NCLT Mumbai Criticises Mediaman Infotech Former RP For Seeking CIRP Extension To Keep 'Assignment In Hand'

The National Company Law Tribunal (NCLT) at Mumbai has criticised the erstwhile Resolution Professional in the insolvency of Mediaman Infotech Private Limited, observing that his attempt to extend the Corporate Insolvency Resolution Process beyond 180 days appeared aimed at continuing his assignment as Resolution Professional.

The Bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar observed:

“It is further noted that, no expression of interest was received in the CIRP of the corporate debtor in the first round and Resolution Professional was fully aware about the facts in relation to the business and the assets of the corporate debtor along with their fair value and liquidation value, the proposal of the Resolution Professional in the third CoC meetings for fresh publication of Form G and further extension of CIRP beyond 180 days was nothing but an attempt to keep the CIRP process going so as to have an assignment in hand.”

The observation came while deciding an application filed by the liquidator of Mediaman Infotech Private Limited, seeking directions against DCB Bank and others for release of funds and payment of pending CIRP and liquidation costs.

The liquidator said Rs 40.57 lakh remained unpaid towards CIRP costs and Rs 18.32 lakh towards liquidation costs. He also alleged that DCB Bank, the sole Committee of Creditors member during CIRP, was not cooperating during liquidation and had transferred Rs 1.59 lakh from the corporate debtor's current account to its loan account.

DCB Bank argued that it had opted out of the liquidation process and had not filed any claim before the liquidator. It said it therefore could not be directed to bear CIRP or liquidation costs.

The tribunal directed DCB Bank to immediately release Rs 1.59 lakh to the liquidator, noting that the amount was lying to the credit of the corporate debtor on the insolvency commencement date and had not been appropriated towards the outstanding loan despite the bank holding a lien over the account.

On the operational creditor's liability, the tribunal rejected the liquidator's plea for payment of Rs 3 lakh that had been directed at the admission stage.

It held that the amount was only interim finance meant to fund the initial CIRP process until the Committee of Creditors was constituted. Since the operational creditor had already contributed Rs 21.70 lakh during liquidation, no further direction was warranted.

The tribunal also examined the fees claimed by the liquidator and the erstwhile Resolution Professional.

It held that since no amount had been realised by the liquidator, he was not entitled to remuneration linked to realisation and distribution.

Accordingly, out of the claimed liquidation costs of Rs 18.32 lakh, the tribunal disallowed Rs 14.16 lakh claimed towards liquidator remuneration and permitted Rs 4.16 lakh towards expenses, subject to verification.

As for CIRP costs, the tribunal found the Resolution Professional's claimed monthly fee of Rs 2 lakh unjustified given the scale of the matter, noting that there were only three claimants, admitted claims of Rs 101.24 lakh, and no business activity in the corporate debtor.

The Bench further observed:

“Since, no resolution was passed in terms of Regulation 34B of the CIRP Regulation and the sole CoC member, DCB Bank, had withdrawn from the liquidation process since inception, we feel that no direction can be issued to the Respondent No. 1 or Respondent No. 4 to contribute any further.”

The tribunal capped the Resolution Professional's fees at Rs 1 lakh per month for 180 days, reduced the total CIRP costs payable to Rs 19.14 lakh, and directed the liquidator to settle the CIRP and liquidation costs from available funds within 30 days.