2022 (8) TMI 234 - AT - Insolvency and Bankruptcy

Appointment of IRP - Learned Adjudicating Authority was of the view that the present IRP is eligible to be appointed as an RP since there is no adverse comments against him and there is no reason to replace him - whether the decision taken by the CoC in their commercial wisdom can be interfered with? - HELD THAT - Admittedly, the Appellant had filed the Application before the Learned Adjudicating Authority under Section 22(3)(b) of the I B Code, 2016 with a specific prayer to appoint Shri CA Mahalingam Suresh Kumar Insolvency Professional as the Resolution Professional of the Corporate Debtor. The Application filed by the Appellant is in accordance with law and rightly invoked the provisions of law. As per sub-section (3) of Section 22, the Committee of Creditors in its 1st Meeting by a majority vote not less than 66% of the voting share either to continue the IRP as RP under sub-clause (a) of sub-section (3) - Since the Appellant had complied with the provision of law as mandated and the Adjudicating Authority ought to have considered the same without going into the other technicalities. When the Applicant comply with the provisions of law and there is no scope to reject the prayer or relief as sought by the Applicant. In the present case, admittedly the 1st CoC was held on 21.01.2022 and at Agenda Item No. B-4 the CoC in accordance with Section 22(2) of the I B Code, 2016, was resolved unanimously resolved for appointment of Shri CA Mahalingam Suresh Kumar as the Resolution Professional in respect of the Corporate Debtor. Thus, it can be seen that the Appellant is having 98.03% voting share in the Committee of Creditors filed the Application for appointment of RP, hence the voting share of the Appellant in passing the Resolution is much more than the required voting percentage i.e. 66% - This Tribunal is of the view that, since two Members of CoC participated it is deemed 100% voting share in favour of the Resolution and it is a unanimous. In any case, the Appellant is having the majority voting share accorded the Resolution for appointment of new RP. In view of the decision of the Hon ble Supreme Court that the commercial wisdom of the CoC is paramount and cannot be interfered with by the Tribunals. Further, the provisions of law empower the CoC contemplated under Section 22 of the I B Code, 2016 either to continue the IRP as RP or replace the IRP. When the provisions are unambiguous and authorises the CoC to act in accordance with law the same cannot be interfered with by the Tribunals unless and until it is arbitrary, illegal and irrational and dehors the provisions of the Code and the Rules. This Tribunal comes to an irresistible and inescapable conclusion that the Appellant has made a prima-facie case to be interfered with the order passed by the Adjudicating Authority - Appeal allowed.

Summary

Issues Involved:
1. Rejection of the proposed Resolution Professional (RP) by the Adjudicating Authority.
2. Compliance with Section 22 of the Insolvency and Bankruptcy Code (IBC), 2016.
3. Commercial wisdom of the Committee of Creditors (CoC).

Issue-wise Detailed Analysis:

1. Rejection of the proposed Resolution Professional (RP) by the Adjudicating Authority:
The Appellant, a Financial Creditor, filed an application under Section 22(3)(b) of the IBC, 2016, proposing Shri CA Mahalingam Suresh Kumar as the RP for the Corporate Debtor. The Adjudicating Authority rejected this proposal on the grounds that the proposed RP's name was not on the NCLT, Kochi Bench's list of Insolvency Professionals circulated by the IBBI. The Adjudicating Authority appointed the Respondent from the said list as the Interim Resolution Professional (IRP). The Appellant argued that this rejection was arbitrary and in contravention of the law, as the proposed RP held a valid Authorization For Assignment (AFA) and there were no disciplinary proceedings against him.

2. Compliance with Section 22 of the Insolvency and Bankruptcy Code (IBC), 2016:
The Appellant contended that the Adjudicating Authority's decision violated Section 22(4) and (5) of the IBC, 2016. According to Section 22, the CoC, in its first meeting, can resolve to replace the IRP by another RP by a majority vote of not less than 66% of the voting share of the Financial Creditors. The CoC, comprising the Appellant Bank and South Indian Bank, unanimously decided to appoint Shri CA Mahalingam Suresh Kumar as the RP, with the Appellant holding 98.03% voting rights. The Appellant argued that the Adjudicating Authority should have considered this decision without delving into technicalities, as the application was in compliance with the law.

3. Commercial wisdom of the Committee of Creditors (CoC):
The CoC's decision, based on their commercial wisdom, to appoint Shri CA Mahalingam Suresh Kumar as the RP was emphasized. The Appellant argued that the Adjudicating Authority should not interfere with the CoC's decision, as it was made in accordance with Section 22 of the IBC, 2016. The Appellant cited various judgments, including Naveen Kumar Jain Vs. Committee of Creditors and Committee of Creditors of LEEL Electrical Limited Vs. LEEL Electrical Limited, to support the argument that the commercial wisdom of the CoC is paramount and not subject to judicial review unless it is arbitrary, illegal, or irrational.

Conclusion:
The Tribunal concluded that the Appellant had made a prima facie case for interference with the Adjudicating Authority's order. The Tribunal allowed the appeal, set aside the Adjudicating Authority's order, and remanded the matter back to the Adjudicating Authority to consider the appointment of Shri CA Mahalingam Suresh Kumar as the RP of the Corporate Debtor within two weeks in accordance with the law. The Tribunal emphasized that the commercial wisdom of the CoC should not be interfered with by the Tribunals unless it is arbitrary, illegal, or irrational.