus, the Applicant was only

trying to wriggle out of its obligations envisaged in the MoU dated 12.07.2023.

The Applicant has failed to provide any concrete reply by when the balance

interim finance will be paid. Moreover, when the Promoters have agreed to infuse

funds which the Applicant has failed to infuse, the Applicant have no locus to

file the instant application. These arguments were repelled by the Applicant by

stating that the IRP was trying to mislead this Tribunal by creating a wrong

impression that the Applicant had failed to infuse Rs 75 Cr. within the

prescribed time line. The time-line of 6-9 months cannot be read in an isolated

manner since it was contingent on fulfilment of four condition precedent by the

IRP which remained unfulfilled.

24. When we look at the terms of the Master Agreement dated 19.09.2023, we

notice that after the initial infusion of Rs 20 cr as advance, the rest of the Rs. 55

cr was to be infused upon fulfilment of the condition precedent by the IRP.

Annexure-1 of the Master Agreement provides for the following four conditions

precedents which were to be met by the IRP which read as follows:

(i) The IRP shall give consent required to ensure the unsold inventory can

be sold as per the law without any hindrance.

Page 17 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023

(ii) Procure Environment Clearance for the project within four months from

the dated of this agreement (with a grace period of 30 days).

(iii) Procure RERA extension/approval for all phases of the project within

4 months from the date of this agreement (with a grace period of three

months).

(iv) Application for revalidation of all approvals including for all

expiry/applicable approvals including revised building plan from Noida

Authority.

Items no. (i) and (iii) above are admittedly still pending while items no. (ii) and

(iv) above have been achieved.

25. The Applicant has indisputably infused sums of money to the tune of Rs

25 Cr. to ensure that construction is continued while it is also indisputable that

the conditions precedent have not been fulfilled by the IRP. In the given facts

and circumstances, we are inclined to agree with the Applicant that when two of

the condition precedent remain unmet on the part of the IRP, it does not behove

of the IRP to put blame on the Applicant for not infusing the balance amount.

The Applicant not having evaded its responsibility to contribute to the interim

financing nor having refused to infuse the balance funds, we do not find

substance in the contention of the IRP that the Applicant had filed this

application to cover up its inability to provide the balance amount.

26. In the conduct of Reverse CIRP, the relationship between the IRP and

stakeholders of the Corporate Debtor including home-buyers and interim

financier is built on trust. Once this trust is belied, it has the potential to

jeopardise the resolution process. In the present case, the IRP has been found Page 18 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 to be forthcoming in parting with all relevant information with regard to the

credentials of their consultants to the Applicant. As a key financier, the

Applicant had a definite stake in the manner of appointment of the PMC and LC.

The contention of the IRP that the consent of the Applicant had been obtained

before the appointment of the PMC and LC has been denied by the Applicant.

The IRP had merely informed the Applicant regarding the appointment of PMC

post their appointment which cannot be viewed as their concurrence after

consultation. The requisite and optimal level of cooperation from the consultants

appointed by the IRP is also found amiss. The consultants have also been paid

hefty fees already but the services have not been found satisfactory. The

performance of these consultants and payments defrayed to them had

implications on both the physical progress of the construction of the project and

running of the Corporate Debtor as a going concern and its financial health. For

a Corporate Debtor which was already financially stressed and insolvent,

payment of fees by the IRP to related party consultants without commensurate

services forthcoming from them constituted sufficient ground to seek change of

the IRP. The Applicant definitely enjoys locus standi to file the present

application since it has been infusing funds into the project for the benefit of all

stakeholders including the home-buyers. There is merit in the application filed

by the Applicant seeking replacement of the IRP with another IRP who can better

safeguard the interest of all stakeholders, especially home-buyers.

27. In the given backdrop, we are of the considered view that there is incidence

of infringement of the Code of Conduct of the Insolvency Professionals by the

present IRP for not having disclosed their relationships or potential conflicts of Page 19 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023 interest in the appointment of consultants. To prevent further abuse of process

and to meet the ends of justice, we direct the removal of the IRP forthwith and

the consultants appointed by them. We allow the application and direct for

replacement of present IRP. The copy of this order be placed before the

Adjudicating Authority. The Adjudicating Authority to immediately appoint a

new IRP in accordance with the statutory provisions of IBC and regulations

framed thereunder. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 08.01.2025

Abdul/Harleen

Page 20 of 20

I.A. No. 7159 of 2024 in Company Appeal (AT) (Insolvency) No. 823 of 2023