2024 (8) TMI 1344 - AT - Insolvency and Bankruptcy

Resolution Professional has valid locus standi to file applications under Section 95 proceedings despite appellant's challenge

NCLAT Principal Bench dismissed an application seeking clarification of judgment dated 30.05.2023 regarding Resolution Professional's locus standi. The ... Violation of principles of natural justice - Seeking clarification of the judgment dated 30.05.2023 - RP has locus to file the Application or not - appointment of the Resolution Professional (RP) and the objections raised by the Personal Guarantors - HELD THAT:- There cannot be any denial that principles of natural justice are also attracted in the proceeding in Application under Section 95. However, the Hon’ble Supreme Court, after noting the scheme of insolvency proceeding, has held that Adjudicating Authority role cannot be held to be applicable at the stage of Section 97(5), i.e., at the stage when RP has been appointed. It is to be noted that Appeal(s) were filed by the Appellant challenging order dated 10.04.2023 by which, RP was appointed in the Application under Section 95 filed by the Financial Creditor. The Appellant while challenging order dated 10.04.2023, did not implead the RP as one of the party, whereas RP was required to be impleaded, since the appointment of RP was sought to be challenged in the Appeal, the Appellant cannot take benefit of its own mistake, in not impleading the RP in the Appeal, who was required to be impleaded. It does not lie in the mouth of the Appellant to contend that RP has no locus to file the Application. The objection, which are sought to be raised by the Appellant, are only clear endeavor to prolong the proceedings under Section 95 - the submission of the Appellant that RP has no locus is rejected. Furthermore, the Adjudicating Authority in its order dated 09.05.2024 has observed that there is no assistance from the learned Counsel for the RP in the matter. It was due to the above observations that present Application has been filed by the RP, which cannot be said to be without any locus. RP cannot be precluded form submitting its Report as per the law laid down by the Hon’ble Supreme Court and the Adjudicating Authority has to consider all objections raised by the Appellant(s) at the time of hearing of Section 100 and the order passed by this Tribunal dated 30.05.2023, cannot be read in any manner as to exclude the applicability of judgment of Hon’ble Supreme Court dated 09.11.2023 in Dilip B Jivrajka. The Adjudicating Authority may proceed in the proceedings under Section 95 as per the law - Application disposed off. Issues Involved:1. Clarification of the judgment dated 30.05.2023 in terms of the Supreme Court judgment in Dilip B Jivrajka vs. Union of India.2. Validity of the appointment of the Resolution Professional (RP) and the objections raised by the Personal Guarantors.3. Applicability of principles of natural justice in the Corporate Insolvency Resolution Process (CIRP) for Personal Guarantors.4. Locus standi of the RP to file applications.5. Adjudicatory role of the Adjudicating Authority at various stages of the insolvency process.Detailed Analysis:1. Clarification of the Judgment Dated 30.05.2023:The RP sought clarification regarding the judgment dated 30.05.2023, in light of the Supreme Court's ruling in Dilip B Jivrajka vs. Union of India. The Tribunal had permitted the Personal Guarantors to file objections, which were to be considered by the Adjudicating Authority. The Supreme Court judgment, however, clarified that adjudicatory issues should be decided at the time of hearing the application under Section 100, not at the stage of RP appointment.2. Validity of the Appointment of the RP and Objections by Personal Guarantors:The Financial Creditor filed applications under Section 95 against the Personal Guarantors, leading to the appointment of the RP by the Adjudicating Authority. The Personal Guarantors challenged this appointment, arguing that they were not served with the application and could not present their objections. The Tribunal allowed them to file objections, but the Supreme Court later clarified that such objections should be considered at the Section 100 hearing.3. Applicability of Principles of Natural Justice:The Supreme Court emphasized that principles of natural justice apply but vary with the situation. The Court held that the adjudicatory role of the Adjudicating Authority begins at the Section 100 stage, not at the RP appointment stage. The RP's role is facilitative, and the debtor's engagement is ensured under Section 99. The Tribunal noted that principles of natural justice are applicable but must align with the statutory scheme.4. Locus Standi of the RP to File Applications:The RP's locus standi to file applications was contested by the Personal Guarantors. The Tribunal rejected this contention, stating that the RP should have been impleaded in the original appeal challenging his appointment. The RP's application was deemed necessary to clarify the applicability of the Supreme Court's judgment.5. Adjudicatory Role of the Adjudicating Authority:The Supreme Court clarified that no judicial adjudication is involved at the stages of Sections 95 to 99. The Adjudicating Authority's role is to appoint the RP, who then facilitates the process by collating relevant facts. The adjudicatory function commences under Section 100, where the Authority decides whether to accept or reject the RP's report. The Tribunal reiterated that the objections of the Personal Guarantors should be considered at this stage.Conclusion:The Tribunal clarified that the Adjudicating Authority must proceed according to the Supreme Court's judgment in Dilip B Jivrajka vs. Union of India. The RP is allowed to file its report, and the objections by the Personal Guarantors will be addressed at the Section 100 hearing. The applications filed by the RP were disposed of, with no order as to costs.