Change In Composition Of COC Will Not Affect Its Prior Decisions: NCLAT New Delhi

Previously, NCLT New Delhi directed the DBS Bank to pay Rs. 10.20 Lakhs to the Resolution Professional as the payment towards its fees and an appeal was filed by the DBS against the same.

An operational Creditor initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor and thereafter, the COC was constituted by the Resolution Professional (RP) comprising of the Operational Creditor as the sole member. In the first COC meeting held on 27.09.2019, the Operational Creditor approved the fees and expenses of the RP at Rupees 1 lakhs per month.

Subsequently, the COC was reconstituted on 12.10.2019 with the DBS Bank (Appellant) as the Sole Financial Creditor. Thereafter, the DBS Bank participated in all COC Meetings and passed as resolution to liquidate the corporate debtor on fourth COC meeting dated 10.02.2020.

It was contended on behalf of the DBS Bank that the fees of RP was approved by the Operational Creditor who was no longer a member of COC and DBS Bank never ratified the remuneration and expenses of the RP in the reconstituted COC. It was further contended that in any case, the fees of the RP will be paid in priority from the liquidation proceeds as per Section 53 of the IBC and therefore, DBS Bank is not required to pay amount to the Resolution Professional.

The contentions of DBS Bank were countered by the Resolution Professional by relying upon Regulation 12(3) of the CIRP Regulations, 2016 which states that inclusion of new member will not affect the validity of prior decision of COC.

NCLAT held that the DBS Bank participated in all the COC meetings and even passed resolution for the liquidation of the Corporate Debtor cannot now turnaround and say that it is not liable to pay the CIRP Costs and fees.

The Bench further held that the proviso to Regulation 12(3) is squarely applicable to the present case and the decision taken by the previous COC comprising of Operational Creditor will not be affected by the inclusion of DBS Bank and therefore, dismissed the appeal filed by the DBS Bank.

Case Details: DBS Bank v. Rakesh Kumar Jain, CA (AT) (Ins) No. 540/2021

Counsel for Appellant: Mr. Ashish Mukhi & Ms. Madhurima Sarangi

Counsel for Respondent: Mr. Mohit Nandwani.

Click Here To Read/Download Order