Tribunal Appoints New Resolution Professional to Break Deadlock in Creditor Committee

The Tribunal appointed Mr. Kiran Shah as the new Interim Resolution Professional/Resolution Professional to address the deadlock in the Committee of Creditors' constitution. This decision aimed to expedite the Corporate Insolvency Resolution Process, uphold the time-bound nature mandated by the Insolvency and Bankruptcy Code, and resolve conflicts related to creditor classification and voting rights within the CoC. The Tribunal utilized its power under Rule 11 of the NCLT Rules 2016 to break the stalemate and ensure the efficient progress of the insolvency proceedings.

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Issues:
1. Appointment of new Interim Resolution Professional under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Analysis:
The Application was filed seeking the appointment of a new Interim Resolution Professional (IRP) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The case involved a dispute arising from the constitution of the Committee of Creditors (CoC) in CP(IB) 397 of 2018. The Applicant, along with other Financial Institutions, raised concerns regarding the classification of creditors in the CoC. The IRP admitted claims without complete verification, leading to a reduction in the voting share of secured Financial Creditors. The Applicant also highlighted potential conflicts of interest among certain creditors related to the Corporate Debtor. The Respondent, representing the IRP, denied the allegations and emphasized the role of the IRP as per CIRP Regulations 2016.

The Respondent argued that the unsecured loans from Financial Creditors were duly reflected in the Corporate Debtor's balance sheets and the voting share was determined based on claim values supported by filed documents. Various parties, including Charms Holding Private Limited and Abhinandan Multitrade Private Limited, submitted replies asserting their status as Financial Creditors and challenging the allegations made by the Applicant. The conflict primarily centered around the appointment of the IRP, leading to a stalemate between secured and unsecured Financial Creditors.

The Tribunal noted the failure to achieve a majority vote for the appointment of the IRP, causing delays in the Corporate Insolvency Resolution Process (CIRP). To break the stalemate and uphold the time-bound nature of the CIRP as mandated by the IB Code, the Tribunal exercised its power under Rule 11 of the NCLT Rules 2016. Mr. Kiran Shah was appointed as the new IRP/RP to convene the CoC meeting and expedite the CIRP. The Tribunal exempted the time consumed in deciding the application and the lockdown period from the overall timeline. Additionally, a related interim application became infructuous following the new appointment, and any prior interim orders were vacated.

In conclusion, the Tribunal's decision aimed to resolve the conflict surrounding the appointment of the IRP, ensure the timely completion of the CIRP, and address concerns raised by various parties regarding creditor classification and voting rights within the CoC.

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