1. The present Interlocutory Application is filed by Mr. Kamal Agarwal, Resolution Professional of the Corporate Debtor, the Applicant herein under Section 65 of the IBC, 2016 read with Rule 11 of NCLT Rules against Manish Soni and six others including the Directors of the Suspended Management of the Corporate Debtor namely, Mr. Gautam Saha and Mr. Abhijit Dutta with the following prayer:

“a) To impose maximum penalty upon the respondents no. 1-3 (Manish Soni, Pankaj Kumar Sahu and Vivek Kumar) for initiating insolvency proceedings against the corporate debtor with a malicious intent for the purpose other than resolution of insolvency of the corporate debtor;

b) To direct the respondents no. 1-3 (Manish Soni, Pankaj Kumar Sahu and Vivek Kumar) to cease and desist from causing disruptions in the functioning of the applicant / resolution professional;

c) To direct the respondent no. 4 (Mr. Hemanta Kalita partner of M/s. Damani Services) to provide available evidence of collusion between the respondents no. 1-3 (Manish Soni, Pankaj Kumar Sahu and Vivek Kumar);

d) Pass any further order(s) as this Hon’ble Bench deem fit and proper”

2. It is stated that:

2.1 The order for initiation of CIRP of the Corporate Debtor was made by this Hon’ble Bench on 26.02.2020 and vide that order Mr. Amit Pareek, having registration No. IBBI/IPA-002/IP-N00413/2017-18/11205 was appointed as an IRP from the list of the empanelled IRPs.

2.2 The First Meeting of the Committee of Creditors of the Corporate Debtor was held on 06.05.2020 comprising of only the Operational Creditors and it was resolved vide agenda item No.6 that the Respondent No.5 herein, the IRP, Mr. Amit Pareek should be appointed as the Resolution Professional.

2.3 In the Fourth Meeting of the Committee of Creditors held on 03.09.2020, vide agenda item No.7A, the sole Financial Creditor, M/s. Volkswagen Finance Pvt. Ltd. having 100% voting rights, resolved to replace the existing RP Mr. Amit Pareek and proposed the name of the Applicant herein Mr. Kamal Agarwal to be appointed as the incoming RP.

2.4 The application for replacement of RP was filed by the CoC vide IA No. 53 of 2020. This Hon’ble Bench passed Order for replacement of the RP and the present applicant, thereafter was appointed as the Resolution Professional in the matter.

2.5 In absence of any expression of interest submitted by any prospective resolution applicant pursuant to publication of Form G on 25.02.2021, the applicant / RP called the Seventh Meeting of the Committee of Creditors of the Corporate Debtor on 31.03.2021 to update the status and the CoC resolved to liquidate the Corporate Debtor vide agenda item No.6 .An application under Section 33(2) of the Code was filed for liquidation vide filing number 1806122/00053/2021.

2.6 Meanwhile, the RP has also filed an application under Section 45 of the Code seeking restoration of its undervalued intellectual property “Trade Mark CONCEPT Educations” sold to the related party by the Suspended Directors vide filing No.1806122/0056/2021 .

3. The present state of affairs of the case is that:

3.1 The Suspended Directors are yet to provide all the necessary information and the limited information provided by them are in the process of verification and authentication. The delay in providing the information by the Suspended Directors are apparent from the fact that the provisional balance sheet as on the insolvency commencement date i.e. 26.02.2020 was provided on 25.03.2021 and a consolidated tally data up to the insolvency commencement date along with the Financials of the partnership firm M/s. Potential & Concept Educations is yet to be provided.

3.2 The RP is trying to verify, collate, synchronize all the available information and is at an advance stage of arriving into a conclusion and thereafter all the necessary avoidance applications shall be filed under the applicable sections. It is mentioned that the erstwhile RP had also appointed Auditor M/s. Bijoy Om & Associates to conduct audit for last five years from 01.04.2015 to 26.02.2020 but the transaction auditor had submitted his report on 08.02.2021 without taking into account all the relevant information necessary for preparation of his report.

