TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 1056
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....ed the 'Petition', filed under the 'Insolvency & Bankruptcy Code, 2016' (in short 'I & B Code', 2016). Brief Facts: 2. Mr. V. Venkata Sivakumar is the 'Appellant- in-person' herein and is an 'Insolvency Professional' who was the 'Liquidator' of 'The Jeypore Sugar Company Ltd.' ("Corporate Debtor") and was subsequently replaced by the 'Adjudicating Authority' on the application of the 1st Respondent vide 'impugned order' dated 01.07.2022 in IA/815/IB/2020 in CP/1307/IB/2018. 'IDBI Bank Limited' is the 1st Respondent herein and is a 'Secured Financial Creditor' of the 'Corporate Debtor' having a stake of 43.57% of the 'Liquidation Process'. 'Insolvency Bankruptcy Board of India' ("IBBI")' is the 2nd Respondent and is the 'Regulator', under I & B Code, 2016. Indian Institute of Insolvency Professionals of ICAI (IIIPI) is the 3rd Respondent herein which is a professional body authorised to issue 'Authorisation for Assignment' (in short 'AFA'). 3. 'The Jeypore Sugar Company Ltd.' ("Corporate Debtor") was incorporated in 1936 and was engaged in manufacturing of sugar and allied products having factories located in Andhra Pradesh and Orissa. On failure to make repayments of various ....
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....The 1st Respondent again sent an email on 06.08.2020 to the 'Appellant' to furnish the copy of 'AFA' since he has been continuing on the panel of the bank. However, the 1st Respondent did not get any response from the 'Appellant'. It is case of the 1st Respondent that he approached the 3rd Respondent and checked IDBI website and came to know that the 'Appellant' did not have valid 'AFA'. 6. On coming to the knowledge that the 'Appellant' did not have 'AFA' on the relevant date and has suppressed the facts, the 1st Respondent moved an application to the 'Adjudicating Authority' for 'Appellant's' removal in IA/815/IB/2020 in CP/1307/IB/2018 and the 'Adjudicating Authority' vide 'impugned order' dated 01.07.2020 replaced the 'Appellant' by new liquidator Mr. S. Hari Karthik under provision of Section 33 & 34 of I & B Code, 2016 r/w Section 16 of 'General Clauses Act, 1897' r/w Section 276 of the 'Companies Act, 2013'. 7. Aggrieved by the 'impugned order', the 'Appellant' has preferred the present appeal before this 'Appellate Tribunal'. Appellant's Submissions:- 8. The 'Appellant' as 'Party -in- person' pleaded his own case in the present appeal. He gave the overall background of ....
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.... pronounced judgment removing him from the 'Liquidator' of the 'Corporate Debtor' contrary to oral orders made in the open court. The 'Appellant' stated that this is clearly a case of judicial misconduct. 12. The 'Appellant' mentioned that his whole intention was to get best value of the assets of the 'Corporate Debtor' and attempted to pay 100% of the claims of stakeholders and this fact was appreciated in 1st, 7th & 9th meeting of 'Stakeholder Consultation Committee' ("SCC"). The 'Appellant' stated that despite his best efforts, due to complications in the process, the 'Appellant' had to file SR/217/2020 seeking extension of 'Corporate Insolvency Resolution Process' period which was dismissed by the 'Adjudicating Authority' and pronounced for liquidation by appointing the 'Appellant' as the 'Liquidator'. The 'Appellant' further submitted that thereafter the 1st Respondent ("IDBI Bank") started complete non-cooperation and filed several petitions for the removal of the 'Appellant'. 13. The 'Appellant' submitted that the 1st Respondent with mala-fide intentions sought to remove the 'Appellant' as 'Liquidator' despite knowing that since then the 'Appellant' had got proper 'AFA' an....
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....s application for granting 'AFA' filed with 3rd Respondent on 31.12.2019 and in terms of Clause 12(A) (5) 'Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 the 'AFA' was deemed to have been received by him since he did not receive any intimation from 3rd Respondent by 14.01.2020. 18. The 'Appellant' also pointed out that the Ex- Promoters filed IA No.579 of 2022 on 31.05.2022 making serious allegations against the 'Appellant' which was heard and order was reserved by the 'Adjudicating Authority' without giving opportunity to the 'Appellant' of being heard and granted interim stay in disregard to Hon'ble Orissa High Court. The 'Appellant' further stated that he had challenged the order vide CA(AT) (Ins.) No. 236 of 2022 before this 'Appellate Tribunal' and the order was passed by the 'Adjudicating Authority' was quashed with a specific direction on the compliance of principle of natural justice. 19. The 'Appellant' stated that the 1st Respondent has moved the application to the 'Adjudicating Authority' for his removal primarily....
