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2024 (11) TMI 481 - AT - IBCReplacement of Resolution Professional - HELD THAT - In the present case, from the facts which have been brought on the record, it is clear that the RP prior to filing of Section 94 application, has been representing the Corporate Debtor and the Personal Guarantor, before the Delhi High Court as a Counsel for the Corporate Debtor and the Personal Guarantor. Formation of opinion by the Financial Creditor on the ground that RP, who has represented the Corporate Debtor and the Personal Guarantor in the dispute between parties arising out of the same debt, cannot be said to be an irrational ground, to form an opinion under Section 98. Hence, the Financial Creditor filed an application for replacement of the RP. The scheme of Section 98, does not require that a particular ground has to be proved by debtor or creditor seeking replacement of the RP. The submission of the learned Counsel for the Appellant that Section 94 gives a vested right to the debtor to initiate insolvency resolution process either personally or through RP, hence, the said vested right cannot be taken away. Section 94, sub-section (1) is a provision, which permits a debtor to initiate insolvency resolution process. Thus, the debtor is fully entitled to initiate the insolvency resolution process, either personally or through RP. The Appellant, thus, was fully entitled to initiate the insolvency resolution process through RP, as was done in the present case. But, the stage under Section 98 sub-section (1) is subsequent to appointment of RP under Section 97 - Hence, Prabhat Ranjan Singh, was appointed by the Adjudicating Authority by order dated 06.12.2023 as per Section 97 of the IBC. The Adjudicating Authority did not commit any error in allowing the application filed by the Financial Creditor for replacement of the RP - there are no error in the order impugned - Appeal is dismissed.
Issues:
Challenge to order of National Company Law Tribunal regarding replacement of Resolution Professional in insolvency resolution process. Detailed Analysis: 1. Background and Facts: The appeal was filed by the Personal Guarantor of the Corporate Debtor challenging the order passed by the National Company Law Tribunal, New Delhi, regarding the replacement of the Resolution Professional (RP) appointed under the Insolvency and Bankruptcy Code, 2016 (IBC). The Financial Creditor filed an application seeking the replacement of the RP, Mr. Prabhat Ranjan Singh, citing reasons related to his previous professional engagements. 2. Contentions of the Appellant: The Appellant argued that the RP was appointed by the Adjudicating Authority based on eligibility criteria and there was no evidence to suggest bias or lack of independence. It was emphasized that the RP had only provided legal services to the Personal Guarantor and had not influenced their actions. 3. Contentions of the Respondent: The Respondent, representing the Financial Creditor, contended that the RP had previously represented the Corporate Debtor and the Personal Guarantor in arbitration proceedings related to the same debt, indicating a lack of independence. The Adjudicating Authority found merit in these arguments and allowed the application for replacement of the RP. 4. Legal Analysis - Section 98 of IBC: Section 98 of the IBC allows both debtors and creditors to apply for the replacement of an RP if they believe it is necessary. The section does not specify grounds for replacement but requires a subjective opinion based on rational and objective considerations. In this case, the Financial Creditor's opinion regarding the RP's previous professional engagements was considered valid by the Adjudicating Authority. 5. Interpretation of Sections 94 and 98: While Section 94 grants debtors the right to initiate insolvency resolution through an RP, Section 98 deals with the subsequent replacement of the RP. The Appellant's argument that the RP cannot be replaced once appointed under Section 94 was deemed immaterial as per the statutory scheme of the IBC. 6. Conclusion: The Appellate Tribunal upheld the decision of the Adjudicating Authority to allow the replacement of the RP, stating that no error was committed in doing so. The appeal was dismissed, affirming the validity of the order for replacement of the RP in the insolvency resolution process. This detailed analysis highlights the key arguments, legal provisions, and reasoning behind the Appellate Tribunal's decision to dismiss the appeal challenging the replacement of the Resolution Professional in the insolvency resolution process under the IBC.
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