2020 (12) TMI 1132 - AT - Insolvency and Bankruptcy

Resolution by CoC for its Replacement of IRP by RP - scope of Section 22 of the I B Code and Section 27 of I B Code - appeal on the ground that there was no occasion for the Adjudicating Authority to have granted time to Interim Resolution Professional to file any objection/ reply to the resolution of Committee of Creditors - HELD THAT - In the instant case, it is not in controversy that in the first CoC Meeting appointment of IRP as RP failed to garner any support. Thereafter, the bid made by the IRP offering himself for appointment as RP also did not cut any ice with the CoC. Ultimately, IRP was replaced by Mr. Gangaram Agarwal in terms of resolution passed in second CoC Meeting with 78% vote share of the Committee of Creditors. It is indisputable that these actions are permissible only within the ambit of Section 22 of I B Code. Therefore, invoking of Section 27 and adopting a protracted procedure in that regard, as appears to have been done by the Adjudicating Authority, is unwarranted. This only has resulted in wastage of time and prolonging the CIRP Process. In the face of CoC resolution passed with more than the requisite majority, it cannot lie in the mouth of IRP that any of his legal rights have been infringed. It would have been wise on his part to bow to the commercial wisdom of the Committee of Creditors and quit gracefully. Be that as it may, there was no merit in the case set up by IRP before the Adjudicating Authority and the same was required to be dealt with without insisting upon filing of affidavit by the IRP in regard to the provision of law invoked to pass the resolution. The Adjudicating Authority is directed to carry forward the Resolution Process in regard to the Corporate Debtor with Resolution Professional Mr. Gangaram Agarwal discharging functions as the Resolution Professional in terms of resolution passed by the CoC - appeal allowed.

Summary

Issues:
Adjourning matter for filing affidavit by Interim Resolution Professional (IRP) | Grounds for granting time to IRP | Resolution to substitute IRP by Resolution Professional (RP) under Section 22 of I&B Code | Applicability of Section 27 | Commercial decision of Committee of Creditors | Judicial review of decisions under Section 22 | Role of Adjudicating Authority | Legal rights of IRP | Resolution Process for Corporate Debtor

Analysis:
The judgment by the National Company Law Appellate Tribunal, New Delhi, involved the appeal against an order adjourning the matter for the Interim Resolution Professional (IRP) to file an affidavit regarding the resolution passed by the Committee of Creditors (CoC) to replace the IRP with a Resolution Professional (RP) under Section 22 of the Insolvency and Bankruptcy (I&B) Code. The Appellant contended that there was no need for the IRP to provide any objection or reply once the CoC had decided to substitute the IRP. The Appellant's counsel argued that the resolution was passed under Section 22 and not Section 27 of the I&B Code. The Respondent, however, claimed that the impugned order was based on the resolution under Section 27.

The Tribunal highlighted that the decision to appoint an RP or replace the IRP fell within the commercial wisdom of the CoC, as per Section 22 of the I&B Code, and was not subject to judicial review. Referring to previous decisions, the Tribunal emphasized that the actions taken by the CoC, such as replacing the IRP with a new RP, were permissible under Section 22. The Tribunal criticized the Adjudicating Authority for unnecessarily invoking Section 27, causing delays in the Corporate Insolvency Resolution Process (CIRP). It was noted that the IRP should have respected the CoC's decision and gracefully accepted the resolution.

Ultimately, the Tribunal allowed the appeal, setting aside the impugned order. The Adjudicating Authority was directed to proceed with the Resolution Process for the Corporate Debtor with the appointed RP, Mr. Gangaram Agarwal, in accordance with the CoC's resolution. The Tribunal emphasized the importance of respecting the commercial decisions of the CoC and avoiding unnecessary delays in the insolvency proceedings.

This detailed analysis of the judgment provides insights into the legal issues surrounding the appointment of Resolution Professionals and the role of the Committee of Creditors in insolvency proceedings under the I&B Code.