2022 (12) TMI 776 - AT - Insolvency and Bankruptcy

Seeking Liquidation of Corporate Debtor - Section 33 (3) (b) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - A Stakeholder, affected by the conduct of the Resolution Professional, may file a complaint, under IBBI (Grievance and Complaint Handling Procedure) Regulations 2017. Therefore, the Creditors are Stakeholders affected by the actions of Resolution Professional, may initiate Proceedings, under the aforesaid Regulations and in the event of allegations are sustained, the IBBI, may recommend for Replacement of a Resolution Professional, under Section 34 (4) (b) of the Code - As far as the present case is concerned, this Tribunal, points out that before the Adjudicating Authority, on behalf of Lenders, even though, a reliance was placed on the Minutes of Joint Lenders Meeting, that took place on 26.04.2022, the said Minutes, was conspicuously silent, about the aspect of any dissatisfaction being expressed, pertaining to the performance of the Resolution Professional, in the earnest opinion of this Tribunal. In the present case, despite, the fact that the Minutes of the Joint Lenders Meeting, that took place on 26.04.2022, were silent as regards the Lenders Expression of Dissatisfaction, relating to the Discharge of Duties, by the Resolution Professional and therefore, another Individual, be Replaced and Appointed, to function as Liquidator, there is no embargo in Law, for the Replacement of present / current Resolution Professional as Liquidator, by another Resolution Professional, on grounds / reasons, other than those specified under Section 34 (4) of the I B Code, 2016 (especially, when the Lenders in their Commercial Decision and Wisdom, had opted for such a Replacement of the existing Resolution Professional, as Liquidator, by another Resolution Professional, which carries due weightage and the same cannot be brushed aside so lightly. As a matter of fact, the Adjudicating Authority, (National Company Law Tribunal, Hyderabad Bench - I, Hyderabad), had applied its mind and exercised its Judicial Discretion, in the impugned order, by making a pertinent Observation, that the graceful exit of the present Resolution Professional, will pave way for the smooth Liquidation Process, of the Corporate Debtor and permitted the plea of the Lenders, in this regard, and passed an Order of Liquidation, against the Corporate Debtor / M/s. Sainath Estates Pvt. Ltd., by appointing Mr. Gollamudi Krishna Mohan as Liquidator and the conclusion so arrived at, by the Adjudicating Authority, in the impugned order, is free from any Legal Infirmities, as held by this Tribunal. Appeal dismissed.

Summary

Issues Involved:
1. Propriety, validity, and legality of the impugned order dated 08.07.2022.
2. Replacement of the current Resolution Professional (RP) as Liquidator.
3. Compliance with Section 34(1) and Section 27(2) of the Insolvency and Bankruptcy Code (IBC), 2016.
4. Grounds for replacing a Liquidator under Section 34(4) of the IBC, 2016.
5. Role and authority of the Adjudicating Authority in replacing the RP.

Detailed Analysis:

Propriety, Validity, and Legality of the Impugned Order:
The appellant challenged the impugned order dated 08.07.2022, which directed the replacement of the existing RP with a new Liquidator. The appellant contended that the order was passed without any valid grounds under Section 34(4) of the IBC, 2016, and that the Adjudicating Authority did not have the authority to replace the RP based on the lenders' dissatisfaction without any misconduct being established.

Replacement of the Current RP as Liquidator:
The Adjudicating Authority noted that the RP had filed his written consent to act as Liquidator, satisfying the requirement under Section 34(1) of the IBC. However, the lenders expressed dissatisfaction with the RP's performance and proposed a new Liquidator. The Authority observed that the minutes of the joint lenders meeting were silent on any dissatisfaction with the RP's performance. Despite this, the Authority allowed the replacement to facilitate a smooth liquidation process, noting the new Liquidator's willingness to accept 50% of the cost.

Compliance with Section 34(1) and Section 27(2) of the IBC, 2016:
The appellant argued that the replacement of the RP as Liquidator was not permissible under Section 34(1) and Section 27(2) of the IBC, 2016. The Adjudicating Authority found that the situation contemplated under Section 34(1)(4) for replacing the RP did not exist, and hence, the replacement was unsustainable under law. However, the Authority allowed the replacement for the smooth liquidation process, noting that the lenders' decision carried due weightage.

Grounds for Replacing a Liquidator under Section 34(4) of the IBC, 2016:
The appellant contended that the grounds for replacing a Liquidator under Section 34(4) were not met. The Adjudicating Authority noted that there was no finding of misconduct by the RP, and the lenders' dissatisfaction was not recorded in the minutes. Despite this, the Authority allowed the replacement to facilitate the liquidation process, emphasizing the lenders' commercial decision and wisdom.

Role and Authority of the Adjudicating Authority in Replacing the RP:
The Adjudicating Authority exercised its judicial discretion to replace the RP, noting that the graceful exit of the current RP would pave the way for a smooth liquidation process. The Authority observed that there was no legal impediment to replacing the RP on grounds other than those specified under Section 34(4) of the IBC, 2016. The Authority's decision was based on the lenders' commercial decision and the need to facilitate the liquidation process.

Conclusion:
The National Company Law Appellate Tribunal (NCLAT) dismissed the appeal, upholding the Adjudicating Authority's decision to replace the RP with a new Liquidator. The Tribunal found no legal infirmities in the impugned order and emphasized the lenders' commercial decision and the need for a smooth liquidation process. The appeal was dismissed, and the stay application was closed.