2021 (11) TMI 839 - Tri - Insolvency and Bankruptcy

Committee of creditors is seeking replacement of IRP - conflict of interest - HELD THAT - In the present case, in the first meeting of CoC, the CoC proposed to replace IRP and in the second meeting the applicant was authorized to file this application. The CIRP has started on April 6, 2021 and as per the contentions made on behalf of the existing IRP, IRP has conducted CIRP as well as run the affairs of the corporate debtor in a most professional manner even during pandemic situation prevailing all over the country. It is also claimed that the CoC has not controverted this factual position. It is also stated that around 170 days have already passed and much progress has been achieved for resolution of insolvency of the corporate debtor. There should be perfect cohesiveness between the two pillars of CIRP. It is also noted that in the present case IRP was proposed by the original financial creditor, i. e., Invesco Asset Management (India) P. Ltd., which is a large financial institution who had filed application under section 7, hence, prima facie professional competency, capacity and neutral approach of such IRP cannot be doubted. CIRP period timeline of 180 days is also approaching - if it is not found so then CoC may file an application for change of IRP based upon short comings in the overall performance of IRP so fair. In this view of the matter, we refrain ourselves from dealing other contentions made by both sides. Application dismissed.

Summary

Issues:
- Replacement of Insolvency Resolution Professional (IRP) sought by Committee of Creditors (CoC)
- Allegations of conflict of interest against proposed Resolution Professional (RP)
- CoC's authority in decision-making regarding remuneration of RP
- Competence and performance evaluation of existing IRP
- Locus standi of suspended management in filing applications

Replacement of IRP by CoC:
The Committee of Creditors (CoC) sought the replacement of the Insolvency Resolution Professional (IRP) through an application. The CoC had resolved to appoint a new Resolution Professional (RP) with a majority voting share, leading to the filing of the application. The applicant argued that the proposed RP had given consent and had no conflicts of interest. The suspended management raised objections, alleging lack of independence, but failed to substantiate the claim. The applicant cited legal precedents supporting the CoC's decision-making authority in appointing and remunerating the RP.

Competence and Performance Evaluation of IRP:
The existing IRP defended their competence and performance, highlighting successful management of the corporate debtor during the insolvency process. They emphasized attracting expressions of interest and managing the affairs professionally. The IRP refuted claims of incompetence and lack of independence, stating no communication challenging their abilities had been received. The IRP also presented evidence of conducting the insolvency process in compliance with regulations, emphasizing the importance of retaining experienced personnel for effective resolution.

Locus Standi of Suspended Management:
The suspended management filed an application supporting the continuation of the current IRP, citing concerns about the proposed RP's alleged conflict of interest due to a prior professional engagement. They argued that the proposed RP's association with a related party compromised their neutrality, violating the code of conduct. The suspended management's application raised cost considerations and questioned the proposed RP's eligibility based on their professional background.

Judgment and Decision:
After considering submissions from both sides and reviewing the case details, the Tribunal emphasized the importance of cohesive functioning between the CoC and the IRP in the Corporate Insolvency Resolution Process (CIRP). The Tribunal advised the CoC to reassess its decision on changing the IRP, emphasizing the need to avoid delays in the resolution process. The Tribunal suggested a thorough evaluation of the existing IRP's performance and recommended continuity unless significant shortcomings were identified. The Tribunal dismissed the application filed by the suspended management, stating lack of locus standi, and rendered the decision on the replacement of the IRP as infructuous. Ultimately, the Tribunal disposed of the applications accordingly, emphasizing the need for a balanced and efficient resolution process in compliance with the Insolvency and Bankruptcy Code, 2016.