West Bengal Financial Corporation vs Krishnaswami Cvr & Anr

[Arising out of order dated 06.08.2021 in I.A. (IB) No. 219/KB/2021 in C.P. (IB) No. 185/KB/2018 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata.)]

IN THE MATTER OF:

West Bengal Financial Corporation, Through its Managing Director DD-22, Salt Lake City, Kolkata-700064, West Bengal. ...... Appellant.

Versus

1. Krishnaswami CVR, Resolution Professional (An Insolvency professional registered with the Insolvency and Bankruptcy Board of India, having Registration No. IBBI/IPA-001/IP- P01302/2018-2019/12217, EmailID: rpcvrkswami@gmail.com Having office at Flat 2D, Second Point, 449 NSC Bose Road, Mahamayatalla, Garia, Kolkata 700084, West Bengal. ...... Respondent No. 1. 2. M/S. GLAZE INFRASTRUCTURE PRIVATE LIMITED 2

Registered Office at 591, Block-O, New Alipore, 3rd Floor from Back Gate, Kolkata- 700053, West Bengal. ...... Respondent No. 2. (Corporate Debtor)

Present: For Appellant: Mr. Madhumita Bhattacharjee, Advocate. For Respondent:- Mr. Rishav Banerjee, Mr. Avik Chowdhuri and Ms. Soumya Dutta, Advocates for R1.

JUDGMENT

(03rd November, 2022)

Justice Anant Bijay Singh;

The present Appeal has been filed by the Appellant being aggrieved and

dissatisfied by the order dated 06.08.2021 passed by the Adjudicating Authority

(National Company Law Tribunal, Kolkata Bench, Kolkata) in I.A. (IB) No.

219/KB/2021 in C.P. (IB) No. 185/KB/2018 whereby and whereunder I.A. (IB)

No. 219/KB/2021 was disposed of with a direction that payment of Rs.

15,00,000/- as a consolidated fee to the Resolution Professional for the entire

CIRP period and this shall be paid within a period of two weeks from today.

2. The facts giving rise to this Appeal are as follows:

i) The Appellant is the West Bengal Financial Corporation (henceforth WBCF)

constituted under the State Financial Corporations Act, 1951 (as amended up

to date), enacted by the Parliament of India. The Head Office of the Corporation

is situated at DD-22, Salt Lake City, Kolkata-700064, West Bengal. The

Company Appeal (AT) (Insolvency) No. 725 of 2021 3

Respondent No. 1, Mr. Krishnaswami C.V.R is an Insolvency Professional

registered with the Insolvency and Bankruptcy Board of India. The Respondent

No. 1 was appointed as an Interim Resolution Professional and later on was

further appointed to be the Resolution Professional in the said matter.

ii) The Respondent No. 2, M/S Glaze Infrastructure Private Limited, a

Company incorporated and registered under the Companies Act, 1956 and

having its Registered Office at 591, Block-O, New Alipore, 3rd Floor from Back

Gate, Kolkata- 700053, West Bengal and is the Corporate Debtor in the instant

case.

iii) The Respondent No. 2 has an outstanding debt of Rs. 1,05,17,735/-

payable to the Operational Creditor - M/s Saint Gobain India Pvt. Ltd. which

the Respondent No. 2 failed to pay within the stipulated dated i.e. by the end of

31st August, 2019, the Adjudicating Authority vide order dated 25.11.2019

passed a direction for initiation of Corporate Insolvency Resolution Process

against the Respondent No. 2 and the Respondent No. 1 was accordingly

appointed as the Interim Resolution Professional and then Resolution

Professional.

iv) Further case is that in the first meeting of the Committee of Creditors of

Glaze International Pvt. Ltd. held on 26.12.2019 it was decided that an amount

of Rs. 2,76,240/- was approved towards the fees and preliminary expenses of

the CIRP conducted by the IRP of which Rs. 2,50,000/- was the fees of the IRP

for the CIRP period only i.e. for one month.

Company Appeal (AT) (Insolvency) No. 725 of 2021 4

v) Further the Adjudicating Authority vide order dated 31.12.2019 appointed

the Interim Resolution Professional as the Resolution Professional (for short RP).

In the 3rd meeting of the COC, the RP informed the Committee that his fees need

to be decided which was postponed for subsequent meetings. In the 5th meeting

of the COC, the RP placed a note under Agenda 8 wherein he sought approval

of his fees at the rate of Rs. 2.50 Lacs per month with a maximum of Rs. 15

Lacs. The Agenda 8 is extracted below:

"Agenda 8: The resolution professional placed a note

requesting for approval of his fees (appended) at the rate of Rs.

2.50 lacs per month with a maximum of Rs. 15 lacs. Members

are requested to pass the following resolution:

Resolved to approve the fees to the resolution

professional at the rate of Rs. 2,50,000.00/- (Rupees two

lacs fifty thousand only) per month subject to a maximum

of Rs. 15 lacs (Rupees Fifteen lacs only) for the entire

CIRP process.

With no further item to discuss the meeting ended with a vote

of thanks for the active participation by the members."

vi) Further case is that the aforesaid fees were not paid the Respondent No. 1

/ RP filed application bearing I.A. (IB) No. 219/KB/2021 in C.P. (IB) No.

185/KB/2018 before the Adjudicating Authority for none payment of fees,

thereafter, the Adjudicating Authority disposed of the said I.A. with certain

directions (supra) which led to filing of this Appeal.