3.3 The Respondent No. 4 (an Operational Creditor – M/s. Damani Services through its Partner Mr. Hemanta Kalita) has also filed an application under Section 60(5) praying for directions to the respondents therein “to apply for withdrawal of CIRP application so that the creditors can sue the CD & suspended BOD in other court of law and at the same time prevent Suspended BOD to escape safely using the ambiguity of IBC”. Para 18 of the said application reads as under:

“Further that, I have strong reasons to believe that, the suspended BOD may have made an attempt/arrangement through the applicant Mr. Manish Soni to file this case before the Hon’ble Court and get a safe route to escape from the various liabilities and obligations by using this very law as the protective shield”.

4. The rationale for the present application is stated as under:

4.1 The Applicant/Resolution Professional is continuously being harassed by the Respondents No.1 to 3 since the day of his appointment in the present matter as the Resolution Professional. All the three respondents had joined hands and filed the main petition under Section 9 through the Respondent No.1 and the purpose for filing the main Petition was not the Resolution of the Corporate Debtor but for other reasons which are evident from their erratic behaviour and continuous e-mails to the Resolution Professional with all sorts of false accusations and sending the cc of all these mails to various persons including the Deputy Registrar, NCLAT, Registrar, NCLT, Secretary, NCLT, various officers of IBBI and Ministry of Corporate Affairs with a view to destabilize and derail the whole CIRP proceedings which is conducted as per law.

4.2 The Respondents No. 1 to 3 were working as faculties in the coaching institutes being run and managed by the Corporate Debtor and on account of their unpaid salary, they filed an application under Section 9 of IBC 2016 which stood admitted as the Corporate Debtor remained ex-parte. The amount of claims filed by these three Respondents comprises of only 3.75% of the total debt admitted by the erstwhile IRP/RP and the details are as under:

4.3 The Respondent No.4 is again an Operational Creditor and is a partnership firm represented by Mr. Hemanta Kalita and is a party to the present application as he has alleged that these Respondents No.1 to 3 are hand in glove with the Suspended Directors of the Corporate Debtor.

4.4 The Respondent No. 5 is the erstwhile IRP/RP against whom the Respondents No.1 to 3 have alleged to be hands in glove with the Suspended Directors of the Corporate Debtor.

4.5 The Respondents No. 6 and 7 are the Suspended Directors of the Corporate Debtor against whom the Respondents No.1 to 3 have made serious allegations of funds diversion to the tune of crores of rupees and in support of their claim of misappropriation of funds by the Suspended Directors have also attached an e-mail which was sent by Respondent No.7 (Suspended Director – Mr. Abhijit Dutta) to the Respondent No.6 (Suspended Director – Mr. Gautam Saha).

5. The RP in support to demonstrate that the the main Petition is an abuse of process of law and is filed for the purpose other than resolution of the Corporate Debtor, has stated that:

5.1 After the appointment as the Resolution Professional of the Corporate Debtor vide Order dated 09.12.2020 of this Bench, the Resolution Professional carried on his duties as per the provisions of the Code. However, in the meantime, the RP had received continuous calls from the Respondents No.1 to 3 on regular basis alleging collusion of the Respondent No.5 – erstwhile IRP/RP with the Respondents No.6 and 7 – Suspended Directors and his working with the sole intent of maximising his fees. They alleged that the Suspended Directors also intended to liquidate the Corporate Debtor to absolve themselves of all the liabilities outstanding including amount payable to the faculties.

5.2 After the 5th meeting of the CoC held on 29.12.2020 of the Corporate Debtor, a call was received by the RP from the Respondent No. 2- Mr. Pankaj Kumar Sahu on 30.12.2020 stating that he has come to know from his sources that the CoC has resolved to liquidate the Corporate Debtor. The RP apprised that it was not correct and in fact the CoC has passed the resolution for extension of the time period. The Respondent No.2 was not willing to understand and then shared the number of an Insolvency Professional Mr. Debadatta Mohapatra [9851073815 / 9437503765] and requested the RP to share the minutes of the meeting to the Insolvency Professional and talk to the Insolvency Professional and explain him the whole outcome of the meeting as they are availing his services in the present matter. The RP refused to talk to any person not related to in the matter and in order to pacify the Respondent No.2, shared the minutes of the 5th CoC meeting with the directors not to share the same with any other person not entitled to it.

