2021 (4) TMI 1144 - Tri - Insolvency and Bankruptcy

Tribunal Denies Withdrawal, Replaces IRP in Collusive CIRP Case

Indu Kumar and Ors. Versus Saha Infratech Private Limited

The Tribunal dismissed the withdrawal applications seeking to terminate the Corporate Insolvency Resolution Process (CIRP) as they were found to be ... Seeking withdrawal of application which was filed for initiation of CIRP against Corporate Debtor - Section 12A of the Insolvency and Bankruptcy Code 2016 read with Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- The Adjudicating Authority may allow a withdrawal application admitted under Section 7, 9 or 10 on an application made by the applicant with the approval of the 90% of the voting share of the CoC. Therefore, to file an application under Section 12A, the applicant is required to fulfill two conditions i.e., first, the application must be filed by the applicant on whose prayer the application under Section 7, 9 or 10 is admitted and secondly, it must be approved by 90% voting share of the CoC. The application for withdrawal application admitted under Section 7, 9 or 10 shall be filed by the applicant - Similarly, Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that an application for withdrawal under section 12A may be made to the Adjudicating Authority before the constitution of the committee, by the applicant through the interim resolution professional and after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be. Mere reading of the provisions shows that under Section 22(2) of the IBC, 2016, the committee of creditors, may, in the first meeting, by a majority vote of not less than sixty-six per cent of the voting share of the financial creditors, either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional. Whereas under Section 27(2) there is a provision for replacement of Resolution Professional, who was appointed under Section 22, with another Resolution Professional by a vote of sixty-six per cent of voting share of the CoC. Therefore, Section 27 of the IBC, 2016 has a provision for replacement of Resolution Professional, who was appointed under Section 22 of the IBC. Hence, Section 27 is not applicable in this matter, because prayer is for the replacement of the IRP not the RP. Mr. Arun Jain IRP neither submitted the explanation as sought for nor filed the Affidavit. All this shows that the IRP not only failed to perform the duty of initiating CIRP of the CD but also disobeyed the directions given by this Adjudicating Authority. The non-initiation of CIRP of the Corporate Debtor is a serious dereliction of duty on the part of the IRP and for which apart from the contempt proceedings, disciplinary proceeding must be initiated against the IRP - in sequel to the above, by exercising the power under Rule 11 of the NCLT Rules, 2016 read with directions given by the Hon'ble NCLAT in the Company Appeal No. 166/2020 in para 7 of the order, we hereby appoint Mr. Shiv Nandan Sharma, Registration No.-IBBI/IPA-001/IP-P00384/2017-18/10641, Email id: [email protected]. Mobile No. 9540000212 as an IRP from the panel communicated to this Adjudicating Authority by IBBI - Mr. Shiv Nandan Sharma is directed to take the charge of the CIRP of the CD with immediate effect. The Court Officer will immediately inform the IRP so appointed by all modes. Application disposed off. Issues Involved:1. Withdrawal of Corporate Insolvency Resolution Process (CIRP) applications.2. Replacement of the Interim Resolution Professional (IRP).Issue-wise Detailed Analysis:1. Withdrawal of CIRP Applications (IA/3896/2020 & IA/3898/2020):The applicants sought permission to withdraw the CIRP against the Corporate Debtor under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016, read with Regulation 30A of the Insolvency Resolution Process for Corporate Persons Regulations, 2016. The application was filed by financial creditors/applicants who had settled their claims with the Corporate Debtor. They requested the IRP to place the withdrawal application before the Adjudicating Authority, but the IRP refused, citing that he had not taken charge and had filed for his replacement.The Tribunal noted that the IRP, Mr. Arun Jain, never took charge and made no public announcement as required under Section 15 of the IBC. The Tribunal also observed that the withdrawal application must be filed by the applicant who initiated the CIRP, and it must be approved by 90% of the voting share of the Committee of Creditors (CoC). In this case, the application was filed by an authorized agent, not the original applicants, and without the IRP's involvement. The Tribunal found that the applicants and the IRP were in collusion with the Corporate Debtor to avoid the strict conditions of terminating the CIRP.The Tribunal rejected the withdrawal applications, stating that the rights of other home-buyers/allottees would be jeopardized if the CIRP was terminated. The applications were dismissed as they were not maintainable under the law.2. Replacement of the IRP (IA/3371/2020 & IA/3912/2020):The applicants sought the replacement of the IRP, Mr. Arun Jain, who had never taken charge of the CIRP. The Tribunal noted that the CoC had not been constituted, and no public announcement was made by the IRP. The Tribunal referred to Sections 22 and 27 of the IBC, which provide for the replacement of the IRP/RP with the approval of the CoC. However, since the CoC was not constituted, these provisions were not applicable.The Tribunal exercised its inherent power under Rule 11 of the NCLT Rules, 2016, and in light of the directions given by the Hon'ble NCLAT, appointed Mr. Shiv Nandan Sharma as the new IRP. The Tribunal directed Mr. Sharma to take charge of the CIRP immediately.The Tribunal also directed the Registrar NCLT to send a copy of the order to the IBBI for initiating disciplinary action against Mr. Arun Jain for failing to perform his duties and obstructing the CIRP proceedings.Conclusion:The Tribunal dismissed the withdrawal applications (IA/3896/2020 & IA/3898/2020) as they were not maintainable under the law. The Tribunal replaced the IRP, Mr. Arun Jain, with Mr. Shiv Nandan Sharma, exercising its inherent powers and in compliance with the directions of the Hon'ble NCLAT. The Tribunal also directed disciplinary action against Mr. Arun Jain for his conduct.