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....ion 276 of the 'Companies Act, 2013' is bad in law. The 'Appellant' further submitted that this 'Appellate Tribunal' has gave the ruling in the judgement of this 'Appellate Tribunal' in "Kiran Shah Vs. Punjab National Bank" CA (AT)(Ins.) No. 102 of 2020 where it has been held that there is no provision in the code for removal of liquidator based on the complaint of a financial creditor who is only a claimant in liquidation. The 'Appellant' further accused that CMD and General Manager of the 2nd Respondent i.e. IDBI Bank Ltd. were against the 'Appellant' since he did not approve the 'Resolution Plan' from ineligible applicants and also accused that both CMDs and General Manager of 1st Respondent were acting against the economic interest of the country and the Financial Interest of the IDBI Bank Ltd. itself. 22. The 'Appellant' stated that as regard the third ground i.e Personal attack on 'Appellant's' character for continuing as a liquidator especially in view of para 17 of the 'impugned order'. The 'Appellant' accused the 'Adjudicating Authority' (Technical Member) for giving selective references of proceedings in IA/255/ 2021 of July 2021 but have not referred to the Interim Stay....
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.... the Model Bye-Laws IPA Regulations are under challenge in this writ petition. the Petitioner states that he applied for an, AFA 2 14 in terms of Regulation 7A of the IP Regulations on 31-12-2019 and his application was rejected on 14-01-2020, inter alia, on the ground that he had not paid the requisite fee as per Regulation 7(2)(ca). In spite of providing proof of payment and the acknowledgment dated 28- 04-2019, in that connection, his application Was rejected." The Petitioner further states that the rejection of the application for AFA was communicated to him on 16.07.2020 when the third Respondent informed the Registry of the National Company Law Tribunal at Chennai that the Petitioner was not authorized to act as an IP." 27. The 'Appellant' resubmitted that 2nd and 3rd Respondent issued show cause notice for violation of Regulation of 7A of "IBBI" 'Insolvency Regulation 2017', however it has been disposed of the same, by imposing the fine of Rs. 10,000/- vide order DC. No. IIIPI/DC/29/2020-21 and dated 01.12.2020 granted the AFA mentioning in Para 8 as follows:- "Taking an overall view of the aforesaid, the DC is of the opinion that Respondent is guilty of Professional M....
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....he Liquidator of the Corporate Debtor to carry out the liquidation process subject to the following terms of the directions. a) The Liquidator shall strictly act in accordance with the provisions of IBC 2016 and the attendant Rules and regulations including Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017 as amended upto date enjoined upon him." 31. The Learned Counsel for the Respondents stated that an annual review for the performance of Insolvency professional empanelled with it was done and in the process the 'Appellant' was asked to provide self declaration that all the documents and information submitted by the 'Appellant' to the 'Respondents' as per law are valid, effective and in full force vide the Appellant's letter dated 21.07.2020 to the 1st Respondent. However, during the course of this exercise, it came to the notice that the 'Appellant' did not have a valid 'AFA' as mandatory requirement as per Regulation of 7A of "IBBI" 'Insolvency Regulation 2017', the same fact was also corroborated from the website of IBBI. 32. The Learned Counsel for the Respondents submitted that an e-mail was sent to the 'Appellant' asking for all information on 21.07.2020....
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....erty to bring it to the notice of the Adjudicating Authority who may have a re-look at the appointment of 'Liquidator' so far as the authorisation of Respondent No. 1 is concerned and pass appropriate order". 35. The Learned Counsel for the Respondents refuted the issue raised by the 'Appellant' regarding non application of Section 7A of IBBI (Insolvency Professional) Regulation 2016 and stated that it is mandatory for 'Insolvency Professional' to hold a valid 'AFA' on the date of acceptance or commencement of assignment after 31.12.2019. The Learned Counsel for the Respondents further stated that it is admitted fact that the 'Appellant' did not have valid 'AFA' on the date of acceptance of the assignment. The order of the 'Adjudicating Authority' was very clear that the 'Liquidator' shall strictly act in accordance with the provisions of the I & B Code, 2016 and Rules & Regulations as amended up to date enjoined upon him and the 'Appellant' gave wrong written submissions and declarations and purposefully concealed the vital information. The Learned Counsel for the Respondents stated that the 'Liquidator' acts as quasi-judicial authority and should act with very high standards and....
