Gaurav Vinimay Private Limited vs Mr. Kanchan Dutta

,,,

Balraj Joshi, Member (Technial)",,,

This court convened via video conferencing.,,,

This is an application filed by Gaurav Vinimay Private Limited, being an Operational creditor of the Corporate debtor, under section 60(5) of the Insolvency and Bankruptcy",,,

Code, 2016 (Code) read with rule 11 of the NCLT Rules, 2016, praying for the following reliefs:",,,

(a) That the NCLT may be pleased to consider the situation and direction may be passed to appoint a new Resolution Professional in place of Respondent;,,,

(b) That NCLT may be pleased to direct IBBI to look into the conduct of the Respondent and take necessary action if found guilty;,,,

(c) That the NCLT may be pleased to pass an appropriate order for approval of resolution in the interest of the creditors of the corporate debtor.,,,

It is submitted that the underlying Company Petition bearing C.P. (IB) No. 07/KB/2019 was filed by the Financial Creditor and this Adjudicating Authority vide order dated,,,

23.01.2020, initiated Corporate Insolvency Resolution Process (CIRP) against Gujrat Metallic Coal & Coke Limited, the Corporate Debtor. Mr. Kanchan Dutta was appointed as the",,,

Interim Resolution Professional (IRP).,,,

Submissions of the Applicant Operational Creditor:,,,

4.1. The case of the Applicant is that the Respondent, being the Resolution Professional of the Corporate Debtor is not a fit person to carry out the CIRP and is not adhering to the",,,

provisions and the timeline laid by the Code.,,,

4.2. A copy of the title deed of the immovable property of the Corporate Debtor was handed over to the IRP. The Corporate Debtor had informed the IRP that the original title deed,,,

had been misplaced. The respondent has neglected to obtain a duplicate certified copy of said title deed and to take possession and control of the said immovable property as per,,,

section 25 of the Code.,,,

4.3. Further, the Respondent has failed to invite expression of Interest within 75 days from the Insolvency Commencement Date, thus being in violation of Regulation 36A(1) of the",,,

IBBI (Insolvency Regulation Process for Corporate Persons) Regulations, 2016. Publication of EOI is pending till date.",,,

4.4. The IRP, in the 2nd COC meeting stated that he is required to revive the company but allowed for a resolution for liquidation to be voted upon in 3rd COC meeting itself, thereby",,,

raising doubts about the impartiality and independence of the IRP.,,,

4.5. The IRP is heavily dependent on the Financial Creditor for most cases being handled by him and has been appointed by the same Financial Creditor as the IP/RP and/ or,,,

Liquidator in many cases. Therefore, there is a possibility that the Respondent may be working in collusion with the Financial Creditor.",,,

4.6.The Respondent did not allow Mr. Saurav Jain being the representative of the Suspended board of Directors to participate in the 2nd COC meeting due to provisions of section,,,

24(4) of the Code but allowed the same representative to participate in the 3rd COC meeting. Such an act reflects the whimsical attitude of the Respondent and his ignorance of the,,,

Code.,,,

4.7. As per Regulation 19 of the CIRP Regulations, the meeting of CoC needs to be convened by giving minimum 5 days notice in writing to every participant. The CoC meeting was",,,

convened on 10.07.2020 for which notice was supposed to be served latest by 5.07.2020. However, the Respondent issued the notice on 6.07.2020. Such proposal of shorter notice",,,

needs to be approved in advance in previous CoC meeting. But no such resolution was passed in the 1st or 2nd CoC meetings. Hence, the Respondent is in violation of Regulation 19",,,

of the CIRP Regulations.,,,

4.8. Further, under Regulation 25(5) of the CIRP Regulations, the Respondent is required to circulate the minutes of the third CoC meeting within 48 hours of conclusion of the",,,

meeting, which the respondent failed to serve within the required time i.e by 12.07.2020. He only circulated the minutes of the said meeting on 13.07.2020 after the applicant wrote an",,,

email to the respondent reminding him the provisions of regulation 25(5).,,,

4.9.The respondent kept the CoC in dark about his plans to seek exclusion of the lockdown period, thereby extending the CIRP period much beyond 180 days thereby increasing the",,,

total CIRP costs payable towards his fees and remuneration disproportionately without any additional benefits to the stakeholders.,,,

