CIRP-31

Criteria to determine whether a cost incurred by Resolution Professional during CIRP qualifies as CIRP cost under Section 5(13)(c) of IBC read with CIRP Regulation 31 – Avil Menezes Liquidator of Sunil Hitech and Engineers Ltd. Vs. Abdul Qudduskhan and Anr. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT defined the criteria to determine whether a cost incurred by the Resolution Professional during CIRP qualifies as CIRP cost as:

(a) maintaining the Corporate Debtor as a going concern,
(b) payment to suppliers of essential goods and services, and
(c) direct relation to CIRP with approval from the Committee of Creditors (CoC).

And held that the Respondent’s claim should be classified as non-CIRP cost, falling under Section 53 of the Code for distribution during liquidation.

Criteria to determine whether a cost incurred by Resolution Professional during CIRP qualifies as CIRP cost under Section 5(13)(c) of IBC read with CIRP Regulation 31 – Avil Menezes Liquidator of Sunil Hitech and Engineers Ltd. Vs. Abdul Qudduskhan and Anr. – NCLAT New Delhi Read Post »

Shifting the entire blame on Resolution Professional on grounds of non-performance of duty and making him the scapegoat does not appear to be justified – Shri Guru Containers Vs. Jitendra Palande – NCLAT New Delhi

NCLAT held that though the scope of CIRP related work became limited and restricted by the fact that progress got stonewalled due to lack of flow of information and lack of claims, diligence on the part of the IRP in proceeding with the CIRP cannot be found to be wanting. Shifting the entire blame on the IRP on grounds of non-performance of duty and making him the scapegoat does not appear to be justified. It is equally important for the creditors to play a catalytic role in the insolvency resolution process given the present regime of creditor-driven IBC. The rigours of similar standards of discipline should also apply on the creditors. This is clearly a case where the CIRP process was being hindered due to want of cooperation and participation from the creditors. The conduct of the Operational Creditor in the present case is deprecatory in that once the CIRP process had commenced, the Operational Creditor went into a sleeping mode. This position has been further aggravated by the fact that it was the Appellant/Operational Creditor who had triggered this judicial process and then abdicated himself from all responsibilities. That the Operational Creditor did not seem interested in resolution of the Corporate Debtor is evident from the fact that till date no claim has been filed with the IRP.

Shifting the entire blame on Resolution Professional on grounds of non-performance of duty and making him the scapegoat does not appear to be justified – Shri Guru Containers Vs. Jitendra Palande – NCLAT New Delhi Read Post »

Payment of CIRP cost by IT Department and Excise & Taxation Department – Income Tax Department Vs. M/s. Indianroots Shopping Ltd. – NCLAT New Delhi

Regulation 22(2) and 22(3) of CIRP Regulations provide that when a meeting could not be held for want of quorum, the meeting automatically stand adjourned at the same time and place on the next day and regulation 22(3) provide that when the adjourned meeting takes place with the members attending the meeting, it shall be quorate, Thus, NCLAT found no illegality in either holding of the 7th meeting of CoC dated 6.12.2019 and in the decisions taken in the meeting regarding the payment of CIRP cost and RP fees. It is also reasonable and prudent to expect that if the two Appellants had refused to participate in the CoC meeting thereby causing a stalemate, the RP was correct in approaching the Adjudicating Authority for necessary directions to the Appellants to pay the CIRP costs and RP’s fees as decided by the CoC.

Payment of CIRP cost by IT Department and Excise & Taxation Department – Income Tax Department Vs. M/s. Indianroots Shopping Ltd. – NCLAT New Delhi Read Post »

Question of CIRP cost and its approval lays in the domain of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision – Bharat Hotels Ltd. Vs. Tapan Chakraborty RP of RDG Interior Decoration Exterior Architecture Pvt. Ltd. – NCLAT New Delhi

In the present case, the Appellant who is a minority shareholder in the CoC cannot resist the passing of the resolution. The Adjudicating Authority has rightly rejected the application filed under Section 18 of Code and Regulation 34A, which was not to be entertained. The Appellant asked Resolution Professional to disclose item wise insolvency resolution process costs in such manner as required by the IBBI. Question of cost and its approval lays in the domain of the CoC. The CoC may ratify, modify or set aside the cost claimed. These issued may be decided in the meeting of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision. It shall be always open for the appellant to raise issue regarding the cost in the meeting of the Committee of Creditors. With reference to the grievance of the Appellant with regard to obtaining valuation report, it is always open to the Appellant to request the Liquidator to obtain a valuation report, if not already obtained.

Question of CIRP cost and its approval lays in the domain of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision – Bharat Hotels Ltd. Vs. Tapan Chakraborty RP of RDG Interior Decoration Exterior Architecture Pvt. Ltd. – NCLAT New Delhi Read Post »

Fees of an Resolution Professional(RP) cannot be considered to be a Claim as defined u/s 3(6) of the IBC and the same cannot be determined or verified by Liquidator at Liquidation process stage, Adjudicating Authority is empowered to fix the fees, in case no CoC – CA Rita Gupta (Erstwhile RP in the matter of Shilpi Cable Technologies Ltd.) Vs. M/s. Shilpi Cable Technologies Ltd. through its Liquidator Mr. Huzefa Fakhri Sitabkhan – NCLAT New Delhi

The main issues which arise in this case are:

Whether the Adjudicating Authority was justified in directing the Appellant to file her Claim before the Liquidator as the Corporate Debtor was under Liquidation.

