Mr. Ashwani Kumar Vs M/s Kuvam Konstruction Private Limited

Harnam Singh Thakur, Member (Judicial)

Subrata Kumar Dash, Member (Technical)

I.A. No. 414 of 2020

The present application has been filed by the Resolution Professional of the Corporate Debtor seeking liquidation of the Corporate Debtor under Section 33(2) of the Insolvency & Bankruptcy Code, 2016.

In this case, the petition for initiation of CIRP process by the Operational Creditor, Mr. Ashwani Sharma under Section 9 of the IBC, 2016 was admitted by this Tribunal by order dated 14.11.2019 and Mr. Parvinder Singh was appointed as Interim Resolution Professional in respect of the CIRP pertaining to the company.

It is averred by the Applicant (“IRP”) that he took all the necessary steps and has duly performed his duties under the Code and Regulations for carrying out the CIRP of the Corporate Debtor and made the requisite public announcement dated November 22, 2019 for intimation of the commencement of the CIRP of the Corporate Debtor and inviting the creditors of the company to submit their respective claims.

It is submitted that the Committee of Creditors (CoC) was constituted by the IRP on December 10, 2019 as per Regulation 17 of the CIRP Regulations, comprising the top 7 Operational Creditors from whom claims were received. It is further submitted that the CoC in its first meeting on December 16, 2019, resolved to appoint the IRP as the Resolution Professional.

The RP appointed two registered valuers for each class of assets, i.e. Land & Building, Plant & Machinery and Financial Assets for determination of the fair value and liquidation value of the Corporate Debtor as per Regulation 27 of IBBI (CIRP) Regulations, 2016 on December 30, 2019.

In the second meeting of the CoC, which was convened by the IRP on December 27, 2019, the RP received claims from the Suspended Directors of the company for their unsecured loans, which were accounted for without assigning any voting rights. The interest amount claimed by the Vendors/Creditors to be paid as per the agreement and the interest rate as per the IBC Code were also mentioned. Further, no claim was received from the Secured Financial Creditors.

In the third meeting of the CoC convened by the Applicant on December 27, 2019, Form G for the invitation of Expression of Interest from the Resolution Applicants was approved by the CoC, and the new claims received after the date of the last meeting were also discussed.

An Expression of Interest (EOI) in terms of Section 25(2)(h) of the Code was published vide advertisement in the newspapers on February 1, 2020, for invitation of prospective resolution applicants for submission of the resolution plans for the revival of the corporate debtor. The fourth meeting of the CoC was convened by the IRP on December 27, 2019, where the CoC agreed to liquidate the Corporate Debtor under Section 33 since no response to Form G was received. The RP also gave his consent to continue as the Liquidator of the Corporate Debtor.

The fifth meeting of the CoC was convened by the IRP on December 27, 2019, where the Liquidation Plan was presented to the Members and the resolution for the deposition of the proceeds of liquidation of the Corporate Debtor in a escrow account with Punjab National Bank or any other Nationalized Bank was passed. Further, it was also decided that since the Corporate Debtor is not a going concern, the Liquidator may sell the assets in parcels or through any other mode as mentioned in (a) to (d) of regulation 32 of IBBI (Liquidation Process) Regulations, 2016.The liquidation value of the Corporate Debtor as per the reports submitted by the valuers under Regulation 35, is Rs. 77,91,895.18.

It is averred by the Applicant that the CoC in its fifth meeting, resolved to liquidate the Corporate Debtor by 100% voting share, but due to Covid 19 lockdown in the entire country, the meeting for discussion of the Liquidation Plan was held on June 19, 2020, after the due consent of the CoC members. The CIRP of the Corporate Debtor was initiated on November 14, 2019, and the time period of 180 days under Section 12(1) was completed on May 12, 2020.

Due to the amendment dated March 19, 2020, in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulation 2016, a new Regulation namely “40C- Special provision relating to time line” was inserted, subsequent to which the CIRP period of the Corporate Debtor expired on July 21, 2020, after taking into account the extended period upto May 31, 2020.

40C. Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown in relation to a corporate insolvency resolution process.

The respondent, M/s Libra Associates through its authorised signatory, Mr. Abhinav Bawa, in its reply dated September 20, 2022 to this application, stated that since the Applicant has not impleaded the Committee of Creditors (CoC) in the present application, it is liable to be rejected on this ground only.