Submissions of the Respondent Resolution Professional:,,,

5.1 The case of the Respondent is that Mr. Arun Jagatramka and his wife, Mona Jagatramka, being the directors and shareholders of the Applicant company, have indirect control",,,

over the Corporate Debtor and are deeply involved in the affairs and business of the Corporate Debtor. The Corporate Debtor has purchased from Aparna Polyflex Pvt. Ltd. (a,,,

related party of the Corporate Debtor) shares of four companies, with Mr. Arun Jagatramka and his wife, Mona Jagatramka, being the directors of the said four companies.",,,

The Corporate Debtor then assigned the debt consisting of the purchase price to the Applicant Company.,,,

5.2 Mr. Arun Jagatramka is also a shareholder and a personal guarantor of the Corporate Debtor. Futher, one of the promoters of the Corporate Debtor, Mr. Ramesh Chandra",,,

Bajoria, is the father of Mrs. Mona Jagatramka nad the father-in-law of Mr. Arun Jagatramka.As such, the Applicant comes within the purview of definition of related party in terms",,,

of the section 5(24)(h) of the Code.,,,

5.3 The Respondent during the CIRP period has un-earthed substantial fraudulent transactions undertaken by the Corporate Debtor and to that effect has filed applications IA (IB),,,

No. 762/KB/2020 and IA (IB) No. 715/KB/2020. Thus, to prevent the respondent from proceeding with the un-earthing of the frauds by the Corporate Debtor, the instant application",,,

has been filed.,,,

5.4 The CoC has been constituted by the Respondent, consisting of one Financial Creditor. It is the sole prerogative of the CoC to remove the Resolution Professional. As such, the",,,

Applicant being an Operational Creditor and not being part of the CoC, has no right to make the instant application.",,,

5.5 The Respondent was not able to obtain the certified copy of ownership deed of the Corporate Debtor’s flat in Jaipur till August 2020 due to lockdown restrictions. That after,,,

lockdown relaxations were given, the Respondent engaged valuers who informed the Respondent that the said flat was occupied and from documents presented to then, it appeared",,,

that the Corporate Debtor was not even the owner of the said flat. Upon enquiry regarding the same, no satisfactory clarification was given by the director of Corporate Debtor.",,,

Further, due to non-cooperation of the directors of the Corporate Debtor, the Respondent could not take possession of the said property.",,,

5.6 The Expression of Interest (Form G) was published in Business Standard (Kolkata edition) and Aajkal on 1st September 2020 â€" within the time period prescribed by the Code.,,,

Due to non-cooperation of the directors of the Corporate Debtor, the Respondent could not publish the Form- G earlier.",,,

5.7 According to the guidelines of ICSI- Institute of Insolvency Professionals, the suspended Board of Directors cannot authorize a representative to attend CoC meeting. As such,",,,

the Respondent did not permit the representative of the Corporate Debtor to attend the 2nd CoC meeting. However, in the subsequent meetings, the respondent was left with no",,,

choice but to allow the said representative to attend the meetings, with hope that the representative would be able to give the answers and clarifications and the CIRP could be",,,

proceeded with.,,,

5.8 The Code permits the Resolution Professional to convene a meeting at a shorter notice if the CoC approves and ratifies the same. In the instant case, the CoC has ratified the",,,

same. That the Respondent is not required to ask for approval of the Applicant for the convening of a meeting at a shorter notice since the approval has been duly received from the,,,

members of the CoC.,,,

5.9 Due to some difficulties over the weekend, the minutes of the CoC meeting held on 10.07.2020 (friday) was circulated on 13.07.2020 (Monday)",,,

