2022 (2) TMI 670 - Tri - Insolvency and Bankruptcy

Seeking to remove and replace the Respondent 2 as resolution Professional or Respondent 1 immediately on account of suppression of facts about the contempt proceedings - seeking to report to the IBBI w.r.t. the conduct of Resolution Professional - stay on frivolous arbitration proceedings at Madras High Court filed by the Respondents - imposition of cost on the Resolution Professional for filing frivolous against the applicant - HELD THAT - At the first instance, the Applicant herein is not entitled to file an Application seeking replacement of RP since such a provision for replacement of RP has been envisaged only under Section 22 and 27 of IBC, 2016. Secondly, the MA/96/2019 which is relied on by the Applicant in the present case came to be dismissed by this Tribunal vide an order dated 11.01.2022 and also the order dated 20.02.2019 passed by this Tribunal was also stayed by the Hon'ble High Court of Madras. Further, it has been time and again held by the Hon'ble Appellate Tribunal that this Adjudicating Authority cannot enforce disciplinary proceedings against the IRP/RP and only IBBI would be the competent authority to initiate disciplinary proceedings against the IRP/RP. Further, Section 217 of the IBC empowers a person aggrieved by the functioning of an RP to file a complaint to the IBBI. If the IBBI believes on the receipt of the complaint that any RP has contravened the provisions of IBC, or the rules, regulations or directions issued by the IBBI, it can, under Section 218 of the IBC, direct an inspection or investigation. Under Section 220 of the IBC, IBBI can constitute a disciplinary committee to consider the report submitted by the investigating authority. If the disciplinary committee is satisfied that sufficient cause exists, it can impose a penalty. The present Application filed by the Applicant for change of RP is devoid of merits and not sustainable before this Tribunal - Application dismissed.

Summary

Issues:
1. Application seeking removal and replacement of Resolution Professional.
2. Allegations of suppression of facts and misconduct against Resolution Professional.
3. Jurisdiction of the Tribunal in disciplinary proceedings against Resolution Professional.
4. Applicability of Sections 217, 218, and 220 of the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The application was filed under Section 27 r/w. Section 60(5) of the IBC, 2016, by the Applicant seeking the removal and replacement of the Resolution Professional due to alleged suppression of facts about contempt proceedings and misconduct. The Applicant also requested reporting the conduct of the Resolution Professional to the IBBI and staying frivolous arbitration proceedings. The Tribunal noted that the Applicant was not entitled to seek replacement of the Resolution Professional under the mentioned sections of the IBC, 2016.

2. The Applicant contended that the Resolution Professional had not disclosed the contempt proceedings against him and was ineligible for the position. The Respondent argued that the RP had not committed any contempt and had valid authorization for assignment. The Tribunal observed that disciplinary proceedings against the RP fall under the jurisdiction of the IBBI and not the Adjudicating Authority. The Tribunal dismissed the application as the Applicant failed to establish grounds for the removal of the Resolution Professional.

3. The Tribunal highlighted the provisions of Sections 217, 218, and 220 of the IBC, empowering aggrieved parties to file complaints with the IBBI regarding RP misconduct. The IBBI can then direct investigations and constitute disciplinary committees to impose penalties if necessary. The Tribunal emphasized that the IBBI is the competent authority for disciplinary actions against Resolution Professionals, reinforcing that the Adjudicating Authority cannot enforce disciplinary proceedings.

4. Considering the lack of merit and sustainability of the Applicant's request for a change of RP, the Tribunal dismissed the application (IA/971/2020) without imposing any costs. The judgment clarified the legal framework governing the removal and disciplinary actions against Resolution Professionals under the Insolvency and Bankruptcy Code, 2016.