Tribunal Upholds Replacement of Resolution Professional in Corporate Insolvency Case

The National Company Law Appellate Tribunal upheld the decision to replace the Resolution Professional, Mr. Diwan Chand Arya, with Mr. Debrath Rana during the Corporate Insolvency Resolution Process of 'Sikkim Hydro Venture Limited'. The Tribunal found that the removal was based on the lack of confidence by the Committee of Creditors in Mr. Arya's ability to effectively handle the process, rather than misconduct. The appeal challenging the replacement was dismissed, emphasizing the importance of stakeholder satisfaction and adherence to the provisions of the Insolvency and Bankruptcy Code, 2016 in such cases.

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Issues involved: Replacement of Resolution Professional during Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016.

Analysis:

The judgment by the National Company Law Appellate Tribunal, New Delhi, dealt with the replacement of a Resolution Professional, Mr. Diwan Chand Arya, by Mr. Debrath Rana in a case involving 'Sikkim Hydro Venture Limited' as the Corporate Debtor. The impugned order, based on an application under Section 22 of the Insolvency and Bankruptcy Code, 2016, stemmed from the 4th Committee of Creditors meeting. The Appellant declined to put his replacement for voting before the Committee of Creditors, leading to his replacement with 97.98% voting shares in favor of Mr. Debrath Rana.

During the hearing, the Appellant's representative contended that the impugned order did not align with the provisions of the Insolvency and Bankruptcy Code, 2016, and tarnished the Appellant's reputation as a Resolution Professional. The Power Department of the Government of Sikkim, a major stakeholder, expressed serious reservations about the Appellant's conduct and actions, leading to the Committee of Creditors' decision to remove him due to dissatisfaction with his handling of the Corporate Insolvency Resolution Process.

The Tribunal emphasized that the removal of the Resolution Professional was not a reflection of misconduct but a result of the Committee of Creditors' lack of confidence in his ability to carry out the resolution process effectively. The Appellant had no inherent right to continue if the majority of the Committee did not support him. As there were no allegations of misconduct against the Appellant, the Tribunal found no grounds to expunge any remarks against him. Ultimately, the appeal was dismissed as lacking merit, with no costs imposed.

In conclusion, the judgment underscores the importance of the Committee of Creditors' confidence in the Resolution Professional's ability to conduct the Corporate Insolvency Resolution Process effectively. The decision to replace the Appellant was deemed valid, given the majority vote shares in favor of the new Resolution Professional, Mr. Debrath Rana, highlighting the significance of stakeholder satisfaction and adherence to the provisions of the Insolvency and Bankruptcy Code, 2016 in such proceedings.

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