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....are violated by the Regulations. The Learned Counsel for the Respondents submitted that after detailed examinations including going through the legality and citing several judgements, the Hon'ble Madras High Court dismissed Writ Petition of the 'Appellant'. The Learned Counsel for the Respondents further submitted that it is therefore, clear that all actions taken by the 'Respondents' is strictly in accordance with the law and therefore the arguments raised by the 'Appellant' are only to derail the process of liquidation. 39. The Learned Counsel for the Respondents pointed out that the 'Appellant' himself has admitted in IA/815/2020 before the 'Adjudicating Authority' that his 'AFA' was issued by 3rd Respondent only on 30.12.2020, whereas he has taken the assignment on 29.05.2020 i.e. much prior to the date of 'AFA' in his favour. The Learned Counsel for the Respondents repeated that after 31.12.2019, it is mandatory for all 'Insolvency Professionals' to accept any assignment under I & B Code, 2016 only if he has got valid 'AFA'. The Learned Counsel for the Respondents emphasised that the 1st Respondent has taken all the action as per law and false accusations of the 'Appellant' a....
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....Counsel for the Respondents stated that this clearly shows the deep sentiments of the lenders who have absolutely no trust in the 'Appellant'. The Learned Counsel for the Respondents also submitted that there can not and should not be any vested interest of the 'Liquidator' to continue if he breaches the provisions of the I & B Code, 2016 and lost the faith and confidence of the lenders. 42. The Learned Counsel for the Respondents submitted that the 'Appellant' has unsuccessfully challenged before the Hon'ble Madras High Court the validity of Regulation 7A of IBBI (Insolvency Professional) Regulation 2016 as well as Regulation 12A of 'Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21.11.2016 and failed miserably and writ petition was dismissed. 43. The Learned Counsel for the Respondents submitted that the 'Appellant' has illegally shared the valuation report of the 'Corporate Debtor' to the 'Resolution Applicant' which was viewed seriously by the 'Adjudicating Authority'. The Learned Counsel for the Respondents further submitted that as per In....
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....al Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016. (c) Whether, the 'AFA' issued subsequent to taking up assignment by the 'Appellant', absolve 'Appellant' of meeting requirement of Regulation 7A of IBBI 'Insolvency Professional' Regulation 2016. (d) Whether, the Regulation 12A of the 'Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 will prevail over Regulation 7A of IBBI 'Insolvency Professional' Regulation 2016. (II) Whether the order passed by Hon'ble Madras High Court in W.M.P. No. 5088 of 2021 in W.P. No. 4458 of 2021 WP No. 4458 of 2021 has any bearing on the current case? (III) Whether the 'Adjudicating Authority' can remove the 'Liquidator' ? 46. Issue (I) (a) Whether the 'Appellant' had valid Authorisations for Assignment ("AFA") on the date of his appointment as the 'Liquidator' of the 'Corporate Debtor'? (b) Whether, the 'AFA' was deemed to have been issued in terms of Regulation 12A of the 'Insolvency and Bankruptcy Board of India (Model Bye -Laws and Govern....
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....ause (g) of regulation 4 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016; (c) is not in employment; (d) is not debarred by any direction or order of the Agency or the Board; (e) has not attained the age of seventy years; (f) has no disciplinary proceeding pending against him before the Agency or the Board; (g) complies with requirements, as on the date of application, with respect to- (i) payment of fee to the Agency and the Board; (ii) filings and disclosures to the Agency and the Board; (iii) continuous professional education; and (iv) other requirements, as stipulated under the Code, regulations, circulars, directions or guidelines issued by the Agency and the Board, from time to time. (3) An application for issue or renewal of an authorisation for assignment, shall be in such form, manner and with such fee, as may be provided by the Agency: Provided that an application for renewal of an authorisation for assignment shall be made any time before the date of expiry of the authorisation, but not earlier than fortyfive days before the date of expiry of the authorisation. (4) The Agency shall consider the applicati....
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....ed not to comply with Regulation 7A in strict sense since he had applied for AFA well in time on 29.12.2019 much before accepting the assignment of the 'Liquidator'. As per Regulation 12A of the 'Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016, the 'AFA' was deemed to have been received on expiry of 15 days from the date of application. The 'Appellant' received the communication of rejection of his application only on 16.07.2020 on telephone, hence the 'Appellant' was under valid assumption of having received deemed approval of the 'AFA' and therefore, did not contravene any laws. The 'Appellant' further submitted that he had wide experience and has been doing insolvency work for many years with excellent track record and his application was rejected on very technical issues like fee etc. * With reference to conflict between Regulation 7A of the IBBI (Insolvency Professional) Regulation 2016 and Regulation 12A of the 'Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agenc....
