2022 (1) TMI 162 - AT - Insolvency and Bankruptcy

Acceptance or rejection of Application within the stipulated time as envisaged under Section 99 of IBC - confirmation of the Resolution Professional from the Board as required by Section 97 - occasion to record any finding regarding default or not - HELD THAT - There cannot be any dispute with the statutory scheme as contained in Section 97 that when Application is filed by the Resolution Professional under Section 95, the Adjudicating Authority shall direct the Board within seven days of the date of the Application to confirm that disciplinary proceedings pending against the Resolution Professional or not and the Board was required within seven days to communicate in writing either confirming the appointment of the Resolution Professional or rejecting the appointment of the Resolution Professional and nominating another Resolution Professional - looking into the facts of the present case where it is not a case of the Appellants before us that any disciplinary proceedings are pending against the Resolution Professional who has filed the Application, we see no useful purpose in again directing the Adjudicating Authority to send the recommendation to the Board for confirmation. The order having been passed more than three months prior to the passing of the order, hence we are of the view that due to this reason the order of the Adjudicating Authority does not need to be interfered with. Second submission of the Learned Counsel for the Appellants is that Adjudicating Authority was not required at the stage when report was still to be filed by the Resolution Professional to record a finding regarding default - HELD THAT - It was an error on the part of Adjudicating Authority to observe in Para 10 as reproduced and hold that there is a default when matter was at the stage of acting on the application under Section 95 read with Section 96 - At the stage of Section 95 Adjudicating Authority is to act upon the application to take further steps. The stage for allowing Application to admit or reject the application would be under Section 100. At the stage of appointment of Resolution Professional, such allowing is not contemplated. In Section 97 no adjudication as such is involved. The observations as quoted regarding default deserves to be deleted from the judgment and are hereby deleted - Appeal allowed in part.

Summary

Issues:
1. Confirmation of Resolution Professional appointment by the Adjudicating Authority.
2. Recording of findings regarding default by the Adjudicating Authority.

Confirmation of Resolution Professional Appointment:
The Appeals were filed against a judgment passed by the Adjudicating Authority in a case under the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority had directed the Resolution Professional to exercise powers under Section 99 of the I&B Code without confirming the appointment with the Board as required by Section 97. The Appellants argued that confirmation from the Board was necessary, citing a previous Tribunal judgment. However, as there were no pending disciplinary proceedings against the Resolution Professional, the Tribunal found no need to interfere with the Adjudicating Authority's order, considering the time elapsed.

Recording of Findings Regarding Default:
The second issue raised was the Adjudicating Authority's premature recording of findings on default before the Resolution Professional submitted a report. The Appellants contended that such findings could hinder the Resolution Professional's ability to provide an unbiased report. Referring to a previous Tribunal judgment, the Tribunal agreed that the Adjudicating Authority should not have made findings on default at an early stage. The Tribunal deleted the observations on default from the judgment to ensure fairness and avoid prejudice to any party. The Appeals were partly allowed on this ground.

In conclusion, the Tribunal addressed the issues of confirmation of Resolution Professional appointment and premature findings on default, providing a detailed analysis based on relevant legal provisions and precedents. The judgment highlighted the importance of following statutory procedures and maintaining fairness in insolvency proceedings under the I&B Code.