6. In accordance with the direction of this Bench, the Respondents No.1, 2 and 3 had filed their common replies/written objections to the Application specifically denying all the averments made by the Petitioner here against them. It is submitted that:

6.1 The Respondent 1 was employed with the CD since 2016 as a faculty member for teaching Chemistry. The CD on the other hand employed the faculty on contact basis for one year commencing from March to February and renewed the contract agreement every year.

6.2 For the year commencing from March 2018 and ending on February 2019, the contract was not renewed as the CD had entered into a partnership agreement with another coaching institute namely Potential Group and formed multiple LLPs with them. Further, the newly formed entity started recruiting faculties on the terms and conditions predominantly decided by the management of the Potential Group of Institution.

6.3 The Respondents including other several faculty and lecturers were terminated as a result of these arrangements between the two coaching institutes. This decision of the suspended BoDs was a severe blow on the employability of the faculty and lecturers. CD terminated faculty and lecturers were not paid their dues at least 3 months prior to their termination.

6.4 The suspended BoDs were requested on several occasions to make payment of the outstanding dues to all the terminated faculty and lecturers, jointly and severally. Despite earnest request, the suspended BoDs gave assurances for the payment but never paid.

6.5 The Respondent No. 1 for a default of Rs.3,48,000.00 duly served Notice of demand as required by the code in form 3 and 4 to which no reply was received from the CD. Prior to pandemic, a default of Rs.1,00,000.00 was sufficient for initiation of CIRP as required by the Code holds equally justified.

6.6 Whereas the first Application filed by the Respondent No.1 was admitted by the Hon’ble Adjudicating Authority with a condition of depositing Rs.1,50,000.00 as security. The Hon’ble Bench at that point of time had even asked whether the applicant was capable of providing the said security deposit amount or not, to which it was brought to the knowledge of the Hon’ble Bench that a total fourteen members were readily available for filing this application.

6.7 The suspended BoDs deducted TDS on the salary /professional fees so paid but never deposited to the concerned statutory authorities i.e. Income Tax Department. Thus due to this noncompliance on the part of the suspended BoDs on behalf of the CD led to huge tax implication and burden on the individual faculty and lecturers. This matter was also brought to the notice of the Income Tax Department.

6.8 The faculty and lecturers jointly submitted an application for addressing their grievances to the Deputy Commissioner Guwahati, for taking cognizance of the matter so that early payment of dues could be made. The concerned Deputy Commissioner denied/refused to take proper action as the matter was out of their preview.

6.9 The CD was going concern and doing great business as evident from the very fact “Potential Coaching Institute” entered into an agreement with the CD for 50% partnership. Had the CD being a loss making company as projected by the several stake holders or had the CD being a non- going concern, why the Potential Coaching Institute, would have offered 50% stake. It is also noteworthy that the CD was having a turnover more than 10 Crores per annum, but their books of accounts were not maintained. They had not appointed any full time accountant for maintenance of books of accounts, records, statements etc.

6.10 Since Feb 2019, the suspended BoDs had entered into several agreements by forming more than four Limited Liability Partnership, where the suspended BoDs or their relatives are significant stake holders in these sister concerns. It can be concluded that these arrangements by the suspended BoDs were made with the intent to divert the revenue/cash flow of the CD for their personal benefits.

6.11 All these matters were brought into the notice of the RP and also the ex RP for their needful actions. The RP was well aware of all these circumstances but still did not take the appropriate steps as required by the Code. As per the contract, the Respondents are professionals but it is also mentioned in the contract that the Respondents cannot work with any other Educational Institute till the contract ends. The Respondent had no malicious intention for initiation of CIRP as alleged by the Applicant merely based on the ground that his application was admitted ex-parte and based on the allegations made by Respondent No. 4 through IA No.26/GB/2021 vide its Order dated 22/09/2021.

