2024 (6) TMI 134 - Tri - Insolvency and Bankruptcy

Resolution Professional replaced in personal guarantor case for bringing unauthorized lawyers during repayment plan meetings under Section 105

NCLT New Delhi replaced the Resolution Professional in a personal guarantor insolvency case. The Tribunal held that under Sections 102-112 of IBC 2016, ... Replacement of resolution professional - role and duties of resolution professional - insolvency resolution process for personal guarantor - transparency and collaborative conduct of RP - prohibition on RP being accompanied by lawyer during pre plan consultations - request under Section 100(2) for conducting negotiations - entitlement to professional fees and expenses as CIRP costAdjournment and change of cause list time - Prayer for opportunity to file reply and advancement of hearing on account of bona fide non appearance due to change in Bench assembling time. - HELD THAT: - The Bench found that the applicant's counsel had reasonably believed the originally published assembling time and that a subsequent, sudden change of the Bench assembling time justified his non appearance. On that basis the application seeking an opportunity to file reply was allowed and the hearing in IA 2148/2024 was advanced for adjudication.Application IA 2724/2024 allowed; opportunity to file reply granted and hearing on IA 2148/2024 advanced.Replacement of resolution professional - role and duties of resolution professional - insolvency resolution process for personal guarantor - transparency and collaborative conduct of RP - prohibition on RP being accompanied by lawyer during pre plan consultations - request under Section 100(2) for conducting negotiations - entitlement to professional fees and expenses as CIRP cost - Whether the Resolution Professional (Mr. Raj Kamal Saraogi) should be replaced and, if so, appointment of a successor and consequential directions. - HELD THAT: - The Tribunal considered the Personal Guarantor's complaints about the RP's conduct, including that the RP met the Personal Guarantor in an expensive hotel in the company of a lawyer and that the RP's conduct lacked transparency and collaboration. The Bench examined relevant provisions of the Code and the IBBI Regulations governing the insolvency resolution process for a personal guarantor and concluded that, at the pre repayment plan stage, the RP's role is that of a consultant/facilitator and the regulations do not indicate a right for the RP to be accompanied by a lawyer to such meetings or to conduct negotiations without seeking directions under Section 100(2). The Tribunal observed that no request under Section 100(2) had been made by the RP to the Adjudicating Authority for conducting negotiations. While the Tribunal did not adjudicate on the disputed allegation that the RP remarked the matter would go to bankruptcy, it found the procedure under Chapter III of the Code to be beneficiary and the RP's role exigible to ensure a collaborative process. In the exercise of its powers and in view of the foregoing, the Bench ordered replacement of the RP with a suitably experienced professional and clarified that the replacement should not be treated as a reflection adversely against the outgoing RP or his counsel. The outgoing RP was held entitled to claim his professional fees and expenses as CIRP cost, and the newly appointed RP was to discharge functions afresh in terms of the earlier order. [Paras 9, 10, 11, 12, 13]Mr. Raj Kamal Saraogi replaced by Mr. Shiv Nandan Sharma as Resolution Professional; outgoing RP entitled to claim professional fees and expenses as CIRP cost; newly appointed RP to discharge functions afresh.Final Conclusion: The Tribunal allowed the procedural application to permit filing of a reply and advanced the hearing; on merits the Tribunal directed replacement of the incumbent Resolution Professional with a new IP in light of concerns about the collaborative and facilitative role required of an RP in a personal guarantor insolvency process, while preserving the outgoing RP's entitlement to professional fees and costs. Issues Involved:1. Change in hearing schedule.2. Replacement of the Resolution Professional (RP).Summary:1. Change in Hearing Schedule:The application IA-2148/2024 was initially scheduled for hearing at 2 pm. However, due to the Judicial Member presiding over three benches, the time was changed to 11:30 am on 18.05.2024. The Counsel for the Creditor requested an opportunity to file a reply within three days, citing the sudden change in the schedule as the reason for their absence. The Tribunal allowed the prayer and advanced the hearing for adjudication.2. Replacement of the Resolution Professional (RP):The Personal Guarantor filed an application u/s 98(2) for the replacement of the RP, Mr. Raj Kamal Saraogi, with Mr. Arvind Kumar. The grounds for replacement included:- Lack of confidence in the RP's understanding of the business's complexity.- The RP's conduct during a meeting on 24.04.2024, where he allegedly suggested the proceedings would lead to bankruptcy.- The RP's failure to seek Tribunal permission for negotiations between the debtor and creditors u/s 100(2).- Lack of transparency and collaboration in the insolvency resolution process.The Tribunal noted that the RP met the Personal Guarantor in an expensive hotel with a lawyer, which was unnecessary and not supported by the regulations. The Tribunal emphasized that the RP's role is to act as a consultant, and there was no authorization for the RP to involve a lawyer at this stage.The Tribunal appointed Mr. Shiv Nandan Sharma as the new RP, considering the beneficial nature of the procedure and the need for a facilitator between the Personal Guarantor and creditors. The order clarified that the replacement should not be held against Mr. Chaurasia or Mr. Raj Kamal Saraogi and that Mr. Saraogi is entitled to claim his professional fees and expenses as CIRP cost. The newly appointed RP is to discharge his functions afresh as per the Tribunal's order dated 22.04.2024.