Mandatory IRP Proposal in Insolvency Cases: Tribunal Allows Rectification Within 7 Days

The tribunal held that proposing the name of an Interim Resolution Professional (IRP) is mandatory for a Financial Creditor under section 7 of the Insolvency and Bankruptcy Code. The absence of a proposed IRP renders the application incomplete, but the Adjudicating Authority must allow for rectification within seven days. The impugned order dismissing the application was overturned as the appellant had indeed proposed an IRP. The case was remitted back for admission, provided the application is otherwise complete, with the appellant given seven days to rectify any defects. The appeal was allowed with no costs.

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Issues Involved:
1. Whether it is mandatory for a 'Financial Creditor' to propose the name of 'Interim Resolution Professional' in an application under section 7 of the 'I&B Code'.
2. Whether in the absence of a proposed name of 'Interim Resolution Professional', the application is incomplete.
3. Whether the impugned order dated 22nd June 2017 is legal and valid.

Detailed Analysis:

Issue 1: Mandatory Proposal of 'Interim Resolution Professional' by Financial Creditor

The tribunal examined whether it is mandatory for a 'Financial Creditor' to propose the name of an 'Interim Resolution Professional' (IRP) in an application under section 7 of the Insolvency and Bankruptcy Code, 2016. The relevant provision, clause (b) of Sub-section (3) of Section 7, mandates that the 'Financial Creditor' must furnish the name of the resolution professional proposed to act as an IRP. The tribunal noted that this requirement is distinct from the provisions applicable to 'Operational Creditors' under sub-section (4) of Section 9, where the proposal of an IRP is optional, indicated by the word "may" rather than "shall."

Issue 2: Completeness of Application in Absence of Proposed IRP

The tribunal further addressed whether the absence of a proposed IRP renders the application incomplete. It concluded that sub-section (3)(b) of Section 7 and sub-section (3)(b) of Section 10 are mandatory, and the failure to furnish the name of an IRP makes the application defective. However, it also emphasized that if an application is defective due to the absence of an IRP's name, the Adjudicating Authority must provide the applicant with a notice to rectify the defect within seven days, as per the proviso to Section 7 and Section 10.

Issue 3: Legality and Validity of the Impugned Order

The tribunal scrutinized the impugned order dated 22nd June 2017, which dismissed the application under section 7 on the grounds that the name of an IRP was not proposed. The tribunal found that the appellant had indeed proposed the name of an IRP, as evidenced in the application and accompanying consent letter. Given this fact, the tribunal held that the impugned order could not be sustained and required the matter to be remitted back to the Adjudicating Authority for admission of the case, provided the application is otherwise complete.

Conclusion:

In conclusion, the tribunal upheld the decision that the proposal of an IRP's name is mandatory for a 'Financial Creditor' under section 7. However, it found that the appellant had complied with this requirement, and thus, the impugned order dismissing the application was not justified. The case was remitted back to the Adjudicating Authority with instructions to admit the application if it is otherwise complete, and to provide the appellant with seven days to rectify any defects if necessary. The appeal was allowed with no order as to costs.

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