It is submitted by the respondent that the Applicant has failed to resolve the matters of the Corporate Debtor and all the proceedings have been carried out by greed and self-obsession. The respondent made requests to the Applicant to provide TDS returns and ledgers so as to uncover the diverted funds and forged bill entries in accounts, which the Applicant denied. Further, some funds have been received by the Applicant but he has not paid the fee for the forensic audit, which is a primary requirement under IBBI.

It is further alleged that the Applicant released the collateral security of the Corporate Debtor without informing the CoC members and moved this application for liquidation without attempting any efforts for recovery of an amount of Rs. 29.56 lacs from NBCC.

It is submitted by the Respondent that the Corporate Debtor entered into a MoU dated 07.01.2016 to share the proceeds of the work done for the National Building Construction Corporation. Which was held as an ‘interested party’ by the Applicant, and the claim of the Respondent which was duly verified by an audit report, was ignored by the Applicant.

It is further submitted that the Applicant proposed himself to be appointed as the Liquidator to cover his wrongdoings and to extend undue benefits to himself as well as the Corporate Debtor, which is against the principles of natural justice and a bias against the Respondent as well as the interest of all the creditors. The appointment of the IRP as the Liquidator himself was objected by the members of the CoC. An application tilted as I.A. No. 845 of 2020, by the Financial Creditor (Petitioner in this case) was also filed against the conduct of the Applicant, which was disposed of vide order dated June 09, 2023 by this Tribunal.

The Applicant in the written submissions stated that as per the terms of the latest recommendations issued by the IBBI dated July 18, 2023, any independent Insolvency Professional other than the IRP/RP needs to be appointed by the Hon'ble Tribunal from the panel list of IBBI and it is nowhere allowed to the CoC members to propose the name of IP as the Liquidator under any provisions of the IBC, 2016 read with the relevant regulations.

The Applicant also seeks directions to be issued to the Respondent and other CoC members to pay the fee of the Applicant of Rs. 54,55,600/- and reimburse the expenses incurred until the disposal of the present application, which amount to Rs. 4,95,000.00 (Rs.15,000/-p.m.), and discharge the applicant from the office of the RP of the Corporate Debtor.

Now, coming to the merit of the application, before considering the prayer, we would like to refer the Section 33(2) of IBC and the relevant provision is reproduced below:

"Section 33(2): Initiation of liquidation

(1) ………….

(2) Where the resolution professional, at any time during the Corporate Insolvency Resolution Process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the Committee of Creditors [approved by not less than sixty-six percent, of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub clauses (i), (ii) and (iii) of clause (b) of sub-section (1).

[Explanation. - For the purpose of this sub-section, it is hereby declared that the Committee of Creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of Section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.]

A bare perusal of the provisions shows that there are three circumstances under which the liquidation order can be passed by the Adjudicating Authority:-

i. before the expiry of the Insolvency Resolution Process period;

ii. before the expiry of the maximum period permitted for completion of the Corporate Insolvency Resolution Process under Section 12 or the fast-track Corporate Insolvency Resolution Process under Section 56, as the case may be;

iii. If no resolution plan is received under sub-section (6) of Section 30; and

iv. after the CoC approval of the proposal for the liquidation with not less than sixty-six per cent of the voting share.

We have carefully considered the submissions made in the application by the Resolution Professional and have also perused the records. It is evident from the fifth meeting of the CoC that the liquidation of the Corporate Debtor is approved in absence of any resolution plan to be submitted u/s 30(6) of the Code. Thus, in view of the satisfaction of the conditions provided under Section 33 of the Code, the Corporate Debtor, i.e. M/S KUVAM KONSTRUCTION PRIVATE LIMITED, is directed to be liquidated in the manner as laid down in Chapter III of the Code.

Accordingly, by exercising our power under Section 33(2) pass the following order:-

I. The Corporate debtor is liquidated with immediate effect in the manner provided under Chapter III Part II of the IBC 2016. Mr. Prashant Gupta is appointed as the Liquidator (appointment discussed in I.A. No. 2040 of 2023).

II. The Law Research Associate of this Adjudicating Authority has checked the credentials of Mr. Prashant Gupta bearing Registration No. IBBI/IPA-001/IP-P-02471/2021-2022/13868, Mobile No.- 9815993315, email Id:- pgupta.rp@gmail.com and nothing adverse has been found against him. In view of the same, he is hereby appointed as liquidator; subject to his written consent to be filed within 7 days of this order;

III. Mr. Prashant Gupta, shall take over the charge of the entire records and assets of the corporate and perform his duty, as required under the Code and Regulations.