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....s the intention of the legislature. The Parliament can delegate its legislative power within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the Courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect... * In view of the above detailed examination this 'Appellate Tribunal' considers that the 'Appellant' did not possess the legally required 'AFA' on the date of the acceptance of the assignment and the 'Appellant' thus fails to meet the legal bar. Therefore, there is no error in the 'impugned order' on these accounts. 47. Issue No. (II) Whether the order passed by Hon'ble Madras High Court in W.M.P. No. 5088 of 2021 in W.P. N....
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....r any other person from taking any coercive action on account of the impugned orders passed in DCNo. IIIPI/DC/29/2020-21 dated 01.12.2020 and No. IBBI/DC/61/2020 Dated 17th Dec 2020 pending disposal of this writ petition. Order : These petitions coming on for orders upon perusing the petitions and the respective affidavits filed in support thereof and upon hearing the arguments of CA.V. VENKATA SIVA KUMAR Party in person for the petitioner the court made the following order :- The petitioner is aggrieved by the impugned order dated 01.12.2020, directing him to pay a penalty of Rs. 10,000/- by the first respondent on account of the alleged violation of Regulation 7A in the IP Regulations committed by him, which requires an Insolvency Professional to procure a valid AFA before undertaking any assignment after 31.12.2019.... 3. This Court after due consideration to the averments contained in the affidavit and after perusing the documents filed in support of the Writ Petition as well as after hearing the submissions of the Party-in-Person, is of the considered view that a prima facie case has been made out for the grant of interim injunction as prayed for in W.M.P No. 5088 of 202....
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....rounds for removing the liquidator. In the absence of specific provisions, we may resort to Section 33 & 34 of the I & B Code, 2016 and Section 276 of the Companies Act, 2013, which provides for the removal and replacement of liquidators on various grounds. * Reference can be made to Section 16 of the General Clauses Act, 1897, which states as follows: "16. Power to appoint to include power to suspend or dismiss. Where, by any Central Act or Regulation, a power to make any appointment is conferred, then, unless a different intention appears, the authority having for the time being power to make the appointment shall also have power to suspend or dismiss any person appointed whether by itself or any other authority in exercise of that power." [emphasis supplied] Section 33 & 34 of the I & B Code, 2016 CHAPTER III LIQUIDATION PROCESS "33. Initiation of liquidation.-(1) Where the Adjudicating Authority,- (a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, ....
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....ss of the corporate debtor is continued during the liquidation process by the liquidator. 34. Appointment of liquidator and fee to be paid.- (1) Where the Adjudicating Authority passes an order for liquidation of the corporate debtor under section 33, the resolution professional appointed for the corporate insolvency resolution process under 2[Chapter II shall, subject to submission of a written consent by the resolution professional to the Adjudicatory Authority in specified form,] act as the liquidator for the purposes of liquidation unless replaced by the Adjudicating Authority under sub-section (4). (2) On the appointment of a liquidator under this section, all powers of the board of directors, key managerial personnel and the partners of the corporate debtor, as the case may be, shall cease to have effect and shall be vested in the liquidator. (3) The personnel of the corporate debtor shall extend all assistance and cooperation to the liquidator as may be required by him in managing the affairs of the corporate debtor and provisions of section 19 shall apply in relation to voluntary liquidation process as they apply in relation to liquidation process with the substitut....
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....fy removal. (2) In the event of death, resignation or removal of the provisional liquidator or as the case may be, Company Liquidator, the Tribunal may transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing. (3) Where the Tribunal is of the opinion that any liquidator is responsible for causing any loss or damage to the company due to fraud or misfeasance or failure to exercise due care and diligence in the performance of his or its powers and functions, the Tribunal may recover or cause to be recovered such loss or damage from the liquidator and pass such other orders as it may think fit. (4) The Tribunal shall, before passing any order under this section, provide a reasonable opportunity of being heard to the provisional liquidator or, as the case may be, Company Liquidator." * Further, the reference can also be made to the judgment in the case of State of Tamil Nadu and Ors. vs. M.N. Sundararajan (1980) 4 SCC 592 wherein it has been stated as under: "9. The question is, whether the expression "appointments" used in this Government Order, dated June 13, 1973, will include 'termination' of service or 'compul....