2018 (7) TMI 2126 - AT - Insolvency and Bankruptcy

Judgment reinstates Resolution Professional challenged for past association, emphasizes eligibility criteria

State Bank of India Versus Ram Dev International Ltd. (Through Resolution Professional)

The appeal by the 'State Bank of India' challenged the Adjudicating Authority's decision to declare a proposed Resolution Professional ineligible due to ... Appointment of Resolution Professional - Whether the Adjudicating Authority can reject the proposal of the Committee of Creditors for appointment of Resolution Professional, on the ground that the name of proposed Resolution Professional is appearing in the panel of one of the member of the Committee of Creditors? HELD THAT:- During the Corporate Insolvency Resolution Process, at any time, if the Committee of Creditors ‘is of opinion’ that the Resolution Professional appointed under Section 22 is required to be replaced, it may replace him with another Resolution Professional in the manner provided under said section. In terms of Section 27(2), the Committee of Creditors at a meeting by vote of 75% of voting share (as per un-amended provision) can propose to replace the Resolution Professional appointed under Section 22 with another Resolution Professional - except for pendency of a disciplinary proceeding or ineligibility in terms of provisions of the I&B Code, there is no bar for appointment of a person as Resolution Professional. A Resolution Professional if empaneled as an Advocate or Company Secretary or Chartered Accountant with one or other ‘Financial Creditor’ that cannot be a ground to reject the proposal, if otherwise there is no disciplinary proceeding is pending or it is shown that the person is an interested person being employee or in the payroll of the ‘Financial Creditor. In the present case, the Adjudicating Authority has failed to take into consideration the facts and as there is no allegation against Mr. K. G. Somani and no disciplinary proceeding is pending against him and he is not in the payroll of one or other member of the Committee of Creditors, we are of the view that the Adjudicating Authority was required to approve his name. Impugned order set aside - petition allowed. Issues:1. Eligibility of a proposed Resolution Professional based on past association with a member of the Committee of Creditors.Analysis:The appeal in this case was filed by the 'State Bank of India' against the order passed by the Adjudicating Authority, which held a proposed Resolution Professional ineligible due to his past association with the 'State Bank of Hyderabad', now merged with the 'State Bank of India'. The primary issue was whether the Adjudicating Authority can reject the appointment of a Resolution Professional based on their past association with a member of the Committee of Creditors.The key argument presented was that the proposed Resolution Professional was not an employee of the bank but a panel lawyer, which should not disqualify him from being appointed. The Adjudicating Authority's decision was challenged on the grounds that no adverse comments were made against the previous Resolution Professional who was replaced.The analysis delved into the provisions of the Insolvency and Bankruptcy Code, 2016, emphasizing that there are no specific ineligibilities for the appointment of a Resolution Professional apart from pending disciplinary proceedings. The decision-making authority of the Committee of Creditors to replace a Resolution Professional was highlighted, requiring a 75% majority vote. The judgment clarified that unless there are disciplinary proceedings pending or specific ineligibilities, a person can be appointed as a Resolution Professional even if associated with a Financial Creditor.The conclusion of the judgment set aside the Adjudicating Authority's order and appointed the initially proposed Resolution Professional, emphasizing that the Authority failed to consider crucial facts. The Resolution Professional was directed to ensure the timely completion of the Resolution Process. Additionally, instructions were provided regarding the fee and cost incurred by the replaced Resolution Professional, advising him to submit claims to the Committee of Creditors for consideration during the Resolution Process.