5.10 The resolution Professional is entitled to the benefits of regulation 40C and the relaxations provided by the Hon’ble NCLAT since he could not proceed with the CIRP due,,,

to repeated non-cooperation from the errant directors of the Corporate Debtor.,,,

5.11 The valuation report of 2019 obtained by the director is a baseless report prepared to serve his own purpose in continuing to siphon out funds of the Corporate Debtor and to,,,

carry on with further frauds on the part of the Corporate Debtor. that applications have been filed in connection with the fraud committed by the directors in connection with the,,,

Happy Mining Pvt. Ltd investment.,,,

5.12 The strict actions taken by the IRP have forced the Applicant to file the application for removal of IRP since these actions have effected the directors in control of the,,,

Corporate Debtor. The application has been filed only after strict actions have been taken against the said directors.,,,

S.No,Violation,Explanation Given By IRP,Remarks

1.,"The IRP has neglected to  obtain Â

a  duplicate certified  copy  of  said

title  deed  and  to  take

possession  and  control of the saidÂ

immovable property as per section 25 of the

Code.","That   the   Respondent was not able toÂ

obtain the  certified  copy  of ownershipÂ

deed of the Corporate Debtor’s flat in Â

Jaipur  till  August 2020 due to lockdown

restrictions. That  after lockdown    relaxations

were       given,       the

Respondent     engaged valuers  who Â

informed the Respondent that the said flat wasÂ

occupied and   from   documents presented Â

to  them,  it appeared     that    Â

the Corporate Debtor was not even the ownerÂ

of the   said   flat.   Upon enquiry Â

regarding  the same,  no  satisfactory

clarification was given by    the   Â

director    of Corporate  Debtor.  In

the   light   of   dispute regarding   Â

ownership, the    Respondent    has

engaged  advocates  to search for the records

in the Jaipur Registry Further,  due  to Â

non- cooperation     of     the

directors       of       the

Corporate  Debtor,  the Respondent  could Â

not take possession of the said property.","The    explanation

given   is   found

satisfactory considering    Â

the lockdown induced by Â

the  Covid-19 pandemic.

2.,"Respondent  has  failed to inviteÂ

expression of Interest within 75 days

from    the    Insolvency

Commencement    Date, thus being inÂ

violation of Regulation 36A(1).

Publication  of  EOI  is pending till date.","The    Expression    of Interest (FormÂ

G) was published  in  Business

Standard         (Kolkata edition) andÂ

Aajkal on 1st September 2020 â€" within theÂ

time period prescribed by the Code if the extension of time

period  is  taken  into consideration.","The explanation is found

satisfactory, considering    Â

the lockdown induced by

  the  Covid-19 pandemic.

3.,"That the IRP, in the 2nd COC   meeting  Â

stated that  he  is  required  to

revive the company but allowed for a resolution

for  liquidation  to  be voted uponÂ

in 3rd COC meeting  itself,  thereby

raising doubts about the

impartiality              and

independence    of    the IRP.",No  explanation  given in Reply- Affidavit.,"The CIRP itself is a    CoC-

    driven process.  Â

It   was

ultimately        the

CoC’s  call,  and theÂ

RP cannot by castigated forÂ

this purpose.

4.,"IRP is heavily dependent on the Financial Creditor for

most cases being handled by him and has been

appointed by the same Financial Creditor as the IP/RP

and/ or Liquidator in many cases. Therefore, there is a

possibility that the Respondent may be working in

collusion with the Financial Creditor.","On perusal of the sections 5(24) and 5(24A) of the Code, it is