IV. Mr. Prashant Gupta, is directed to file his written consent along with an affidavit within 7 days, stating therein that no disciplinary proceedings have been initiated against him by the Board or the insolvency professional agency;

V. The liquidator is directed to take custody and control of the assets, and property of the Corporate Debtor with immediate effect and made a public announcement clearly stating that the Corporate Debtor is under Liquidation in terms of Regulation 12 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016;

VI. The Provision of Section 33 (5), (6) and (7) of the IBC, 2016 shall have come into force with immediate effect. The Order of Moratorium passed under Section 14 of the Insolvency and Bankruptcy Code, 2016 shall cease to have its effect, and a fresh Moratorium under Section 33(5) of the Insolvency and Bankruptcy Code shall commence;

VII. This Order shall be deemed to be a notice of discharge to the officers, employees and workmen of the corporate debtor as per Section 33(7) of the Insolvency and Bankruptcy Code, 2016;

VIII. The Liquidator shall submit a Preliminary Report to the Adjudicating Authority within seventy-five (75) days from the Liquidation commencement date as per Regulation 13 of the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016;

IX. The Liquidator shall file regular progress reports as per Regulation 15 of the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016 every fortnightly thereafter;

X. The Liquidator shall take necessary legal action to recover the trade receivables and other credits, such as loans and advances from the parties, which are reflected in the latest Balance Sheet of the Corporate Debtor, if any. This direction is hereby given in concurrence of the jurisdiction prescribed under Section 33(5) of the Code.

XI. On initiation of the liquidation process but subject to Section 52 of the Code, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor save and except the liberty to the Liquidator to institute suit or other legal proceeding on behalf of the Corporate Debtor with prior approval of this Adjudicating Authority, as provided in Section 33(5) of the Code read with its proviso.

XII. That all the powers of the Board of Directors, key managerial personnel and the partners of the Corporate Debtor, as the case may be, shall cease to have effect and shall be vested in the liquidator;

XIII. That the personnel of the Corporate Debtor shall extend all assistance and cooperation to the Liquidator as may be required by him in managing the affairs of the Corporate Debtor and provisions of Section 19 of the Code shall apply in relation to voluntary liquidation process as they apply in relation to liquidation process with the substitution of references to the liquidator for references to the Interim Resolution Professional

XIV. The liquidator will be entitled to the protection of action taken in good faith as per the provisions of Section 233 of the Insolvency and Bankruptcy Code 2016.

XV. The Registry is directed to communicate a copy of the Order to the Corporate Debtor immediately;

XVI. A copy of this order be sent by the Registry to the concerned Registrar of Companies (RoC) for updating Master Data. After updating Master Data, RoC shall send a compliance report to the Registrar, NCLT, within a period of 30 days.

XVII. The Registry and Liquidator are directed to communicate a copy of this Order to the Insolvency and Bankruptcy Board of India for their record.

XVIII. The Liquidator is at liberty to seek any directions, if need be, from this Tribunal during the Liquidation Process.

Thus, IA No. 414/2020 stands allowed and disposed of accordingly.

I.A. 2040/2023

The instant Joint Application has been preferred by Ashwani Kumar (the Petitioner in the Original petition) along with Amrish Singla, (Members of CoC) and Abhinav Bawa of M/s Libra Associates, on the grounds of Oppression and professional misconduct of the present Resolution Professional, failure to adhere to the provisions of the Insolvency and Bankruptcy Code, 2016 and the Regulations attached to it while performing his statutory duties and concealment of material facts while approaching this Tribunal and also manipulation of the Minutes of the Committee of Creditors.

It is submitted that the Resolution Professional took undue advantage of the lack of knowledge of the provisions of the Code to the Members of CoC and misused in order to save the skin of his akin, the Suspended Board of Directors and to mint money for himself from the hard earned money of the Applicants.

The Applicant submitted that the Corporate Debtor failed to pay the legitimate dues to the Applicant/Petitioner and hence, the Applicant was forced to file the Insolvency Petition against the Corporate Debtor. The payment is due for about 3 years and now the Resolution Professional is minting money for his own.

The Applicant/Petitioner reminded the Resolution Professional about the prospects of recoveries from respective parties and offered assistance in the same, but he always kept the Applicants uninformed.

Further, the members of the CoC opposed him on many fronts and wrote many emails and letters conveying their anger and distrust in him even then the Resolution Professional did not bother and carried on with the misdeeds and chose to nominate himself as the Liquidator.

As per the first meeting of the CoC, the Applicants were collectively given 50% of the voting rights and also considered the claims of the associates of the Suspended Board of Directors. When asked about their details, the RP remained silent on the material information.