6.12 Further, it is beyond the control of the respondent if CD/then BoD chooses not to reply and respondents 1 to 3 shall not be held for the non-responsive nature of the concerned and cannot be construed as collusion among the applicant and the CD.

6.13 It is prayed that this Hon’ble Tribunal may be pleased to dismiss the application filed against R1 to R3 by the applicant u/s 60(4) of the Insolvency and Bankruptcy Code, in view of the above contention and submissions made by the Respondents.

7. The Respondent No.4, Mr. Hemanta Kalita has submitted his reply as under:

7.1 The respondent herein denies and disputes all the averments and allegations made by the applicant upon him, save and limited to the extent expressly admitted hereinafter or that what is a matter of record. The respondent states that this denial shall be treated as specific denial.

7.2 The respondent states that the said I.A. has been filed to divert the attention from irregularity and misfeasance in the conduct of CIRP of the CD.

7.3 The applicant has no reasonable ground to make him party to the present case.

7.4 The respondent is representing partner of M/s. Damani Services, a partnership firm who happens to be member of CoC and an Operational Creditor, by virtue of having more than 10% of total claim admitted.

7.5 The applicant in Para no.9 and 12 of this I.A has misinterpreted and presented the statement as per his own convenience and suitability. The applicant deliberately ignores the context in which such statement was made.

7.6 Also, in view of IA 26/GB/2021 in CP(IB) No. 03/GB/2020, wherein Para 18 concern was raised regarding attempt / arrangement between Mr. Manish Soni and suspended Board of Directors, the extract of which is reproduced as follows:

“Further, that I have strong reasons to believe that, the suspended BoD may have made an attempt / arrangement through the applicant Mr. Manish Soni to file this case before this Hon’ble court and get a safe route to escape from the various liabilities and obligations by using this very law as a protective shield”.

From the above extract it may be noted that the word ‘may have’, which is based on my belief and understanding based on the conduct of each party associated with the CD and shall not be construed otherwise.

7.7 It was observed that the present RP Mr. Kamal Agarwal was very lenient on taking action against the suspended BoDs and reluctant to act diligently on the information provided upon. Also to note that the suspended BoD are pretty silent on this issue and very least bothered to reply or to co-operate in the CIRP process.

8. The Respondent No. 5 has also filed his submission as under:

8.1 This IA has been filed in gross suppression of material facts pertaining to subject matter; the applicant omitted to bring on record actual course of events; the instant application is not maintainable on the face of it and the applicant has no cause of action to initiate and or proceed against the answering respondent.

8.2 Each and every allegations and or averment contained in the said application is denied as if the same are set out in seriatim and specially traversed. He strongly opposes and denies to have any collusion/ arrangement with Respondent No.4 and aggrieved by his replacement as alleged by the applicant Mr. Kamal Agarwal in Para 17 of the instant I.A., merely on the ground that Respondent No. 5 has raised his observations through email dated 01/01/2021 of not recording the attendance of Respondent No.4 in the Minutes of 5th COC meeting held on 29/12/2020 whereas fact is that the Respondent No.4 was present in person and his attendance should have been recorded.

8.3 Further, he strongly objects that as alleged he is aggrieved by the decision of the CoC for replacement of RP. It is pertinent to mention here that if he had been aggrieved by the decision of COC than he would have opposed the I.A. No.53/GB/2020 filed u/s 27 of IBC 2016 but he preferred not to oppose.

8.4 It is humbly requested that all the allegations as filed by the petitioner be dismissed by this Hon’ble Tribunal and his name be removed as a party of instant I.A.

