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2022 (7) TMI 1033 - Tri - Insolvency and BankruptcySeeking to maintain status quo and not to take no further actions as the Liquidator of the Corporate Debtor pending the disposal of this Application - seeking removal of Liquidator of the Corporate Debtor - requirement under Regulation 7A of the Insolvency and Bankruptcy Board of India (Resolution Professionals) Regulations, 2016 not met - suppression of material facts - HELD THAT - On a conjoint reading of Section 33 of IBC, 2016 with Section 16 of the General Clauses Act, 1897 would show that the Authority which has the power to appoint a person, equally has the power to suspend or dismiss that person, in the absence of any specific powers conferred thereto. Thus, by virtue of Section 16 of the General Clauses Act, 1897 it clear that this Adjudicating Authority has the power to dismiss the Liquidator since this Authority is vested with the powers under Section 33 and 34 of IBC, 2016 to appoint a Liquidator. Grounds on which the Liquidator can be changed - HELD THAT - The provisions of IBC, 2016 does not explicitly state the grounds on which the Liquidator can be removed. In the absence of the specific provisions under the IBC, 2016 we may resort to Section 276 of the Companies Act, 2013 - In the present case, the Liquidator has stated in his reply that no stakeholder has the right to seek for replacement of Liquidator and that once the Liquidator is appointed, he cannot be removed unless there is a serious allegation of corruption. If we go by the contention as made by the Learned Liquidator then it should be construed that the Liquidator is infallible and this Adjudicating Authority has to simply close its eyes and let the Liquidator do whatever he wants. As to the present case of M/s. Jeypore Sugar Company Limited, it is to be seen that in the previous hearings serious allegations have been made against the Liquidator by the stakeholders that he has shared the valuation report with the prospective Scheme proponents and the Liquidator has also not denied the same. It is an admitted fact that the Liquidator has shared the valuation Report of the Corporate Debtor with the prospective Scheme proponents which lead to the proponents quoting value on par with the valuation report. Such an act committed by the Liquidator is viewed seriously by this Tribunal. The said act of the Liquidator would amount to failure to exercise due care and diligence in performance of the powers and functions and as such, it is one of the grounds on which the Liquidator can be changed. In so far as the appointment of Liquidator is concerned, it is an undisputed fact that the Respondent/Liquidator herein has accepted the assignment in respect of the Corporate Debtor without holding a valid AFA. Further, the Appellant viz. IDBI Bank was given the liberty to bring to the notice of the Adjudicating Authority to have a re-look at the appointment of the Liquidator so far as the Authorization is concerned - It is to be noted here that IIIPI and also the IBBI have issued show cause notice to the Respondent and has stated that the Respondent has accepted the assignment without holding a valid AFA and hence IIIPI imposed a penalty of Rs. 10,000/- upon the Respondent. The same is also reflecting the order passed by IBBI. Hence, it is crystal clear that the Respondent has accepted the assignment without holding a valid AFA, however as observed by the Hon'ble NCLAT, the non-holding of a valid AFA will not render the order of liquidation passed by the Adjudicating Authority illegal or invalid and moreover the Hon'ble NCLAT it has stated that if any irregularity is brought by the Appellant, then this Tribunal may have a re-look at the appointment of the Liquidator, in the present case. The Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited has failed to exercise due care and diligence in performance of the powers and functions while discharging his functions as Liquidator in respect of the Corporate Debtor viz. M/s. Jeypore Sugar Company Limited and hence he is required to be replaced. Thus, under the provisions of Section 33 and 34 of IBC, 2016 read with Section 16 of the General Clauses Act, 1897 read with Section 276 of the Companies Act, 2013, from the latest list provided from IBBI, for the period from July 2022 to December 2022, we hereby appoint Mr. S. Hari Karthik as the Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited. The outgoing Liquidator/Respondent is directed to handover the charges to the newly appointed Liquidator within a period of 7 days from the date of this order. Application allowed.
Issues Involved:
1. Validity of the Liquidator's Appointment 2. Grounds for Removal of the Liquidator 3. Authority of the Tribunal to Remove the Liquidator 4. Compliance with Regulation 7A of the IBBI (Resolution Professionals) Regulations, 2016 Issue-wise Detailed Analysis: 1. Validity of the Liquidator's Appointment: The application was filed by IDBI Bank Limited seeking the removal of the Liquidator, Shri V. Venkata Sivakumar, and nullification of his actions since May 29, 2020. The Tribunal had initially appointed the Respondent as the Interim Resolution Professional and later as the Liquidator. The applicant contended that the Liquidator did not possess a valid Authorisation for Assignment (AFA) at the time of his appointment, which is a requirement under Regulation 7A of the Insolvency and Bankruptcy Board of India (Resolution Professionals) Regulations, 2016. 2. Grounds for Removal of the Liquidator: The applicant argued that the Liquidator's actions, including sharing the valuation report with prospective Scheme proponents, amounted to a failure to exercise due care and diligence. The Tribunal referred to Section 276 of the Companies Act, 2013, which outlines grounds for removal such as misconduct, fraud, professional incompetence, inability to act, and conflict of interest. The Tribunal found that the Liquidator's conduct in sharing the valuation report was a serious lapse, justifying his removal. 3. Authority of the Tribunal to Remove the Liquidator: The Tribunal emphasized its authority under Section 16 of the General Clauses Act, 1897, which allows the appointing authority to suspend or dismiss an appointee. The Tribunal also referred to Sections 33 and 34 of the Insolvency and Bankruptcy Code (IBC), 2016, which empower it to appoint and thus remove a Liquidator. The Tribunal concluded that it has the power to replace the Liquidator, especially when serious allegations are substantiated. 4. Compliance with Regulation 7A of the IBBI (Resolution Professionals) Regulations, 2016: The Tribunal noted that the Liquidator did not hold a valid AFA at the time of his appointment, which was a breach of Regulation 7A. Although the Hon'ble NCLAT had previously stated that such irregularity does not render the liquidation order illegal, it allowed the applicant to bring the issue before the Adjudicating Authority for reconsideration. The Tribunal acknowledged that both IIIPI and IBBI had issued show cause notices to the Liquidator for accepting the assignment without a valid AFA and imposed a penalty. Conclusion: Based on the findings, the Tribunal decided to replace the Liquidator due to his failure to exercise due care and diligence. The Tribunal appointed Mr. S. Hari Karthik as the new Liquidator and directed the outgoing Liquidator to hand over the charges within seven days. The application was allowed, and the Registry was instructed to inform IBBI of the order.
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