TaxTMI 
TaxTMI 
2025 (12) TMI 240
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....and the Adjudicating Authority, who has the authority to appoint the liquidator? The situation arose when the Adjudicating Authority appointed the second respondent in each of the two cases as liquidator, overlooking the choice of the CoC. Facts: 2. The bare minimum fact which are required for the current purpose may be stated: a) The appellant in both the cases is same and in one case it has cent percent voting share and in another about 98% voting share in the CoC. CIRP failed and the CoC had resolved that the CD must go to liquidation. b) Earlier, during the CIRP the CoC had appointed two separate RPs in both the cases. However, when liquidation was ordered, it named M/s Stress Credit Resolution Pvt Ltd (SCRIL) as the liquidator, which is a different entity from the RP. c) When the Adjudicating Authority took up the matter, it appointed the second respondent in each of the cases in this batch as a liquidator, who is neither the RP appointed during the CIRP, nor is the candidate of CoC's choice. Asserting that the right to appoint the liquidator rests with the CoC, the appellant, who, constitutes one member CoC in one case, and has about 98% vo....
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.... give their respective consent to function as a liquidator, and this necessitated that a replacement be found for them, and this authority to replace vests exclusively with the Adjudicating Authority. b) Nowhere in the entire scheme of IBC or in IBBI (liquidation process) Regulation 2016, is the CoC or the Stakeholders' Consultation Committee (hereinafter SCC) is empowered to appoint a liquidator. Indeed, Regulation 31(A)(11) only provides that the SCC may apply for replacing the liquidator on grounds to be stated. Summing up their arguments, both the counsel submitted that while in terms of Sec. 27 IBC the CoC has the authority to appoint the RP, so far as appointment of a liquidator is concerned the entire authority rests with the Adjudicating Authority. 5. Replying to the same learned counsel for the appellant would submit that in terms of the scheme of Sec. 34(1) IBC, the Adjudicating Authority only has a power to replace, and not any power to appoint. If the CoC's appointee who a RP is, can continue as a liquidator, necessarily, the strings will still be with the CoC to appoint the liquidator. Secondly, the circumstance under which the CoC has appointed the liqu....
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.... the petitioners (of Sec. 7, 9 or 10 IBC petitions) is found to face any disciplinary proceeding, or in cases falling under Sec. 16(3), the Code has not authorised the Adjudicating Authority to appoint an IRP of its choice. If only IBC required the Adjudicating Authority to play a role in appointing an IRP, it could have authorised it to nominate one of its choice as the IRP, at least in cases where the IRP as recommended by the creditor or debtor faces disciplinary proceedings, or where an operational creditor has not named an IRP. The legislative idea therefore, is to separate the selection process or procedure involved in appointing an IRP from a formal appointment. To state it differently, selection of the IRP will be with the petitioner initiating a CIRP and the Board, and the Adjudicating Authority is only required to appoint the one so chosen as the IRP. In other words, an Adjudicating Authority is not the part of the selection process, nor is it vested with any power to veto the choice of the petitioner in the matter of appointing the IRP. 8. Moving to the next stage, after the constitution of the CoC, under Sec. 22(2) IBC, the CoC is given the choice to appoint (a) the ....
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.... the reasons, may by a majority vote of not less sixty-six per cent., propose to replace the liquidator and shall file an application, after obtaining the written consent of the proposed liquidator in Form AA of the Schedule II, before the Adjudicating Authority for replacement of the liquidator:" 11. In terms of Sec. 34(1), the RP, who may either be the IRP originally appointed or replaced under Sec. 22 or the one who may have stepped in under Sec. 27 IBC, will be the liquidator provided the RP has given his/its consent to be the liquidator. The point is, merely because a certain RP did not give his consent to be the liquidator, implies that the Adjudicating Authority should have the exclusive authority to replace an unwilling resolution professional with the one of it's choice? Now, if the second part of Sec. 34(1) and Sec. 34(4)(c) is read carefully, it only has authorised the Adjudicating Authority to replace the resolution professional and not to appoint a liquidator. But, the authority to replace the resolution professional is left to the CoC under Sec. 27 as per the procedure contemplated therein. Even in terms of Sec. 27, the Adjudicating Authority appoints only that RP ....
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.... 86 (1923)], the immortal Oliver Wendell Holmes J. has declared: "..if the case is that the whole proceeding is a mask - that counsel, jury and judge were swept to the fatal end by an irresistible wave of public passion, and that the State Courts failed to correct the wrong, neither perfection in the machinery for correction nor the possibility that the trial court and counsel saw no other way of avoiding an immediate outbreak of the mob can prevent this Court from securing to the petitioners their constitutional rights." The context is different, but the instructions are unambiguous. Therefore, no judicial forum, guided solely by its conscience with the consciousness to perform its Constitutional obligations can be reduced to a cheer-leader when fraud on statute is on display. The power to arrest and interfere with statutory frauds is inherent in the very structure of our judicial system of which the tribunals are a part and it does not require the statute to spell the authority to do it. (For the purists of positive law school who refuse to acknowledge a power unless it is conferred in law Rule 11 of the NCLT and also NCLAT Rules will come in handy). It may be that th....