2021 (1) TMI 618 - AT - Insolvency and Bankruptcy

Non-appointment of persons selected by the COC (Committee of Creditors) as Resolution Professional and Authorized Representative - Section 22 of IBC - HELD THAT - Under Sub-Section (5) of Section 22 if the Board does not confirm the name of the proposed Resolution Professional within 10 days of the receipt of the name of the proposed Resolution Professional, then the Adjudicating Authority shall direct the IRP to continue to function as Resolution Professional until such time as the Board confirms the appointment of the Resolution Professional - Section 21(6-A) has provision with regard to Authorized Representative. This Section is required to be read with Regulation 16A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Regulation 16A of these Regulations records procedure with regard to selection of Resolution Professional to act as Authorized Representative. When Section 21(6-A) is read with these Regulations, and Resolutions passed by COC are kept in view, it is apparent that the Adjudicating Authority was required to treat Mr. Hari T. Devadiga as Authorized Representative whose name was even recognised by the Respondent No.1 when he filed CA No.669 of 2019. We find Adjudicating Authority had no power to impose Resolution Professional of its choice. Even for Authorised Representative decision of the majority is to be respected. The Impugned Order to the extent it appointed Respondent No.1 as Resolution Professional and Respondent No.2 as Authorised Representative - Matter remitted to the Adjudicating Authority directing that Mr. Hari T. Devadiga will be treated as the Authorized Representative of class of Financial Creditors (home or shop buyers) of Dreamz Infra India Ltd. under Section 21(6-A)(b) of IBC. Charge, if any, required to be handed over by Respondent No.2 shall be handed over to Mr. Hari T. Devadiga. The Adjudicating Authority shall in compliance of Section 22(4) forward the name of Mr. Konduru Prasanth Raju to the IBBI and follow the procedure as laid down in Section 22(4) and (5) of IBC. Appeal allowed by way of remand.

Issues:
1. Appointment of Resolution Professional and Authorized Representative in a Corporate Insolvency Resolution Process (CIRP).
2. Compliance with Section 22 of the Insolvency and Bankruptcy Code, 2016 (IBC).
3. Discretion of the Committee of Creditors (COC) in confirming the Resolution Professional.
4. Selection of Authorized Representative and Resolution Professional by the COC.
5. Impugned Order appointing Respondents as Resolution Professional and Authorized Representative.
6. Legality of actions taken by Respondents during the CIRP process.

Detailed Analysis:

1. The appeal involved the appointment of a Resolution Professional and Authorized Representative in a Corporate Insolvency Resolution Process (CIRP) related to a specific Corporate Debtor. The Appellants, who were members of the Committee of Creditors (COC), challenged the Impugned Order passed by the Adjudicating Authority for not appointing the individuals selected by the COC.

2. The primary issue revolved around the compliance with Section 22 of the Insolvency and Bankruptcy Code, 2016 (IBC). Section 22 outlines the process for appointing a Resolution Professional, emphasizing the role of the COC in making such appointments. The Adjudicating Authority's actions were scrutinized for adherence to the procedural requirements of Section 22.

3. The discretion of the Committee of Creditors (COC) in confirming the Resolution Professional was a crucial aspect of the case. The COC's decisions regarding the appointment of the Resolution Professional and Authorized Representative were pivotal, and any deviation from the COC's selections required justification.

4. The selection process of the Authorized Representative and Resolution Professional by the COC was thoroughly examined. The Appellants argued that the COC had approved specific individuals for these roles, and the Adjudicating Authority's decision to appoint different individuals raised concerns regarding the COC's authority in such appointments.

5. The Impugned Order appointing the Respondents as the Resolution Professional and Authorized Representative was challenged on the grounds of non-compliance with the COC's decisions and procedural irregularities. The Appellants contended that the Adjudicating Authority's appointments deviated from the COC's selections, leading to a dispute over the legitimacy of the appointments.

6. The legality of actions taken by the Respondents during the CIRP process was another critical issue. The Appellants raised concerns about the actions taken by the appointed Resolution Professional and Authorized Representative, seeking clarity on the validity of these actions in light of the disputed appointments.

This comprehensive analysis covers the key issues raised in the legal judgment, providing a detailed examination of the arguments presented by the parties and the decision rendered by the Appellate Tribunal.

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