Tribunal sets aside RP's decision on PRAs, emphasizes adherence to IBC procedures

The Tribunal allowed the application, setting aside the RP's decision to include DSKL in the list of PRAs. The Tribunal held that the list of PRAs prepared by the former RP on 6th March 2020 was valid and accepted. The Tribunal emphasized that the RP and the Committee of Creditors (CoC) must adhere to the procedures prescribed under the IBC and the CIRP Regulations to ensure a fair and unbiased resolution process.

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Issues Involved:
1. Authority of the applicant to file the application.
2. Non-joinder of Dwarkadhish Sakhar Karkhana Limited (DSKL) as a necessary party.
3. Inclusion of DSKL in the final list of Prospective Resolution Applicants (PRAs) after initial rejection.
4. Allegations of bias and arbitrariness in the conduct of the Resolution Professional (RP).
5. Compliance with the Insolvency and Bankruptcy Code (IBC) and related regulations.

Issue-wise Detailed Analysis:

1. Authority of the Applicant to File the Application:
The Respondent challenged the authority of the applicant to file the application, arguing that no Board Resolution authorizing the filing was presented. The applicant countered that the Managing Director, by virtue of their position, is empowered to file such applications. The Tribunal accepted the applicant's submission, citing Section 2(54) of the Companies Act, 2013, which entrusts substantial powers of management to the Managing Director. The Tribunal also referenced a Karnataka High Court judgment supporting the Managing Director's authority to institute proceedings.

2. Non-joinder of DSKL as a Necessary Party:
The Respondent argued that DSKL was a necessary party to the proceedings. The applicant contended that no relief was sought against DSKL, and thus, it was not necessary to include them as a party. The Tribunal agreed with the applicant, stating that since no relief was claimed against DSKL, the application could be decided in their absence.

3. Inclusion of DSKL in the Final List of PRAs:
The applicant objected to the inclusion of DSKL in the final list of PRAs after their initial rejection due to late submission of their Expression of Interest (EoI). The applicant argued that the RP’s actions were arbitrary and biased, and that the inclusion of DSKL without issuing a new Form G was against the regulations. The Tribunal noted that the RP had deviated from the established procedure by accepting DSKL’s EoI after the deadline without issuing a fresh invitation for EoIs, which was prejudicial to other PRAs.

4. Allegations of Bias and Arbitrariness in the Conduct of the RP:
The applicant alleged that the RP’s conduct was biased and arbitrary, favoring DSKL. The Tribunal found merit in the applicant's arguments, noting that the RP had changed the rules mid-process to favor DSKL. The Tribunal referenced the NCLAT judgment in Kotak Investment Advisors Limited Vs. Mr. Krishna Chamadia, which held that accepting a resolution plan after the deadline without following due process was arbitrary and against the principles of natural justice.

5. Compliance with the IBC and Related Regulations:
The Tribunal emphasized the importance of adhering to the IBC and related regulations. It noted that the RP’s acceptance of DSKL’s EoI after the deadline without issuing a fresh Form G was a violation of Regulation 36A(6) of the CIRP Regulations. The Tribunal highlighted that any deviation from the established procedure must be done in a manner that ensures fairness and transparency, which was not observed in this case.

Conclusion:
The Tribunal allowed the application, setting aside the RP’s decision to include DSKL in the list of PRAs. The Tribunal held that the list of PRAs prepared by the former RP on 6th March 2020 was valid and accepted. The Tribunal emphasized that the RP and the Committee of Creditors (CoC) must adhere to the procedures prescribed under the IBC and the CIRP Regulations to ensure a fair and unbiased resolution process.

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