2021 (11) TMI 795 - AT - Insolvency and Bankruptcy

Interpretation of statute - prime submission of the Learned Counsel of the Appellants is that Sections 97(1) 97(2) of IBC are mandatory pre-condition which ought to be satisfied before the Adjudicating Authority can proceed to pass order under Section 97(5) of IBC - HELD THAT - In the instant case on hand, ongoing through word shall occurred in Section 97(1) of IBC employed in Section 97(1) of IBC , this Tribunal is of the considered view that it is only Directory and not Mandatory and holds it so, in the teeth of Rule 8(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 and also by which the NCLT may pick up any one from the Panel for appointment of IRP Liquidator, Resolution Professional and Bankruptcy Trustee. As such, when the Adjudicating Authority had exercised its judicial discretion in fair manner for the appointment of Mr. Anil Kohli as an IRP , the same cannot be found fault with as opined by this Tribunal . Appeal dismissed.

Issues Involved:
1. Validity of the Impugned Orders passed by the Adjudicating Authority.
2. Compliance with Sections 95 and 97 of the Insolvency and Bankruptcy Code (IBC), 2016.
3. Interpretation of the term "shall" in Section 97 of IBC.
4. Appointment of the Interim Resolution Professional (IRP) without confirmation from the Board.

Detailed Analysis:

1. Validity of the Impugned Orders:
The Appellants challenged the Impugned Orders dated 23.07.2021, passed by the Adjudicating Authority, which appointed Mr. Anil Kohli as the Interim Resolution Professional (IRP) and directed him to file a report under Section 90 of IBC within ten days. The Appellants argued that these orders were cryptic, unreasoned, and non-speaking, violating the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC).

2. Compliance with Sections 95 and 97 of IBC:
The Appellants contended that the Adjudicating Authority did not adhere to the mandatory provisions of Section 97 of IBC, which requires confirmation from the Board that no disciplinary proceedings are pending against the Resolution Professional. They emphasized that Section 97(1) and 97(2) of IBC, read with Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, mandate this confirmation before appointing an IRP. The Appellants argued that the Impugned Orders were silent on whether the Adjudicating Authority received such confirmation from the Board.

3. Interpretation of the Term "Shall" in Section 97 of IBC:
The Appellants argued that the term "shall" in Section 97 of IBC indicates a mandatory requirement, reflecting the legislative intent that the Adjudicating Authority must seek confirmation from the Board before appointing an IRP. They cited various judgments to support their contention that statutory formalities prescribed by the legislature must be strictly followed.

Conversely, the Respondents argued that the provisions of Section 97 of IBC are directory, not mandatory. They referred to the Guidelines issued by the Insolvency and Bankruptcy Board of India (IBBI), which allow the Adjudicating Authority to pick a name from a pre-approved panel of Insolvency Professionals (IPs) to avoid administrative delays. The Respondents also cited judgments that supported the view that procedural requirements should not hinder the timely resolution of insolvency processes.

4. Appointment of the IRP Without Confirmation from the Board:
The Appellants argued that the Adjudicating Authority's appointment of Mr. Anil Kohli as the IRP without obtaining confirmation from the Board violated Sections 97(1) and 97(2) of IBC. They contended that this non-compliance affected their vital rights and that any determination under Section 100 of IBC would be flawed.

The Respondents countered that the Adjudicating Authority's appointment of Mr. Anil Kohli was valid, as the IBBI Guidelines and Rule 8 of the Insolvency and Bankruptcy Rules allow for the appointment from a pre-approved panel of IPs. They argued that the term "shall" in Section 97 of IBC should be interpreted as directory to facilitate timely resolution and avoid delays.

Conclusion:
The Tribunal concluded that the term "shall" in Section 97 of IBC is directory, not mandatory. It held that the Adjudicating Authority exercised its judicial discretion fairly in appointing Mr. Anil Kohli as the IRP. The Tribunal found no legal errors in the Impugned Orders and dismissed the appeals, affirming the appointment of Mr. Anil Kohli as the IRP and directing him to file a report under Section 19(9) of IBC. The appeals were dismissed without costs.

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