2019 (8) TMI 1552 - AT - Insolvency and Bankruptcy

Committee's Choice Denied: New Resolution Professional Appointed. Allegations Unsubstantiated.

Axis Bank Ltd. Versus Sixth Dimension Project Solution Ltd.

The Adjudicating Authority rejected the application to change the Interim Resolution Professional, despite unanimous support from the Committee of ... Application for change of 'Interim Resolution Professional' - appointment of 'Mr. Santanu T. Ray' as 'Resolution Professional' though the decision was taken with 100% voting share of 'Committee of Creditors' - rejection on the ground that 'Committee of Creditors' failed to put forth any tenable or valid or genuine reasons for the same - HELD THAT:- The Adjudicating Authority rejected application on the basis that no specific ground has been given for replacement of 'Mr. S. Gopalakrishnan', but we are of the opinion that if any ground is given against the 'Resolution Professional' - 'Mr. S. Gopalakrishnan' for removal, it would require first decision on the correctness of the ground and would delay 'IRP' and such procedure is not in interest of the process. Sections 22 and 27 of the I&B Code do not require giving reasons for replacement and Adjudicating Authority is not required to decide on such reasons. The 'Committee of Creditors', therefore, did not reflect any allegation or any proceeding against 'Mr. S. Gopalakrishnan' and simply decided to replace him. Further in the facts and circumstances, we are of the view that the Adjudicating Authority though decided the matter relating to the 'Resolution Professional' should have also decided the extension of period. We make it clear that the 'Committee of Creditors' having not recorded any allegation against 'Mr. S. Gopalakrishnan', IRP/ RP, should not be taken into consideration for any action against 'Mr. S. Gopalakrishnan'. The 'Committee of Creditors' to engage 'Mr. Santanu T. Ray' as 'Resolution Professional' if there is no proceeding pending against him is allowed - Insofar as the fee and cost incurred by 'Mr. S. Gopalakrishnan' is concerned, he will place the evidence in support of the fee and cost incurred by him and 'Committee of Creditors' will decide the same and admitted dues to be released in his favour by the 'Committee of Creditors', which may be adjusted from the resolution cost. 'Mr. S. Gopalakrishnan' will hand over the charge to 'Mr. Santanu T. Ray'. Appeal allowed. Issues:1. Rejection of application for change of Interim Resolution Professional and appointment of a new Resolution Professional.2. Lack of progress during the Corporate Insolvency Resolution Process.3. Allegations against the Resolution Professional.4. Decision-making process of the Committee of Creditors.5. Extension of the resolution process period.Analysis:1. The Adjudicating Authority rejected the application for changing the Interim Resolution Professional and appointing a new Resolution Professional, despite the decision being supported by 100% voting share of the Committee of Creditors. The rejection was based on the lack of valid reasons presented by the Committee of Creditors for the change. The matter regarding the extension of time was left pending.2. It was argued that during the 180-day period, no significant progress was made by the Interim Resolution Professional, leading to the decision to appoint a new Resolution Professional with the unanimous support of the Committee of Creditors. The lack of progress was a key factor in this decision-making process.3. Allegations were made against the Resolution Professional by the Committee of Creditors, which were deemed unsubstantiated and not based on record. The Information Memorandum was not prepared due to non-cooperation from the Directors/Partners of the Corporate Debtor. However, the failure to bring this to the attention of the Adjudicating Authority within the stipulated time frame was noted.4. The decision-making process of the Committee of Creditors was scrutinized, with the Tribunal emphasizing that specific grounds for the replacement of the Resolution Professional were not mandatory as per the Insolvency and Bankruptcy Code. The Tribunal highlighted that delaying the process by requiring detailed reasons for replacement was not in the interest of the resolution process.5. In the interest of the resolution process, the Tribunal set aside the previous order and allowed the Committee of Creditors to engage the proposed Resolution Professional. The period for the resolution process was extended by 90 days, with the extension starting from the date of receipt of the order. Any pending applications for extension of time were also disposed of as a part of this judgment.