‘Lenders must catalyse IBC proceedings’

“Shifting the entire blame on the Interim Resolution Professional (IRP) on grounds of non-performance of duty and making him the scapegoat does not appear to be justified. Creditors need to play a catalytic role in such resolution process”, a bench of justices Ashok Bhushan and Barun Mitra said. “We are thus of the considered view that the IRP was entitled in this case to claim his fees/expenses incurred on CIRP and needs to be compensated for his professional services”, the court said.

The issue began when Guru Containers, an operational creditor, initiated insolvency proceedings against Tarang Exports under Section 9 of the IBC. The National Company Law Tribunal appointed Jitendra Palande as the IRP for the company.

As per an earlier NCLT order, the operational creditor was to reimburse the total cost incurred by the IRP for discharge of his duties. However, the operational creditor moved the NCLAT, alleging the IRP failed to discharge his duties; so the creditor is not liable for reimbursing the fees.

The creditor added that the IRP was seeking the court’s intervention for reimbursement of his fees mainly to cover up his non-performance and had undertaken minimum work pertaining to issuing public announcement of the insolvency proceedings against the company.

The IRP argued that even after the public announcement of the CIRP against the company and despite initiating insolvency proceedings, the operational creditor did not get in touch with him and did not provide the Tarang Exports’ financial statements and books of accounts.

Moreover, the IRP said he could not constitute a committee of creditors (CoC) as per due process since he did not receive any claim from either financial or operational creditors. The counsel for the IRP accused the operational creditor of apathy and non-cooperation, and disinterest in the revival of Tarang Exports.

Further, when the CIRP could not progress and the IRP could not function due to reasons beyond his control, IRP was therefore, constrained to file an application under Section 19 seeking directions from the NCLT to the suspended management to extend assistance and cooperation, besides reimbursement of expenditure incurred on CIRP.

The bench, however, disagreed with the operational creditor, and said the operational creditor has failed to substantiate any lapses or deficiencies in the IRP’s performance of its duties; so, it must pay the fees.