2022 (4) TMI 12 - AT - Insolvency and Bankruptcy

Deliberate and wilful disobedience - Contempt Proceedings - clear cut stand of the Appellant/Applicant is that the Insolvency Resolution Professional is to maintain integrity by being honest, straight forward, forthright in all his professional relationships and that the Insolvency Resolution Professional is not to misrepresent any fact situation and refrain himself - HELD THAT - The Adjudicating Authority is to adhere to the procedural aspects, while determining the question of priorities, question of law and facts, arising out of an order, of course, depending on the issue involved - In fact, the Appellant/Applicant in IA/971/IB/2021 in IBA/1099/2019 had prayed for the removal and replacement of the 2nd Respondent as Resolution Professional of the 1st Respondent immediately on account of suppression of facts about the Contempt Proceedings and to report to the IBBI relating to the conduct of the Resolution Professional and to state a frivolous Arbitration Proceedings at Madras High Court filed by the Respondent. Although, an emphatic argument is projected on the side of the Appellant/Applicant that the Appellant/Applicant is empowered to prefer an Application under Section 27 Read with Section 60 (5) of the I B Code, 2016 this Tribunal is of the considered view that the Appellant/Applicant is not showered with any Locus to prefer an Application praying for Displacement/Replacement of the Resolution Professional. In fact, Section 27 speaks of Replacement of Resolution Professional by the Committee of Creditors - Section 60(5) deals with Question of Priority or Question of fact relating to the I B Code. When there is an express Provision namely Section 27 of the Code, which unerringly deals with Replacement of Resolution Professional by the Committee of Creditors, then, the same is to be followed/adhered to by the Litigant/Stakeholders and others connected with the I B Code. Even the saddling of penalty by the Disciplinary Committee is permissible as per Section 220(3) of the I B Code, 2016 and only when the said Committee is subjectively satisfied there exists a sufficient cause in imposing a penalty upon the deviant. Looking at from any angle, the Appeal sans merits - Appeal dismissed.

Summary

Issues Involved:
1. Entitlement to file an application for replacement of the Resolution Professional (RP).
2. Jurisdiction of the Adjudicating Authority to enforce disciplinary proceedings against the RP.
3. Competence and conduct of the RP.
4. Applicability of Section 27 and Section 60(5) of the Insolvency and Bankruptcy Code (IBC), 2016.
5. Replacement of the RP by the Committee of Creditors (CoC).
6. Role of the Insolvency and Bankruptcy Board of India (IBBI) in disciplinary proceedings against the RP.

Issue-wise Detailed Analysis:

1. Entitlement to File an Application for Replacement of the RP:
The Appellant filed an application seeking the replacement of the RP under Section 27 read with Section 60(5) of the IBC, 2016. The Adjudicating Authority observed that the Applicant is not entitled to file such an application as the provisions for replacement of the RP are only envisaged under Sections 22 and 27 of the IBC. The Tribunal noted that the application relied upon by the Applicant had been dismissed and the order was stayed by the Hon'ble High Court of Madras.

2. Jurisdiction of the Adjudicating Authority to Enforce Disciplinary Proceedings Against the RP:
The Adjudicating Authority emphasized that it cannot enforce disciplinary proceedings against the RP. Only the IBBI is competent to initiate such proceedings. Section 217 of the IBC empowers an aggrieved person to file a complaint with the IBBI, which can then direct an inspection or investigation under Section 218 and constitute a disciplinary committee under Section 220.

3. Competence and Conduct of the RP:
The Appellant argued that the RP was involved in contempt proceedings for deliberate disobedience of the Tribunal's order and failed to meet the integrity and competence standards required under the IBBI (Insolvency Professionals) Regulations, 2016. The Tribunal, however, found that the Appellant did not have the locus to seek the RP's replacement based on these grounds.

4. Applicability of Section 27 and Section 60(5) of the IBC, 2016:
The Tribunal clarified that Section 27 of the IBC deals specifically with the replacement of the RP by the CoC and does not confer any right on individual stakeholders to file such an application. Section 60(5) of the IBC provides the Adjudicating Authority with jurisdiction over questions of priority, law, or facts related to insolvency resolution, but this does not extend to replacing the RP outside the provisions of Section 27.

5. Replacement of the RP by the Committee of Creditors (CoC):
The Tribunal highlighted that the CoC, with a 60% majority vote, can replace the RP during the Corporate Insolvency Resolution Process (CIRP). The Adjudicating Authority is required to consider the name proposed by the CoC and may seek a replacement from the IBBI if necessary. The Appellant's application did not follow this prescribed procedure.

6. Role of the IBBI in Disciplinary Proceedings Against the RP:
The Tribunal reiterated that the IBBI is the competent authority to handle complaints and disciplinary actions against the RP. The Appellant should have approached the IBBI with their grievances rather than seeking relief directly from the Adjudicating Authority.

Conclusion:
The Tribunal dismissed the appeal, stating that the Appellant lacked the locus to file an application for the RP's replacement and that the appropriate procedure under Section 27 of the IBC was not followed. The Tribunal also underscored the role of the IBBI in handling disciplinary proceedings against the RP, affirming that the Adjudicating Authority cannot enforce such actions. The appeal was dismissed as devoid of merits.