2022 (5) TMI 400 - HC - Insolvency and Bankruptcy

Appointment of the same resolution professional - it is submitted that, the resolution professional is appointed by the creditor and no person can be a judge in on own case. - Constitutional Validity of Section 95(1), 99 and 100 of the Insolvency and Bankruptcy Code, 2016 - ultra vires Article 14 of the Constitution of India or not - subsequent appointment of the same resolution professional - HELD THAT - The contention raised by the petitioner that the impugned provisions are arbitrary as no person can be allowed to be a judge in his own case is misconceived. The Supreme Court in GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. 2021 (3) TMI 340 - SUPREME COURT has negative the contention of the petitioner and has held that the role of Adjudicating Authority is that of a rubber stamp in the context of Section 95, 97, 99 and 100 of the Code. It has further been held by the Supreme Court that Section 95, 97, 99 and 100 of the Code do not suffer from any illegality or any unconstitutionality. As per the procedure prescribed under Section 95 to 100 of the Code, the role of resolution professional is limited to make the appropriate recommendation to the Adjudicating Authority and the final decision of the admission or rejection of the application referred to under Section 95 solely lies with the Adjudicating Authority. It is also pertinent to note that Section 5(27) of the Code read with the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 defines the expression resolution professional . The contention of the petitioner that subsequent appointment of the same resolution professional is arbitrary cannot be accepted. The procedure prescribed under the provisions is fair, rational and reasonable and same cannot be termed to be violative of Article 14. The challenge made to the validity of the provisions as contained in Section 95 to 100 of the Code is hereby repelled - Petition dismissed.

Summary

Issues:
Validity of Section 95(1), 99, and 100 of the Insolvency and Bankruptcy Code, 2016 under Article 14 of the Constitution of India.

Analysis:

Issue 1: Violation of Principles of Natural Justice
The petitioner challenged the validity of Sections 95(1), 99, and 100 of the Insolvency and Bankruptcy Code, 2016, alleging a violation of principles of natural justice due to the lack of an opportunity for a hearing in the proceedings. The petitioner argued that the appointment of a resolution professional by the creditor could lead to bias. Citing legal precedents, the petitioner contended that such provisions were against natural justice principles.

Analysis: The court examined the role of the resolution professional in insolvency proceedings and noted that the process is time-bound, involving specific steps such as the appointment of a resolution professional, submission of a report, and the final decision by the Adjudicating Authority. The court emphasized that the resolution professional's role is limited to making recommendations, and the Adjudicating Authority holds the final decision-making power. Referring to a Supreme Court judgment, the court rejected the petitioner's argument, stating that the Adjudicating Authority acts independently and is not bound by the resolution professional's recommendations. The court found no arbitrariness in the process and upheld the legality of Sections 95, 97, 99, and 100 of the Code.

Conclusion: The court dismissed the petitioner's claim of a violation of natural justice principles, affirming the fairness and constitutionality of the provisions under scrutiny.

Final Decision:
The court rejected the challenge to the validity of Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016, finding no merit in the writ petition and consequently dismissing it.