clear that the Resolution Professional does not fall within the

category of a ‘related party’ in respect to the Financial

Creditor. Further, under the IBBI Circular No. IP/005/2018

dated 16th January 2018, an Insolvency Professional can be

held to be a related party of the Financial creditor if such

Insolvency Professional has derived 5% or more of his/its

gross revenue in a year from professional services to the

related party. In the instant case, the Applicant has failed to

prove that such a relation exists between the parties in

question. Hence, the Resolution Professional cannot be

deemed to be a ‘related party’ of the financial creditor

simply for the reason of being nominated by the said Financial

Creditor on multiple occasions.","The applicant has completely misread

the circular. Related Party as defined

in section 5(24A) of the Code does

not cover a situation as mentioned in

the present application. The RP is not

earning a remuneration for service to

one bank, but as RP or liquidator of

various corporate debtors. He cannot

be termed as “related partyâ€​

within the meaning of section 5(24A)

or Regulation 3(1)(b) of the

Insolvency And Bankruptcy Board Of

India (Insolvency Resolution Process

For Corporate Persons) Regulations,

2016. He is an independent

professional carrying out his roles and

responsibilities assigned to him under

the Code and the regulations framed

thereunder.

5.,"Respondent    did    not allow Mr.Â

Saurav Jain being the representative of theÂ

Suspended board of       Â

Directors        to participate Â

in  the  2nd COC  meeting  due Â

to provisions   of   section 24(4) ofÂ

the Code but allowed     Â

the      same

representative             to

participate  in  the  3rd COCÂ

meeting. Such an act       Â

reflects        the whimsical  Â

attitude   of the Respondent and his

ignorance of the Code.","That according to the guidelines    of   Â

ICSI- Institute of Insolvency

Professionals,          the suspended  Â

Board   of Directors           Â

cannot

authorize                    Â

a

representative to attend CoC meeting. As such, the

Respondent did not

permit                     Â

the

representative   of   the Corporate  Â

Debtor   to attend   the   2nd   CoC

meeting.  However,  in

the               subsequent

meetings,                 the

respondent    was    left with noÂ

choice but to allow       Â

the        said representative to attend the

meetings, with hope that the representative would beÂ

able to give the      answers     Â

and clarifications  and  the CIRP     Â

 could       be proceeded with.","The explanation is found

satisfactory.

6.,"As per Regulation 19 of the  CIRP Â

Regulations, the   meeting   of   CoC

needs to be convened by giving minimum 5 days

notice   in   writing   to every Â

participant.  The CoC    Â

meeting     was convened on 10.07.2020

for  which  notice  was supposed toÂ

be served latest    by    5.07.2020.

However,                 Â

the Respondent  issued  the notice  Â

on   6.07.2020. Such proposal of shorter

notice  needs      to  be

approved in advance in previous CoCÂ

meeting. But no such resolution

was passed in the 1st or 2nd CoC meetings.","That the Code permits

the               Resolution

Professional to convene a meeting at a shorter

notice    if    the    CoC approves Â

and  ratifies the same. In the instant case,  Â

the   CoC   has ratified the same. That

the Respondent is not required   to  Â

ask   for approval       of      Â

the Applicant     for     the convening of a

meeting at a shorter notice since the approval has been

duly received from the members of the CoC.","Since the actions of Â

the  RP  have been  Â

ratified   at the     Â

subsequent meeting   of  Â

the CoC, it should be deemed

to be with CoC’s   Â

approval. The     Â

regulation does  not  provide

for prior approval. In  any Â

case,  the applicant has not

shown          Â

what

prejudice         has

been   caused   to him in

this regard

apart            Â

from technicalities.

7.,"Further,                under

Regulation 25(5) of the CIRP Â

Regulations,  the Respondent is required toÂ

circulate the minutes of    the   Â

third    CoC meeting within 48 hours of Â

conclusion  of  the meeting,   Â

which    the respondent   Â

failed    to serve Â

     within       the

required   time   i.e   by

12.07.2020.   He   only

circulated  the  minutes of the saidÂ

meeting on 13.07.2020    after    the

applicant     wrote     an emailÂ

to the respondent reminding    Â

him     the provisions of regulation 25(5).","Due         to         some

difficulties   over   the weekend,  the Â

minutes of  the  CoC  meeting held   Â

on    10.07.2020 (friday) was circulated

on               13.07.2020

(Monday)","The explanation is found

satisfactory.

