2022 (12) TMI 1056 - AT - Insolvency and Bankruptcy

Validity of Liquidator Appointment Upheld, AFA Requirement Confirmed

CA V. Venkata Sivakumar Versus IDBI Bank Limited, Insolvency Bankruptcy Board of India (IBBI), Indian Institute of Insolvency Professionals of ICAI (IIIPI)

CA V. Venkata Sivakumar Versus IDBI Bank Limited, Insolvency Bankruptcy Board of India (IBBI), Indian Institute of Insolvency Professionals of ICAI ... Issues Involved:1. Validity of Authorisation for Assignment (AFA) on the date of Liquidator's appointment.2. Impact of the Hon'ble Madras High Court's interim stay on the current case.3. Authority of the Adjudicating Authority to remove the Liquidator.Detailed Analysis:Issue I: Validity of Authorisation for Assignment (AFA)(a) Whether the Appellant had valid AFA on the date of his appointment as the Liquidator:The Appellant was appointed as the Liquidator on 29.05.2020. Regulation 7A of IBBI (Insolvency Professional) Regulation 2016 mandates that no Insolvency Professional shall accept an assignment after 31.12.2019 without a valid AFA. The Appellant did not possess a valid AFA on the date of his appointment.(b) Whether the AFA was deemed to have been issued in terms of Regulation 12A:Regulation 12A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, states that if the AFA is not issued, renewed, or rejected within fifteen days of the application, it shall be deemed to have been issued. However, the Appellant's application for AFA was rejected on 14.01.2020, thus the argument of deemed issuance does not hold.(c) Whether the AFA issued subsequent to taking up the assignment absolves the Appellant of meeting the requirement of Regulation 7A:The Appellant received a valid AFA on 30.12.2020, which is after his appointment as Liquidator. Therefore, the subsequent issuance does not absolve the Appellant of the requirement to have a valid AFA at the time of appointment.(d) Whether Regulation 12A will prevail over Regulation 7A:The Hon'ble Madras High Court, in dismissing the Appellant's Writ Petition No. 13229 of 2020, upheld the requirement for an Insolvency Professional to obtain AFA from the appropriate IPA, as per Regulation 12A. Therefore, Regulation 7A stands valid and applicable.Issue II: Impact of the Hon'ble Madras High Court's interim stay:The interim injunction granted by the Hon'ble Madras High Court in W.M.P. No. 5088 of 2021 in W.P. No. 4458 of 2021 pertains only to the penalty imposed by the Disciplinary Committee and does not address the requirement of AFA or the removal of the Appellant as Liquidator. The Hon'ble Madras High Court's dismissal of Writ Petition No. 13229 of 2020 further validates the requirement of AFA.Issue III: Authority of the Adjudicating Authority to remove the Liquidator:The I & B Code, 2016, under Sections 33 and 34, and Section 276 of the Companies Act, 2013, provide grounds for removing a Liquidator. Section 16 of the General Clauses Act, 1897, states that the authority to appoint includes the power to suspend or dismiss. The power to remove a Liquidator is thus inherent in the Adjudicating Authority. The judgment in State of Tamil Nadu and Ors. vs. M.N. Sundararajan (1980) and Heckett Engineering Co. vs. Their Workmen (1977) further support this principle. The Principal Bench, NCLAT, in Company Appeal (AT) (Ins.) No. 1234 of 2022, confirmed that the Liquidator does not have a personal right to continue and can be replaced by the Adjudicating Authority for valid reasons.Conclusion:The Appellant did not possess a valid AFA on the date of his appointment as Liquidator, and the Hon'ble Madras High Court's interim stay does not impact the requirement of AFA or the removal of the Appellant. The Adjudicating Authority has the power to remove the Liquidator. The appeal is dismissed, and there is no error in the impugned order.