2024 (11) TMI 929 - AT - IBC

Liquidator's Appeal Dismissed; Investigation into Conduct by IBBI Ordered, Awaiting Final Decision.

CA Ramasamy Shanmuggam, Liquidator of RLS Alloys Pvt. Ltd. Versus Insolvency and Bankruptcy Board of India

The appeal by the Official Liquidator of M/s RLS Alloys Pvt. Ltd. was dismissed due to a lack of specific cause of action under Section 61 of the ... Challenge to Impugned Order - directions has been issued to the IBBI to conduct detailed inspection regards the conduct of Liquidator and the records, pertaining to the Corporate Debtor in order to find out the irregularities in the process - cause of action - prior to passing of the order, no opportunity of explaining or defending himself was provided - violation of principles of natural justice - HELD THAT:- The appellate proceedings under Section 61, of I & B Code cannot be resorted to by the Liquidator, for the purposes of the challenging direction issued to the IBBI to enquire into the conduct of the appellant regards his functioning as a liquidator, because that will be absolutely an in-house proceeding of the registering body of the liquidator to justify as to whether at all, the based on the set of allegations, if proved, he is required to continue as a Liquidator or not. In fact, at this stage, there is nothing apparently adverse against the Appellant, which could call for invocation of an Appellate Jurisdiction particularly when it is only an enquiry and upon which the decision on the same is yet to be taken. As of now there is no specific cause of action for the Appellant, to invoke the Appellate Jurisdiction under Section 61, of I & B Code. The Appeal lacks merit and the same is accordingly dismissed. Issues:1. Challenge to Impugned Order dated 02.06.2022 by the Official Liquidator of M/s RLS Alloys Pvt. Ltd.2. Allegations of irregularities in conducting auctions by the Liquidator.3. Authority of Ld. Adjudicating Authority to refer matters to IBBI for enquiry.4. Applicability of Section 61 of I & B Code for challenging directions to IBBI.5. High Court's judgment on inspection/investigation matter.6. Lack of specific cause of action for invoking Appellate Jurisdiction under Section 61 of I & B Code.Detailed Analysis:1. The Appellant, as the Official Liquidator of M/s RLS Alloys Pvt. Ltd., challenged the Impugned Order dated 02.06.2022 passed by the Ld. Adjudicating Authority in IA No.796/2021, CP /661(IB)/CB/2017. The challenge was limited to the observation made in para 30(vii) of the Judgment, directing IBBI to conduct a detailed inspection regarding the conduct of the Liquidator and the records of the Corporate Debtor. The Appellant argued that no opportunity was given to explain or defend the conduct before passing the order.2. The Ld. Adjudicating Authority found anomalies in the auction process conducted by the Liquidator, such as non-transparent conduct, failure to maximize value, and allowing participation of a bidder with a wrong bid. These irregularities led to a decrease in the value for the financial creditor, raising concerns about the conduct of the Liquidator in the auction proceedings on 23.09.2020 and 25.09.2020.3. The Ld. Adjudicating Authority has the power to refer matters to IBBI for conducting an enquiry when anomalies are found in the functioning of the Liquidator. The direction for inspection/enquiry by IBBI was considered justified as a fact-finding exercise to investigate the irregularities observed during the auction proceedings.4. Section 61 of I & B Code cannot be used by the Liquidator to challenge the direction issued to IBBI for an enquiry into the conduct of the Liquidator. The Appellate Jurisdiction should not be invoked prematurely, especially when the decision based on the enquiry is pending and no adverse findings have been made against the Appellant.5. The High Court of Delhi, in a related matter, observed that the inspection/investigation matter was not finally decided against the Appellant. The Court remanded the matter to IBBI with directions to provide a copy of the Final Inspection Report to the Petitioner and set aside the Impugned Orders. This decision left the issue open for IBBI to decide after receiving the Petitioner's reply to the Show Cause Notice.6. Due to the High Court's decision and the pending nature of the inspection/investigation matter, there is no specific cause of action for the Appellant to invoke the Appellate Jurisdiction under Section 61 of I & B Code at this stage. The Appeal lacks merit and is dismissed accordingly. The matter remains open for IBBI to decide based on the Final Inspection Report and the Petitioner's reply to the Show Cause Notice.