8.,"The   Respondent   had

filed             application

u/s.19(2)   against   Mr. Tailor    Â

(     suspended director)   and  Â

pressed Mr. tailor to open his office during

lockdown- while  suppressing  the

NCLAT   order   dated 30/03/2020.  Â

Thus   the IRP was never effected

by the covid lockdown

in carrying on CIRP.

But  when  Mr.  Sourav Jain Â

emailed  the  IRP stating that CIRP period

was over on 21.07.2020 and asked for an update onÂ

the status of CIRP- the IRP emailedÂ

to him the   Hon’ble   NCLAT

order dated 30.03.2020 in   Â

response    to    the queries","The        Code,        the

guidelines     and     the

observations    of    the NCLT Â

during  several hearings are that the RP should tryÂ

and proceed with the CIRP during the  Â

lockdown   period and if he is obstructed, then   Â

he    would    be entitled to exclusion of

time.

In the instant case, the Respondent has tried to

conduct the CIRP but the    errant   Â

directors have   chosen   not   to

cooperate with the RP. The  Registered Â

office of  the  CD  is  closed since 23rdÂ

March 2020 and there was only one employee i.e MD/CFO,

who was not aware of the business activity of theÂ

CD, who had not attended    Â

any     CoC meetings, and did not respondÂ

to the emails of the Respondent in a

timely   manner.   The respondent    Â

is     thus entitled  to  claim  the

benefit  of  Regulation 40C and the relaxation

provided       by       the NCLAT

since he could not effectively proceed with the CIRP","The explanation is found

satisfactory.

9.,"The IRP is not entitled to   Â

exclusion    Under clause   40C  Â

in   IBBI (insolvency  Resolution

Process  for  Corporate Persons)   Â

Regulations, since he continued with the Â

CIRP  during  the lockdown.",,"The explanation is found

satisfactory.

10.,"The  IRP  circulated  a copy of a forensic

audit report  dated  08.08.20. the  Â

said   report   was issued  by Â

the  auditors without having received

any     explanation     or

information  as  sought by them andÂ

the same

were provided only on

10.08.20 after the report had  been Â

issued.  The IRP was well aware of this

and yet did not ask the  auditors  to  revisit

and      modify      their

forensic audit report in light  of Â

the  response received on 10.08.20.

Therefore,                Â

the incomplete report does not serve anyÂ

purpose other than to thwart a successfulÂ

resolution of the CD",No  explanation  given in Reply- Affidavit,"No   prejudice   is

caused    to    the

auditor,        since

ultimately  it  will be Â

tested  before the  Â

Adjudicating Authority

11.,"Two  valuation  reports were received from

Mr. Sajjan   Kumar   Tailor. The  Â

one   obtained   at behest of the IRP which

valued  the  investment of CD in Happy

Mining Pvt Ltd at Rs. 5 Crores. The  Â

second   valuation report   Â

was    obtained from   an  Â

independent IBBI  registered  valuer

according    to    which

value         of        Â

such investment      as      on

30.06.2019 was around Rs.57.51 croresÂ

having gone up from Rs. 46.23 crores as on 30.06.2018.

Such highly depreciated value asÂ

obtained    by the IRP could result in

destroying the value of

investments held by the CD.     Â

Such      meagre valuations  along Â

with allegations of fraudulent conduct  being Â

pursued without making proper enquiries  Â

might   scare any potential resolution

applicant.","The   valuation   report obtained by the director

is baseless prepared to suit   his  Â

purpose   of siphoning funds out of CD.

The   valuation   report obtained  by Â

the  IRP shows the correct value of  investment Â

of  the CD  made  in  Happy Mining Â

Pvt.  Ltd  and has been done by IBBI approved

valuers","The        valuation

obtained from the IBBI-

approved valuer alone will

be     taken     into

consideration. We cannot   Â

at    this stage, get intoÂ

the mess     Â

of      the individual

valuation since it is Â

subjective  and

an            Â

inexact science.