2020 (9) TMI 51 - AT - Insolvency and Bankruptcy

Replacement of IRP with a new IRP - removal of IRP on the ground that the Appellant had been in gainful employment of the Financial Creditor / Union Bank of India for 34 years and had been dealing with the accounts of the Corporate Debtor which facts were unknown to the Corporate Debtor previously - impugned order is assailed on the ground that the removal of the Interim Resolution Professional who had been appointed and confirmed can be carried out only with concurrence of Committee of Creditors - HELD THAT - Admittedly the Appellant had been in gainful employment of the Financial Creditor for 34 years and had been dealing with the accounts of the Corporate Debtor a fact which the Corporate Debtor claims not to be in know-of previously. The Appellant may not be currently in employment of the Financial Creditor or drawing salary under it but the fact remains that on account of services rendered in past an element of loyalty is there which cannot be ignored. In view of this fact appreciation on the part of the Corporate Debtor that the Appellant would not be fair in his working as Resolution Professional cannot be dismissed off-hand more so when an instance of deviation was pointed out which the Appellant, when confronted, admitted as a mistake. This factual position emanates from the impugned order. This is independent of any prejudice caused actually and factually as the bias has to be viewed from the perspective of the Corporate Debtor on the mere basis of apprehension on account of past services rendered by the Appellant with the Financial Creditor . In such circumstances, no exception can be taken to the powers of the Adjudicating Authority acting independent of the opinion of the Committee of Creditors in this regard. Appeal dismissed.

Summary

Issues: Appeal against order directing replacement of Resolution Professional due to past association with Financial Creditor.

Analysis:
1. Issue of Removal of Resolution Professional: The appellant challenged the order directing the replacement of the Resolution Professional due to his past association with the Financial Creditor. The Adjudicating Authority had directed the replacement based on the grounds of potential bias and lack of fairness in the Resolution Professional's role. The appellant argued that the removal of the Resolution Professional can only be done with the concurrence of the Committee of Creditors. However, the Appellate Tribunal found that the past employment of the Resolution Professional with the Financial Creditor, even though not current, could create a perception of bias and lack of fairness in the eyes of the Corporate Debtor. The Tribunal emphasized that the bias must be viewed from the perspective of the Corporate Debtor, and in this case, the apprehension of bias due to past services rendered was valid.

2. Precedent and Legal Interpretation: The Appellate Tribunal referred to a previous judgment in 'State Bank of India vs. M/s. Metenere Ltd.' to support its decision. The Tribunal highlighted that the mere past association of a Resolution Professional with a Financial Creditor does not disqualify them unless there are pending disciplinary proceedings or a direct conflict of interest. In this case, the long relationship of the Resolution Professional with the Financial Creditor raised apprehensions of bias in the mind of the Corporate Debtor. The Tribunal emphasized the importance of the Resolution Professional acting fairly and independently, especially in collating creditor claims, as mandated by the Insolvency and Bankruptcy Code.

3. Apprehension of Bias and Fairness: The Tribunal concluded that the apprehension of bias raised by the Corporate Debtor was reasonable given the past loyalty and association of the Resolution Professional with the Financial Creditor. The Adjudicating Authority's decision to substitute the Resolution Professional was upheld based on the need for impartiality and fairness in the insolvency resolution process. The Tribunal highlighted the statutory duties of the Resolution Professional to act independently and fairly, regardless of their past affiliations or associations.

In summary, the appeal against the order directing the replacement of the Resolution Professional was dismissed by the Appellate Tribunal, emphasizing the importance of impartiality, fairness, and independence in insolvency resolution proceedings, especially in cases where past associations could raise apprehensions of bias. The decision was supported by legal precedent and a thorough analysis of the roles and responsibilities of the Resolution Professional under the Insolvency and Bankruptcy Code.