2020 (7) TMI 776 - Tri - Insolvency and Bankruptcy

Prayer to appoint new Interim Resolution Professional - no consensus regarding appointment of IRP - secured Financial Creditors has proposed the name of Mr. Sanjay Gupta as the new IRP of the Corporate Debtor to which the Respondent i.e. IRP as well as some of the Financial Creditors did not agree - HELD THAT - When there is a conflict and no consensus is reached by the majority of voting share to appoint the IRP/RP so proposed by the Applicant, it is expedient to appoint an independent IRP/RP to break any kind of stalemate between the Financial Creditors. Moreover, the very object of IB Code is to complete the CIRP in the time bound manner and if the dispute with regard to the IRP will continue, in that event, the very object of the IB Code will get frustrated. The IB Code prescribes timelines for various activities of the CIRP. It is mandatory to complete a CIRP within 180 days, extendable by a one-time extension of up to 90 days. Though as per Section 7 of the IB Code, the Financial Creditor has the prerogative to propose the name of the IRP/RP and thereafter, they may change it by filing an application under Section 22 of the IB Code - However, to resolve this issue and to end the stalemate between the secured and unsecured Financial Creditors, this Bench in exercise of power under Rule 11 of the NCLT Rules 2016, do hereby appoint Mr. Kiran Shah as the new IRP/RP and direct him to convene the CoC meeting and complete the CIRP as early as possible. Application disposed off.

Summary

Issues:
1. Appointment of new Interim Resolution Professional under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Analysis:
The Application was filed seeking the appointment of a new Interim Resolution Professional (IRP) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The case involved a dispute arising from the constitution of the Committee of Creditors (CoC) in CP(IB) 397 of 2018. The Applicant, along with other Financial Institutions, raised concerns regarding the classification of creditors in the CoC. The IRP admitted claims without complete verification, leading to a reduction in the voting share of secured Financial Creditors. The Applicant also highlighted potential conflicts of interest among certain creditors related to the Corporate Debtor. The Respondent, representing the IRP, denied the allegations and emphasized the role of the IRP as per CIRP Regulations 2016.

The Respondent argued that the unsecured loans from Financial Creditors were duly reflected in the Corporate Debtor's balance sheets and the voting share was determined based on claim values supported by filed documents. Various parties, including Charms Holding Private Limited and Abhinandan Multitrade Private Limited, submitted replies asserting their status as Financial Creditors and challenging the allegations made by the Applicant. The conflict primarily centered around the appointment of the IRP, leading to a stalemate between secured and unsecured Financial Creditors.

The Tribunal noted the failure to achieve a majority vote for the appointment of the IRP, causing delays in the Corporate Insolvency Resolution Process (CIRP). To break the stalemate and uphold the time-bound nature of the CIRP as mandated by the IB Code, the Tribunal exercised its power under Rule 11 of the NCLT Rules 2016. Mr. Kiran Shah was appointed as the new IRP/RP to convene the CoC meeting and expedite the CIRP. The Tribunal exempted the time consumed in deciding the application and the lockdown period from the overall timeline. Additionally, a related interim application became infructuous following the new appointment, and any prior interim orders were vacated.

In conclusion, the Tribunal's decision aimed to resolve the conflict surrounding the appointment of the IRP, ensure the timely completion of the CIRP, and address concerns raised by various parties regarding creditor classification and voting rights within the CoC.