Resolution Professional appointment under Section 95 IBC upheld as valid facilitation step not adjudication

The NCLAT dismissed appeals challenging appointment of Resolution Professional (RP) under Section 95 of IBC for personal guarantors. The court held that following SC precedent in Dilip B Jiwrajka case, RP serves only as facilitator, not adjudicator, with adjudication occurring at Section 100 stage. Arguments regarding time-barred debt and authorization defects were deemed premature at RP appointment stage, with Section 98 providing remedy for RP replacement if needed. The Adjudicating Authority's order appointing RP was upheld as valid.

---

---

Issues Involved:
1. Whether the Applications filed under Section 95, sub-section (1) of the Insolvency and Bankruptcy Code, 2016 (IBC) were barred by limitation.
2. Whether the Adjudicating Authority erred in appointing the Resolution Professional (RP) without considering the limitation issue.
3. Whether the RP is precluded from submitting a report on the limitation or jurisdictional facts.
4. Whether the absence of Authorization for Assignment (AFA) by the RP invalidates the appointment.

Summary of Judgment:

Issue 1: Limitation of Applications under Section 95(1) of IBC
The Appellants contended that the Applications filed by the Bank of Maharashtra were barred by limitation since the debt was classified as a Non-Performing Asset (NPA) on 27.07.2016, and the Applications were only filed on 16.03.2023. The Appellants argued that the Adjudicating Authority should not entertain time-barred debts.

Issue 2: Appointment of RP without Considering Limitation
The Respondents argued that at the stage of appointing the RP, the Adjudicating Authority is not required to adjudicate on the Applications filed under Section 95. The adjudication of issues, including limitation, arises only after the RP submits a report under Section 99, and the Adjudicating Authority considers the Applications for admission or rejection under Section 100. The Supreme Court's judgment in Diliip B Jiwrjka vs. Union of India & Ors. was cited, which clarified that the adjudicatory function commences under Section 100 after the submission of the report by the RP.

Issue 3: RP's Role in Submitting Report on Limitation or Jurisdictional Facts
The Appellants argued that the RP is not supposed to submit any report regarding the limitation issue under Section 99. However, the court held that the RP's report, which recommends approval or rejection of the Application, must include reasons and can address whether the debt is time-barred. The RP is not precluded from giving recommendations based on the materials on record. The Supreme Court emphasized that the RP's role is that of a facilitator, not an adjudicator, and the debtor has the right to file objections to the RP's report.

Issue 4: Absence of Authorization for Assignment (AFA)
The Appellants raised the issue that the RP did not file the AFA, arguing it invalidates the appointment. The court held that such issues can be raised during the adjudication of the Application under Section 95, and if there is any invalidity or shortcoming, Section 98 provides for the replacement of the RP.

Conclusion:
The court dismissed the Appeals, holding that there was no error in the Adjudicating Authority's order appointing the RP. The issues raised by the Appellants regarding limitation and the RP's role are to be considered at the stage of adjudication under Section 100, not at the stage of appointing the RP. The Appeals were dismissed with no order as to costs.

---