2018 (6) TMI 1063 - AT - Insolvency and Bankruptcy

Tribunal Upholds Decision to Replace Resolution Professional with Liquidator

Mr. Devendra Padamchand Jain Versus State Bank of India, Hyderabad, State Bank of Hyderabad, Hyderabad, Indian Overseas Bank, Secunderabad, Punjab National Bank, Hyderabad, Bank of India, Hyderabad, Bank of Baroda, IFCI Factors Limited, VNR Infrastructure Limited, Telangana And Insolvency and Bankruptcy Board of India, New Delhi

The Tribunal upheld the Adjudicating Authority's decision to replace the appellant as the Resolution Professional and appoint Mr. T.S.N. Raja as the ... Adjudicating Authority jurisdiction replacing the appellant as resolution professional to liquidator and not appointing him as liquidator - corporate insolvency resolution process - Appointment of resolution professional(distinct from interim resolution professional) - Held that:- Adjudicating Authority is empowered to remove the resolution professional, apart from the Committee of Creditors, but it should be for the reasons and in the manner as provided under the relevant provisions. Resolution Plan was filed by the Corporate Debtor itself which was rejected by the Committee of Creditors (Financial Creditor herein having 100% voting power). However, the Committee of Creditors (Financial Creditor – SBI) have not recommend the name of any other person as the liquidator. The Financial Creditors herein having 100% voting right has accepted that the Resolution Professional (appellant herein) was not assisting the Adjudicating Authority to its satisfaction during hearing. The Resolution Professional (appellant herein) was required to examine the Resolution Plan but had not stated that the plan submitted by him provides for all the requirements as provided under sub-section (2) of Section 30. The Committee of Creditors i.e. Financial Creditor, who has 100% right is also not satisfied with the Resolution Professional and taken plea that they are happy with Mr. T.S.N. Raja, the Liquidator who has been appointed and performing the duty since September, 2017 in accordance with law. Thus we hold that the Adjudicating Authority has jurisdiction to remove the resolution professional if it is not satisfied with its functioning of the resolution professional, which amounts to non-compliance of sub-section (2) of Section 30 of the I & B Code. For the reasons aforesaid no interference is called for - appeal dismissed. Issues Involved:1. Jurisdiction of the Adjudicating Authority to replace the Resolution Professional.2. Compliance with Sections 33 and 34 of the Insolvency and Bankruptcy Code, 2016.3. Satisfaction of the Adjudicating Authority with the Resolution Professional's performance.4. Procedures for appointing and replacing a Resolution Professional and Liquidator.Issue-wise Detailed Analysis:1. Jurisdiction of the Adjudicating Authority to Replace the Resolution Professional:The appellant contended that the Adjudicating Authority exceeded its jurisdiction by replacing him as the Resolution Professional and not appointing him as the Liquidator. The appellant argued that as per Section 34(1) of the Insolvency and Bankruptcy Code, 2016 (I&B Code), the Adjudicating Authority is required to appoint the Resolution Professional as the Liquidator unless there are specific reasons for replacement under Section 34(4). The Tribunal, however, held that the Adjudicating Authority is empowered to remove the Resolution Professional if it is not satisfied with his performance, which amounts to non-compliance with Section 30(2) of the I&B Code.2. Compliance with Sections 33 and 34 of the Insolvency and Bankruptcy Code, 2016:The Tribunal discussed the relevant provisions for appointing and removing a Resolution Professional or Liquidator. Section 22 allows the Committee of Creditors (CoC) to appoint or replace the interim Resolution Professional. Section 27 provides the CoC with the power to replace the Resolution Professional if necessary. Section 34(1) states that the Resolution Professional shall act as the Liquidator unless replaced by the Adjudicating Authority under Section 34(4), which allows replacement if the resolution plan fails to meet the requirements of Section 30(2) or if the Board recommends replacement.3. Satisfaction of the Adjudicating Authority with the Resolution Professional's Performance:The Adjudicating Authority observed that the existing Resolution Professional did not assist to its satisfaction during various hearings. The Tribunal noted that the Resolution Professional scheduled the last CoC meeting close to the end of the CIRP period and filed for liquidation late. The Financial Creditor (State Bank of India) with 100% voting power expressed dissatisfaction with the Resolution Professional's assistance and supported the appointment of Mr. T.S.N. Raja as the Liquidator, who had been effectively performing his duties since his appointment.4. Procedures for Appointing and Replacing a Resolution Professional and Liquidator:The Tribunal elaborated on the procedures for appointing and replacing a Resolution Professional and Liquidator as per the I&B Code. The CoC can replace the interim Resolution Professional by a majority vote (Section 22). The Adjudicating Authority can replace the Resolution Professional if the resolution plan is rejected for not meeting Section 30(2) requirements or if the Board recommends replacement (Section 34(4)). The Tribunal concluded that the Adjudicating Authority acted within its jurisdiction by replacing the Resolution Professional due to dissatisfaction with his performance.Conclusion:The Tribunal upheld the Adjudicating Authority's decision to replace the appellant as the Resolution Professional and appoint Mr. T.S.N. Raja as the Liquidator. It emphasized that the Adjudicating Authority has the jurisdiction to remove the Resolution Professional if not satisfied with his functioning, which constitutes non-compliance with Section 30(2) of the I&B Code. The appeal was dismissed, and no interference was deemed necessary.