Whether the fee of an RP falls under the definition of a Claim as defined under the Code.

Whether the Liquidator is having the jurisdiction to decide the fee of the RP as the CoC is no longer in existence. or Whether the fee of a Resolution Professional is required to be fixed by CoC, failing which such decisions/determination is to be made by the Adjudicating Authority under the provisions of Section 60(5) of the Code read with Regulation 33(2) of the CIRP Regulation to fix the fees as payable to the RP.

Fees of an Resolution Professional(RP) cannot be considered to be a Claim as defined u/s 3(6) of the IBC and the same cannot be determined or verified by Liquidator at Liquidation process stage, Adjudicating Authority is empowered to fix the fees, in case no CoC – CA Rita Gupta (Erstwhile RP in the matter of Shilpi Cable Technologies Ltd.) Vs. M/s. Shilpi Cable Technologies Ltd. through its Liquidator Mr. Huzefa Fakhri Sitabkhan – NCLAT New Delhi Read Post »

The Landlord cannot recover the possession of its premises in view of imposition of moratorium – S. Rajendran RP of M/s. Vasan Health Care Pvt. Ltd. Vs. B.M Anand (HUF) – NCLAT Chennai

NCLAT held that after admitting the Application, the Adjudicating Authority would declare moratorium as per Section 14 of the Code, 2016. In pursuance of clause (d) of Sub- Section 1 of Section 14, which provides that during the moratorium period the lesser or an owner of the property cannot recover the possession of the property from the Corporate Debtor. In view of the law, the Corporate Debtor continuing its business in the premises leased to it. For the aforesaid reason the Learned Adjudicating Authority rejected the prayer of the Respondents seeking handing over of vacant possession of the premises. Hence, no interference is called for

The Landlord cannot recover the possession of its premises in view of imposition of moratorium – S. Rajendran RP of M/s. Vasan Health Care Pvt. Ltd. Vs. B.M Anand (HUF) – NCLAT Chennai Read Post »

If the right of lessor to recover rent are affected on account of moratorium, the lessor is entitled to recover the rent and which shall include in CIRP costs – Prerna Singh Vs. CoC of M/s Xalta Food and Beverages Pvt. Ltd. – NCLAT New Delhi

NCLAT held that it is not disputed that this Appellate Tribunal does not have power to punish for contempt of its own order. The objection is only about the invoking of inherent powers under Rule 11 of NCLAT Rules, 2016. Mere mentioning a wrong provision in the Application will not affect the merits of the case and therefore, we find no substance in this preliminary objection. As per CIRP Regulation 31 Insolvency Resolution Process costs under Section 5(13)(e) mean defined in clause (a) to (e). for the present case, Regulation 31(b) is relevant which provides that amounts due to a person whose rights are prejudicially affected on account of the moratorium imposed under Section 14(1) (d). Due to moratorium period the lessor could not recover the possession of the property from the Corporate Debtor. Thus, the right of lessor to recover rent are affected on account of moratorium. Therefore, the lessor is entitled to recover the rent and which shall include in CIRP costs. Thus, we find no substance in the argument that the rent cannot be included in the CIRP costs.

If the right of lessor to recover rent are affected on account of moratorium, the lessor is entitled to recover the rent and which shall include in CIRP costs – Prerna Singh Vs. CoC of M/s Xalta Food and Beverages Pvt. Ltd. – NCLAT New Delhi Read Post »

‘Success fees’ which is more in the nature of contingency and speculative is not part of the provisions of the IBC and the Regulations and the same is not chargeable – Mr. Jayesh N. Sanghrajka, Erstwhile R.P. of Ariisto Developers Pvt. Ltd Vs. The Monitoring Agency nominated by the CoC of Ariisto Developers Pvt. Ltd. – NCLAT New Delhi

NCLAT observed that the Appellant claiming that he had done excessively well to deserve Rs. 3 Crores of success fees, the Adjudicating Authority had made comments as to what was the scenario when it was supervising the CIRP. The Adjudicating Authority was at the ground level monitoring the progress of CIRP and its observations cannot be simply ignored. Further, it was held that ‘success fees’ which is more in the nature of contingency and speculative is not part of the provisions of the IBC and the Regulations and the same is not chargeable.

‘Success fees’ which is more in the nature of contingency and speculative is not part of the provisions of the IBC and the Regulations and the same is not chargeable – Mr. Jayesh N. Sanghrajka, Erstwhile R.P. of Ariisto Developers Pvt. Ltd Vs. The Monitoring Agency nominated by the CoC of Ariisto Developers Pvt. Ltd. – NCLAT New Delhi Read Post »

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