2019 (8) TMI 1551 - AT - Insolvency and Bankruptcy

Appellate Tribunal Overturns Adjudicating Authority, Upholds Creditor Committee Decision

Punjab National Bank Versus Versus Mr. Kiran Shah,

The Appellate Tribunal set aside the order passed by the Adjudicating Authority, allowing the Committee of Creditors' decision to replace the Resolution ... Replacement the IRP with the proposed RP by the COC - Section 22 of the Insolvency and Bankruptcy Code - HELD THAT:- The ‘Committee of Creditors’ is not required to record any reason or ground for replacing of the ‘Resolution Professional’, which may otherwise call for proceedings against such ‘Resolution Professional’. For the purpose of proceedings reported to the ‘Insolvency and Bankruptcy Board of India’ (for short, ‘the IBBI’, the ‘Committee of Creditors’ cannot await the decision of the IBBI for the purpose of replacement. The ‘Committee of Creditors’ having decided to remove the ‘Resolution Professional with 88% voting share, it was not open to the Adjudicating Authority to interfere with such decision, till it is shown that the decision of the ‘Committee of Creditors is perverse or without jurisdiction. The ‘Committee of Creditors’ with majority voting share of 88% having decided to replace ‘Mr. Kiran Shah’, he cannot function as ‘Resolution Professional’, though he will be entitled to his fee and cost, if any, incurred by him in terms of the ‘I&B Code’. It was not open to the Adjudicating Authority to direct the same very ‘Resolution Professional’ to file an application for ‘Liquidation’ particularly when the ‘Committee of Creditors’ in its meeting decided to request the Adjudicating Authority to extend certain period and if not allowed, then pass order of ‘Liquidation’. The impugned order dated 27th June, 2019 passed by the Adjudicating Authority is set aside - appeal allowed. Issues involved:- Appeal against order dated 27th June, 2019 passed by the Adjudicating Authority (National Company Law Tribunal)- Replacement of the Interim Resolution Professional (IRP) with the proposed Resolution Professional (RP) by the Committee of Creditors (COC)- Compliance with Section 22 of the Insolvency and Bankruptcy Code- Completion of Corporate Insolvency Resolution Process (CIRP) within the stipulated time frame- Payment of professional fee and expenditure to the Resolution Professional- Decision of the Committee of Creditors to replace the Resolution ProfessionalAnalysis of the Judgment:1. Appeal against the Adjudicating Authority's Order:The appeal was filed by the Punjab National Bank, as the lead bank of the Committee of Creditors, against the order dated 27th June, 2019 passed by the Adjudicating Authority. The issue primarily revolved around the replacement of the Interim Resolution Professional (IRP) with the proposed Resolution Professional (RP) by the COC.2. Compliance with Section 22 of the Insolvency and Bankruptcy Code:The Adjudicating Authority highlighted the importance of complying with Section 22 of the Insolvency and Bankruptcy Code, which mandates that the COC must take necessary steps promptly after the first meeting to appoint or replace the IRP. Failure to adhere to this provision can disrupt the time-bound Corporate Insolvency Resolution Process (CIRP).3. Completion of CIRP within the stipulated time frame:It was noted that the CIRP had already exceeded the 180-day limit, with no resolution plan submitted by the COC. The Authority emphasized the need for diligent and timely actions by the COC to avoid delays in the insolvency resolution process.4. Payment of professional fee and expenditure to the Resolution Professional:The Resolution Professional informed the bench that the professional fee and expenses incurred during the CIRP had not been paid. The COC was directed to take necessary steps to ensure the payment of remuneration and expenses to the IRP.5. Decision of the Committee of Creditors to replace the Resolution Professional:The COC, with an 88% majority voting share, decided to replace the Resolution Professional. The Adjudicating Authority acknowledged the COC's decision and ruled that the Resolution Professional could not continue in the role, but would be entitled to fees and costs as per the Insolvency and Bankruptcy Code.6. Conclusion and Setting Aside the Order:The Appellate Tribunal set aside the impugned order passed by the Adjudicating Authority. While refraining from expressing an opinion on the order of liquidation already passed by the Authority, the Tribunal allowed parties to challenge it if necessary. The appeal was allowed with observations, and no costs were imposed.This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal in the context of the Insolvency and Bankruptcy proceedings, emphasizing the importance of procedural compliance and timely actions by the concerned parties.