Tribunal Denies Withdrawal, Replaces IRP in Collusive CIRP Case

The Tribunal dismissed the withdrawal applications seeking to terminate the Corporate Insolvency Resolution Process (CIRP) as they were found to be collusive and not maintainable under the law. Additionally, the Tribunal replaced the Interim Resolution Professional (IRP) who failed to take charge with a new IRP, directing immediate action and disciplinary measures against the former IRP for obstructing the CIRP proceedings.

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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.

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