It is submitted that in the second meeting, the RP arbitrarily increased the voting share of M/s Pee Aar Scaffolders and brought the total voting to 101% which is unethical. Copy of the minutes of the second meeting are attached as Annexure A-4.

It is further submitted that in the third meeting, the Resolution Professional inducted M/s Modern Tiles and Concrete Pavers in connivance with the suspended Board of Directors and brought the total voting to 101% once again. The Resolution Professional also inducted M/s Bomaby Interior Decorators, who was given 8% voting share in order to dilute the voting share of the Applicants, even when the claim was not supported by an affidavit and also inducted M/s Bansal Italian and Marble House without receiving any documents from them. Further, the Resolution Professional also gave the voting share to the Excise and Taxation Office, Panchkula, whose voting rights were denied in the previous meeting and a payment was made to M/s Modern Tiles and Concrete Pavers immediately after the admission of the Petition for the insolvency and till date the Resolution Professional has not filed any Application for avoidance of preferential transactions under Section 43 of the Code. (Annexure A-5)

It is also submitted that the Resolution Professional imposed the liquidation of the Corporate Debtor upon the CoC members, who still require efforts for the recovery of the dues.

It is further submitted that the share was again changed in the 5th meeting of the CoC and the suspended Board of Directors have settled with NBCC, EMAAR and IREO and have also received the recovery amount from the Housing \Board Panchkula. Further, no action has been taken by the Resolution Professional on preferential transactions or on fraudulent transactions and has also failed to explain about the Open charge mentioned in the Master Data of the Corporate Debtor. Copy of the Master Data attached as Annexure A-8.

It is alleged that the Resolution Professional has failed to adhere to the duties mentioned in Regulations 13, 14 and 16 of the IBBI (Insolvency Resolution Process for Corporate Persons), Regulations, 2016 and has also contravened the provisions of the Regulations 18 to 21 and the instructions of this Tribunal for conducting the sixth meeting of the CoC by intentionally boycotting the First Applicant and the main Petitioner, who were informed by the other CoC members about the meeting. The Resolution Professional also violated the provisions of Regulations 23 and 24 and has changed the minutes of the meetings at his whims and fancies.

It is also alleged that the RP failed to continue to run the Corporate Debtor as a going concern and eventually no Resolution Applicant could come forward. The RP also failed to appoint the Registered Valuers as per the mandate of Regulation 27. He also duly admitted that he has recovered Rs. 17 Lakhs and has adjusted the same for his cost and fee. He has also been putting up the cost of the Advocate, whose authorisation has not been given by the CoC. Copy of the minutes of the 6th meeting of the CoC are attached as Annexure A-9.

It is further submitted that the Resolution Professional is also liable for contempt of the Court, as he conducted the 6th meeting which was to be conducted within 15 days of the order passed by this Tribunal on 09.06.2023, (Annexure A-10)i.e. by 24.06.2023 but conducted the same on 01/02.08.2023 after several reminders.

It is averred by the Applicants/Petitioners that the Resolution Professional did not intentionally filed the record of the claims with the IBBI and has been collecting funds for himself without even intimating to the members of the CoC. Copy of the records of IBBI are attached as Annexure A-12.

It is also submitted that as per the IBBI notification no. 12011/214/2023-IBBI/840 (Annexure A-13) dated 18.07.2023, the Resolution Professional cannot be allowed to carry on as a Liquidator, still he has been pushing for the liquidation of the Corporate Debtor.This sort of similar application was earlier filed by the same applicants which was dismissed by this Adjudicating Authority on 09.06.2023

The Respondent RP in his reply dated 20.09.2023 denied all allegations and stated that the Applicant(s) also filed a complaint against the answering respondent with IBBI (hereinafter referred as 'Board') which was also dismissed by the Board.

It is submitted by the Respondent that Applicant No. 1 has filed the Section 9 petition against the Corporate Debtor with a view to recover the money and not with the intent to resolve the debt-ridden Corporate Person. The Respondent has made serious efforts to recover the monies due from the debtors of the Corporate Debtor and for that purpose several visits have been made to their offices at Delhi and other places. The Respondent IRP has ecovered good amounts from them and several other payments have been assured by debtors of the Corporate Debtor to pay their outstanding and that can be realized any time sooner.