9. The Applicant /Resolution Professional has filed his rejoinder to the reply filed by the Respondents No. 1 to 5, wherein it has been submitted that :

9.1 The respondent no. 1 in collusion with respondent no. 2 and 3 has filed the main petition for recovery of his 3 months’ unpaid dues amounting to Rs.3,48,000.00 only calculated @Rs.1,16,000.00 per month and the corporate debtor remained ex-parte in the proceedings allowing the petition to be admitted.

9.2 The malicious and fraudulent intent of the respondent no. 1 to 3 are evident from the fact that they continuously harassed the RP by constantly demanding the details of progress in the case either telephonically or though e-mails with a cc of the e-mails and selective readings to officers of IBBI, Registrar NCLAT, Registrar NCLT, Secretary NCLT and Ministry of Corporate Affairs.

9.3 Further, respondents were aware of the diversion of funds by the respondent no.6 & 7 since 2015 and it is evident from the e-mail dated 01.09.2015 in their possession written by respondent no.6 & 7, have admitted the writing of this e-mail dated 01.09.2015 in the 6th CoC meeting held on 06.03.2021. This e- mail is also attached by the respondents no.1-3 in their replies to the present IA 37 of 2021:

i. All the three respondents admitted to have been working with the corporate debtor since last three years and always had the knowledge of the wrong doings of the respondent no. 6 and 7 but had never filed a single complaint before any forum until they were terminated in the month of Feb 2019.

ii. The conduct of the respondent proves beyond doubt that the communications made by them were not with the intent of value maximization. Had that been their intent, then why would they make so much of noise by marking a cc of e-mails sent to the applicant/RP, to Deputy Registrar NCLAT, Secretary NCLT, Registrar Guwahati, officers of IBBI, Ministry of Corporate Affairs, and then calling the RP and directing the RP to inform them about each and every action taken by the RP in the matter and making all sorts of false accusations against him with an intent to record the conversations and thereafter sending the selective recordings of the conversations to all these authorities. All these acts of respondents clearly indicate their mala fide and malicious intent,

iii. It is submitted in para 4 that an application was made to Deputy Commissioner Guwahati for recovery of their dues, without attaching any evidence to that effect and it shows that the respondents are in the habit of wrong forum shopping. Therefore, it cannot be ruled out that the respondents are in fact assisting the Respondents no. 6 & 7 by showing to the outside world that they are filing complaints against them, but are deliberately filing at wrong forums. It is even not mentioned as to the particular department of the Deputy Commissioner whether it was of Sales Tax, Income Tax, Police, Vigilance, EOW or any other department.

iv. The respondents in Para 6 have themselves submitted that the CD was going concern and doing great business and was not a “loss” making company and that their books of accounts were never maintained. It is never the case of the respondents that the CD was unable to pay off their debts. In fact, this only proves beyond any doubt that the main petition was filed for ulterior motive and not for the resolution of the corporate debtor.

v. The respondents blow hot and cold from the same mouth, at one place they plead ignorance of law and at the other place they allege the RP of not taking appropriate steps as required by the Code. All these three respondents always made verbal allegations without any cogent evidence and whatsoever evidence they provide are vague, unsigned and masked as is evident from page 13, 15, 17, 18 of the reply filed by them.

vi. Ignorance of law is never an excuse and the respondents are also not paupers as each one of them earned more than 1 lakh per month. Further they cannot plead illiteracy as they are faculties. It is also submitted in para 13 that there were group of 13 faculty members joining hands together. The RP fails to understand as to what prevented a group of 13 people earning more than 1 lakh per month from taking services of an advocate and when they were out on a mission to grant justice to all as submitted by them.

10. The Applicant further submits that:

10.1 The respondent 4 is made a party to the present application to substantiate the allegation of collusion levelled by him against the respondent no.1 to 3 and respondent no.6 & 7. The conduct of the respondent is evident from the reply in para 6 wherein he now submits that his allegation of collusion was based upon his belief and understanding and ‘shall not be construed otherwise’.

10.2 It is reiterated that the respondent was a necessary party in the present application as he himself had alleged collusion between the applicant to the main petition and the suspended board.

