Tribunal orders replacement of Resolution Professional for bias

The Tribunal ordered the removal of RP due to bias arising from his long association with the Financial Creditor. The CoC was directed to appoint a new RP, ensuring the continuation of the CIRP process. The outgoing RP was instructed to hand over all records to the incoming RP, and the CoC to clear all dues and costs incurred by the outgoing RP. The unnumbered I.A. of 2020 in C.P.(IB) No. 980/KB/2018 was disposed of accordingly, with no order as to costs.

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Issues Involved:
1. Removal of the Resolution Professional (RP) due to alleged bias and conflict of interest.
2. Allegations of non-cooperation and harassment by the RP.
3. Legality of actions taken by the RP during the Corporate Insolvency Resolution Process (CIRP).
4. Appointment of advisors by the RP and their affiliations.
5. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016.

Issue-wise Detailed Analysis:

1. Removal of the Resolution Professional (RP) due to alleged bias and conflict of interest:

The applicant, a suspended Director of the Corporate Debtor, sought the removal of the RP, Mr. Kanakabha Ray, on grounds of bias and conflict of interest. The RP was previously employed by the Financial Creditor for over 30 years and continued to receive pension benefits from the same. The applicant argued that this long association and the financial benefits created a presumption of bias, as supported by a recent judgment of the Hon'ble Appellate Tribunal. The RP admitted to his past employment and pension but denied any bias. The Tribunal found that the RP's prior involvement with the accounts of the Corporate Debtor while in the service of the Financial Creditor raised a presumption of bias, warranting his replacement.

2. Allegations of non-cooperation and harassment by the RP:

The applicant alleged that the RP was acting more as a recovery agent for the Financial Creditor rather than an independent RP. The RP was accused of harassing the Corporate Debtor by demanding documents spanning over 38 years and threatening legal consequences for non-compliance. The Tribunal noted that the RP's actions, such as questioning old transactions and demanding extensive documentation, were indicative of bias and harassment.

3. Legality of actions taken by the RP during the CIRP:

The applicant contended that the RP failed to seek an extension of the CIRP period, which expired on February 4, 2020, and continued to act without proper authority. The Tribunal observed that the RP did not take timely steps to extend the CIRP period, which was a significant procedural lapse. The RP's justification for not seeking an extension was found to be inadequate.

4. Appointment of advisors by the RP and their affiliations:

The RP appointed advisors who were also former employees of the Financial Creditor, raising further concerns about bias. The Tribunal noted that the RP's choice of advisors, who had affiliations with the Financial Creditor, compounded the perception of bias and conflict of interest.

5. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016:

The Tribunal emphasized the importance of adhering to procedural requirements under the IBC. The RP's failure to seek an extension of the CIRP period and the improper conduct of CoC meetings without proper authorization were significant procedural violations. The Tribunal directed the CoC to replace the RP with a new Insolvency Professional within one week and ensure the continuation of the CIRP process.

Conclusion:

The Tribunal ordered the removal of the RP, Mr. Kanakabha Ray, due to the presumption of bias arising from his long association with the Financial Creditor. The CoC was directed to appoint a new RP and ensure the continuation of the CIRP process. The outgoing RP was instructed to hand over all records to the incoming RP, and the CoC was directed to clear all dues and costs incurred by the outgoing RP. The unnumbered I.A. of 2020 in C.P.(IB) No. 980/KB/2018 was disposed of accordingly, with no order as to costs.

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