Company Appeal (AT) (Insolvency) No. 725 of 2021 5

Submissions on behalf of the Appellant

3. The Ld. Counsel for the Appellant during the course of argument and in

his memo of Appeal along with written submissions submitted that they have

provided term loans aggregating Rs. 1550 Lakh to Glaze Infrastructure Pvt. Ltd.

between 2010 and 2013 for setting up a laminated and toughened glass

manufacturing unit at Ganipur, South 24 Parganas. The account of the

Corporate Debtor is in heavy default for a long time and there has not been any

recovery during last few years and a huge amount of public fund is blocked and

the account position has taken an alarming shape, the outstanding-cum-default

amount as on 30.06.2021 is Rs. 20,64,81594.41 including interest. As against

such a huge demand, the Appellant was not able to recover any amount from

the Corporate Debtor and as such they are unable to make such payment

towards the fees of Resolution Professional.

4. It is further submitted that the voting share of WBFC is 74.01% and thus

the proportionate amount of the Resolution Professional fees that WBFC needs

to pay is Rs. 11,10,150/-. The resolution plan submitted by the Resolution

Professional was not a pragmatic one and it failed to attract prospective buyers.

The tenure of the Resolution Professional is long and other than conducting a

few meetings, he failed to function satisfactorily and place a practical resolution

plan to revive the unit as a result of which the unit needs to be liquidated.

5. It is further submitted that the impugned order directing the Appellant to

pay the Resolution Professional 15 Lacs towards his fees is uncalled for as the

CoC have already voted against it and it is unfair to saddle a government

Company Appeal (AT) (Insolvency) No. 725 of 2021 6

institution dealing with public money with unnecessary burden. It is further

submitted that without prejudice to the aforesaid, the Appellant herein is ready

and willing to pay Rs. 5,55,075/- towards the fees of the Resolution Professional

which can be adjusted from the sale proceeds of the liquidation. Based on these

submissions, the ex-parte impugned order is bad in law and deserves to be set

aside as it is illegal and the Appeal be allowed.

Submissions on behalf of the Respondent

6. The Ld. Counsel for the Respondent No. 1/Resolution Professional during

the course of argument and in his reply affidavit along with written submissions

submitted that the Respondent No. 1 was constrained to file an application

before the Adjudicating Authority praying for payment of fees which the

Respondent No. 1 in good faith had restricted to a total of Rs. 15 Lakhs though

he was actually entitled to much higher fees (more than Rs. 35 lakhs calculated

@ Rs. 2.50 lakhs per month, which was approved as IRP fees). It is a matter of

undisputed record that despite several notices issued to the CoC members,

nobody appeared to represent the CoC Members at the time of hearing of the

application. The impugned order was passed ex-parte because none of the CoC

members chose to appear despite service of notice.

7. It is further submitted that the Respondent No. 1 has not received any fees

whatsoever throughout the CIRP. It is absurd and contrary to the provisions of

the Code for the CoC to force the Resolution Professional to conduct the CIRP

without any fees whatsoever. It is further submitted that the CoC comprised of

total 6 members including the Appellant (who enjoyed 74.01% share). All the 5

Company Appeal (AT) (Insolvency) No. 725 of 2021 7

other CoC members has duly complied with the order dated 06.08.2021 and paid

their share of the fee to the Resolution Professional. This goes to show that there

is actually no grievance of the CoC against the Resolution Professional and that

the appellant is wrongfully withholding payment of Resolution Professional.

8. The Ld. Counsel for the Respondent No. 1 relying on an order dated

10.01.2020 passed by this Appellate Tribunal in the case of Committee of

Creditors, M/s Smartec Build Systems Pvt. Ltd. Vs. B. Santosh Babu & Ors.

[Company Appeal (AT) (Ins.) No. 48 of 2020] wherein this Appellate Tribunal

held as follows:

"........

8. At this stage, learned counsel for the Appellant submits that the 'Resolution Professional' having charged high fee, we specifically asked the counsel whether the 'Committee of Creditors' is agreeable to the fees, we may determine and to be paid by them, it is submitted that he is having no such instructions.

As the plea taken by the 'Committee of Creditors' is frivolous, we dismiss the appeal with cost of Rs. 1,00,000/- (Rupees One Lac only)."

9. It is further submitted that the aforesaid decision was upheld by the

Hon'ble Supreme Court vide order dated 15.10.2020 filed by the Committee of

Creditors, M/s Smartec Build Systems Pvt. Ltd. in Civil Appeal Nos. 2190/2020.

Based on these submissions, the Adjudicating Authority has rightly passed the

impugned order, therefore, there is no merit in the present Appeal, the Appeal is

fit to be dismissed.

Company Appeal (AT) (Insolvency) No. 725 of 2021 8

FINDINGS

10. After hearing the parties and going through the pleadings made on behalf

of the parties and also in view of the resolution in its fifth meeting of Committee

of Creditors held on 23rd September, 2020 whereby the Committee of Creditors

approved the fees of Resolution Professional at the rate of Rs. 2.50 lacs per

month with a maximum of Rs. 15 lacs (at page 41 to 43 of the Appeal Paper

Book), we are of the view that the Adjudicating Authority has rightly considered

all these facts and also recommendation of the Committee of Creditors.

11. Taking all the facts aforenoted, we agree with the reasons given by the

Adjudicating Authority. The Impugned Order dated 06.08.2021 passed by the

Adjudicating Authority (National Company Law Tribunal, Kolkata Bench,

Kolkata) in I.A. (IB) No. 219/KB/2021 in C.P. (IB) No. 185/KB/2018 is hereby

affirmed. The instant Appeal is hereby dismissed devoid of merit.

12. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the Adjudicating Authority (National

Company Law Tribunal, Kolkata Bench, Kolkata), forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

New Delhi 03rd November, 2022 R. Nath.

Company Appeal (AT) (Insolvency) No. 725 of 2021