10.3 Contents of Para 3 A to C of the reply of R 5 are a surprise to the applicant RP as to why the erstwhile IRP/RP is contesting the maintainability of the present application when the penal proceedings as envisaged under section 65 of the Code will befall upon the initiators of the main petition and not upon him. The applicant RP has not proceeded against the erstwhile IRP/RP. It is specifically stated in Para 13 and Para 23 by the applicant that the respondents no.1 to 3 have made serious allegations against him and he is only one who would rebut the allegations made against him.

10.4 The contents of Para 10 are again a surprise to the applicant/RP as the allegations against him were levelled by respondents no.1 to 3 of being hands in glove with the suspended board. However, in his entire reply he has nowhere addressed to the allegations and even rebutted the same.

10.5 In view of the above submissions it is prayed before the Hon’ble Tribunal to:

a. Impose penalty upon the initiators of the main petition i.e., respondent no.1 along with respondent no.2 & 3 for initiating the insolvency resolution process for purpose other than resolution of insolvency;

b. Impose penalty upon respondent no.6 & 7, the suspended directors of the corporate debtor for allowing the commencement of the insolvency proceedings for a mere amount of Rs.3.48 lakhs only;

O R D E R

11. Heard both the sides and gone through the records and submissions. On perusal of the materials available on record it is observed that:

11.1 Respondent No. 1, the Applicant in the original petition CP (IB) No. 03 of 2020, is a contractual faculty member in the coaching institutes being run and managed by the Corporate Debtor and on account of unpaid salary of 3 months only, he had filed the application under Section 9 of IBC 2016 which stood admitted ex-parte as the Corporate Debtor remained absent in the proceedings allowing the petition to be admitted. The Respondent therein i.e. the Corporate Debtor never appeared/not cooperated.

11.2 The CoC initially resolved to go for Liquidation and an application under the Section 33(2) of the Code filed by the RP, the Applicant here, vide filing number 1806122/00053/2021 was not found just during the COVID period by this Bench in the absence of sincere attempt on the part of the CoC to find a Viable Resolution Plan for the MSME CD. Now One Resolution Plan, out of two received, has been placed before this Bench for Approval.

12. It is a fact that the Respondent no. 1, Mr Manish Soni has filed the Application under Sec 9 of IBC for his 3 months’ unpaid salaries amounting to Rs.3,48,000.00 only calculated @Rs.1,16,000.00 per month and the corporate debtor remained absent in the proceedings allowing the petition to be admitted ex-parte but the RP’s allegation against Respondent No. 1 that, he ,in collusion with respondent no. 2 and 3 and in connivance with the Suspended Board of Management, has initiated insolvency proceedings against the corporate debtor with a malicious intent for the purpose other than resolution of insolvency of the corporate debtor could not be proved with materials to the satisfaction of this Bench. Hence the prayer made in this IA by the RP to impose maximum penalty upon the respondents no. 1 to 3 is declined. However it is made clear that if the R 1, 2 and 3 as Operational Creditors make further attempts to harass the RP and create hurdles in completing the CIRP, necessary proceedings shall be initiated against them.

13. The Submission of R4, that his belief and understanding based on the conduct of each party associated with the CD shall not be construed otherwise, is accepted.

14. The reply of R 5, ex IRP is accepted and as such there was no allegations against him. The matter of his fees as IRP/RP has already been settled.

15. It is found from the materials, papers, and submissions of the Transaction Auditor and the RP that the R 6 & 7, Suspended Board of Management /Ex Directors are still not cooperating, as required under the code of the IBC, to the RP for completion of the CIRP in time. The RP in the meantime has filed other two IAs for preferential transactions and fraudulent trading or wrongful trading under the Sections 43 and 66 of IBC respectively. Hence the issues raised relating to the R6 &R 7 shall be disposed of along with these two IAs separately.

16. We find that there is no much substance left at this time to proceed further in the matter. Hence, the present IA being IA No. 37 of 2021 in CP (IB) No. 03/GB/2020 is disposed of with the above Observations and Directions.