2023 (1) TMI 393 - AT - Insolvency and Bankruptcy

Dismissal of Appeal Against Removal of Resolution Professional for CIRP Non-Compliance

Srigopal Choudary Resolution Professional of Shree Ram Urban Infrastructure Ltd Versus SREI Equipment Finance Ltd

The appeal challenging the removal of the Resolution Professional (RP) of Shree Ram Urban Infrastructure Ltd. was dismissed by the National Company Law ... Jurisdiction of Adjudicating authority to Remove Resolution Professional - direction to hand over all records/documents to the newly appointed RP - HELD THAT:- In the present case the RP who was expected to convene the CoC Meeting was avoiding to convene the ‘Meeting’ despite a request made by the applicant/respondent herein vide email dated 06.10.2021 for convening the ‘Meeting’ with agenda to remove the RP. Accordingly the applicant was left with no option but to approach the Adjudicating Authority and the Adjudicating Authority has rightly exercised its inherent jurisdiction. Moreover it is settled law that one who appoints can also remove/dismiss the appointee. This position is further clarified on examination of Section 16 of The General Clauses Act, 1897. The Hon’ble Supreme Court in M/s. Heckett Engineering Co. Vs. Their Workmen reported in [1977 (10) TMI 128 - SUPREME COURT] has held that the Appointing Authority can also dismiss the appointee. In the present case, the Adjudicating Authority being the appointing authority of IRP/RP was well within its jurisdiction to pass an order for removal of the RP particularly in a situation where the RP had not taken any steps to convene a meeting of the CoC for the purposes of removal of RP. The Adjudicating Authority with an object to implement the provisions of IBC in its letter and spirit has rightly exercised its inherent jurisdiction by way of passing order of removing the appellant as RP of the CD. This fact which is reflected on record is sufficient to draw an inference that the Appellant was proceeding contrary to the statutory provisions as contained in the IBC and also delaying the smooth conclusion of CIRP - there is no defect in the impugned order warranting interference by this Tribunal. On the contrary the conduct of the appellant/RP which was observed by the Adjudicating Authority and reflected so in the impugned order is sufficient enough to direct IBBI to conduct an inquiry regarding the role played by the RP in this matter. Appeal dismissed. Issues Involved:1. Removal of the Resolution Professional (RP).2. Jurisdiction of the Adjudicating Authority under Sections 22 and 27 of the Insolvency and Bankruptcy Code (IBC).3. Non-joinder of necessary parties in the appeal.4. Conduct and performance of the RP in the Corporate Insolvency Resolution Process (CIRP).Detailed Analysis:1. Removal of the Resolution Professional (RP):The appeal was filed against an order dated 28.11.2022 by the National Company Law Tribunal (NCLT), Mumbai, which directed the removal of the appellant as the RP of Shree Ram Urban Infrastructure Ltd. The order also appointed Mr. Sapan Mohan Garg as the new RP. The removal was based on multiple Interlocutory Applications (IAs) citing various grounds, including the RP's failure to adhere to CIRP timelines, lack of concrete steps towards the CIRP process, and loss of faith by the majority of the Committee of Creditors (CoC).2. Jurisdiction of the Adjudicating Authority under Sections 22 and 27 of the IBC:The appellant argued that the NCLT did not have the jurisdiction to remove the RP under Sections 22 and 27 of the IBC, which vest the power to remove the RP with the CoC. However, the Tribunal noted that the RP had failed to convene CoC meetings despite requests, compelling the applicants to approach the Adjudicating Authority. The Tribunal held that the Adjudicating Authority, being the appointing authority, inherently possessed the power to remove the RP, especially in situations where the RP was obstructing the CIRP process.3. Non-joinder of necessary parties in the appeal:The appeal was criticized for not including all necessary parties, specifically the applicants of the other IAs (IA No.1304/2022 and IA No.3537/2022) who had also sought the RP's removal. The Tribunal emphasized that all applicants whose IAs were allowed by the impugned order should have been impleaded as respondents in the appeal. This oversight was significant enough to warrant the dismissal of the appeal on the grounds of non-joinder of necessary parties.4. Conduct and performance of the RP in the CIRP:The Tribunal highlighted several instances of the RP's misconduct and inefficiency. The first CoC meeting was delayed by over a year and a half from the initiation of CIRP. The RP failed to raise interim finance, did not take steps to gauge interest from prospective resolution applicants, and did not convene CoC meetings despite requests. These actions, or lack thereof, were deemed contrary to the statutory provisions of the IBC and indicative of the RP's failure to perform duties effectively. The Tribunal also noted that the RP had received significant remuneration without corresponding progress in the CIRP.Conclusion:The appeal was dismissed due to lack of merit and non-joinder of necessary parties. The Tribunal upheld the Adjudicating Authority's decision to remove the RP, citing the RP's failure to adhere to CIRP timelines and other statutory duties. The Tribunal also directed the Insolvency and Bankruptcy Board of India (IBBI) to conduct an inquiry into the RP's conduct and take appropriate steps.