The approval of fee was already taken in the meeting of the Committee of Creditors (CoC) in its meeting and only after that M/s K S Dua & Company were appointed as Transactional Auditors. It is not denied that they haven't endorsed any name of any other Transactional Auditor. The applicants proposed a name only after the appointment letter was issued to the earlier appointed Transactional Auditor and that too after the conclusion of the 5tn meeting of CoC which was convened on 19th June 2020 at 11 AM and mail was received from them at 4.48 PM on 19th June 2020. In the fourth CoC convened meeting on 11th March, 2022 one M/s Charanjeet Singh & Associates was approved to be the Transactional & Forensic Auditor at the fee of Rs. 60,000/- for which minutes were duly circulated and no member has raised any objection to it even after that RP agreed to negotiate on the Fee of Transactional & Forensic Auditor, M/s K S Dua & Company were appointed on a lower fee of Rs. 50,000/- and it was agreed to be paid by Mls Libra Associates who is one of the applicants to this instant application, which is yet to be paid.

It is averred by the Respondent that he has always replied and answered to all the queries and details sought by the CoC members and it is strongly denied that he did not provide any help to them which is available in the provisions of IBC.

It is further submitted by the Respondent that the CIR Process needs to be managed by the RP and not by the Creditors. With due respect to the Creditors support, the debtors are needed to be contacted by the RP and not to be supported by the Creditors of the Corporate Debtors. Allegation of keeping the applicants in dark and uninformed is unwarranted as the CoC has been informed of all such things in the respective meetings held during the CIR Process.

The Respondent submitted that Section 34 of the IBC, 2016 clearly mandates that the RP can nominate himself to be appointed as a Liquidator if proposed and approved u/s 33 of the IBC, 2016.

It is submitted by the respondent that the claims received by him from the Operational Creditors have been admitted only after due verifications and there is no such connivance with the suspended board of directors as alleged by the applicants. There is no bar in any of the provisions of the IBC, 2016 which restricts to accept the claims of the related parties of the Corporate Debtor. It was clearly mentioned in the minutes that they are not given voting rights. Even if their claims have been admitted, the pay-out position would come on the very last number.

The Respondent in its reply to the allegation w.r.t. the transaction audit report submitted that it is yet to be received as they have not been paid and the members in connivance with each other have not contributed anything in favor of meeting out the expenditure of CIR Process and hence, the application for preferential/ fraudulent transactions could not be filed.

It is submitted by the Respondent that the voting share to any of the Creditors has been assigned on the basis of submission of their claims, verification and admission of the claim and that has nothing to do with the suspended directors of the Corporate Debtor. Excise and Taxation office's claim is also treated as the claim submitted by operational creditors and has been decided by numerous judgments now, In this case the CoC is constituted duly only with the operational creditors and accordingly, the Excise and Taxation Office was given the voting share.

It is averred by the Respondent that the open charge on the MCA Master Data has nothing to do as there is no claim filed by the Financial Creditor and as informed by the suspended directors the charge stands NIL at the time of commencement of CIR Process.

It is further submitted by the respondent that he has conducted the sixth CoC meeting after being aware of the uploaded orders from the NCLT portal and has never received the certified copy of the Orders even till the filing of this reply. .

It is submitted by the Respondent that he has never fabricated the minutes as all such minutes reflect the true facts of the proceedings of the minutes. When the minutes were circulated; none of the CoC members has ever questioned the proceedings of the meetings and are now claiming that the Respondent has prepared the minutes as per his own wish.

That the Corporate Debtor was not a going concern on the date of Commencement of CIRP and that the Respondent has submitted everything in its Progress Reports with this Tribunal mentioning whatever the status of the CIRP and there is nothing which could be concealed from any of the stakeholders be it the creditors or regulators/ authorities.

After taking into consideration the rival contentions of the parties, although applicants have proposed replacement of the RP/Respondent with new IP, Mr. Deepankur Sharma, whose consent form has also been submitted with the application and as per the IBBI Notification dated 18.07.2023, annexed as Annexure A-13, the Respondent RP cannot be allowed to continue as a Liquidator but an independent IP other than the Respondent RP needs to be appointed.

Thus, without going into the allegations leveled against the Respondent RP in this present application, we hereby direct that Mr. Parvinder Singh is hereby substituted with Mr. Prashant Gupta as the Liquidator,whose antecedents have been verified by the Law Research Associate of this Adjudicating Authority (Report enclosed).

Mr. Parvinder Singh, the erstwhile RP, is at liberty to file his claim for fee and expenses as RP with the Stakeholders Committee to be constituted and if the claim is filed before the Stakeholders Committee, the same will be decided expeditiously in accordance with rules and regulations and preferably in its first meeting.

Thus, I.A. No. 2040/2023 stands allowed and is disposed off accordingly.