2022 (11) TMI 929 - Tri - Insolvency and Bankruptcy

Opportunity to seek replacement of Resolution Professional - right of hearing - principles of natural justice - HELD THAT - The arguments that Section 98 provides for replacement of the Resolution Professional and hence the Guarantor should have an opportunity to seek replacement of Resolution Professional and hence he should be heard before appointment of IRP was also considered and held that going through Section 98 of IBC, 2016, it is found that Section 98 is not stage specific. Section 98 itself shows that the section could be resorted to even at stages like implementation of repayment plan which would be a stage beyond Section 116, where implementation and supervision of repayment plan is provided for. It was held that the argument, that before report of Resolution Professional the Debtor must get a chance to seek replacement of Resolution Professional and thus notice was required to be given, has no substance. It is clearly held that, it is only after the Resolution Professional is appointed by the Adjudicating Authority under Section 97(5), that the step under Section 98 is contemplated. The principles of natural justice, which were considered by the Bombay High Court in the above cited judgment, are not violated by not providing for a notice before appointment of IRP, as can be seen from Section 99 of IBC. Any amount of audience is provided to the debtor before the Resolution Professional submits a report. Section 99(2) of IBC gives an opportunity to the debtor to prove repayment of debt claimed as unpaid by the creditor. Section 99(4) of IBC, empowers the Resolution Professional to seek further information or explanation in connection with the application as may be required from the Debtor or the Creditor or any other person, who, in the opinion of the Resolution Professional, may provide such information. Hence it is not as if, the Debtor is not provided an audience before the submission of the report. Thus, no notice is required for the Respondent at the stage of appointment of Resolution Professional (RP) - this Tribunal is of the considered opinion that there is no hurdle to entertain this application under Section 95 of IBC, 2016, since the application is found to be complete. Mr. Madasa Kumar is appointed as the Resolution Professional - application allowed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process (CIRP) against a Personal Guarantor by a Financial Creditor.

Analysis:
1. The Company Petition was filed by the Central Bank of India seeking to initiate CIRP against the Personal Guarantor due to non-repayment of a Term Loan, resulting in the loan account being declared as NPA.
2. The Respondent sought to file a counter, but it was rejected as no right of audience is provided under relevant provisions such as Sections 95 or 97 of the Insolvency and Bankruptcy Code (IBC).
3. The judgment highlighted the procedural aspects under Sections 95, 97, 99, and 100 of the IBC, emphasizing the timeline provided at each stage of the proceeding and the absence of a specific timeline for the submission of the Resolution Professional's report.
4. The judgment discussed the need for principles of natural justice, suggesting that parties should be heard before the Adjudicating Authority takes a decision under Section 100 of the IBC.
5. It was clarified that notice before admission under Section 100(1) would serve the principles of natural justice, even though not mandated, as per the Bombay High Court's decision and relevant case laws.
6. The arguments regarding the replacement of the Resolution Professional under Section 98 were considered, concluding that notice before the appointment of the Interim Resolution Professional (IRP) is not required for the Respondent.
7. The Tribunal appointed Mr. Madasa Kumar as the Resolution Professional, directing him to file his consent and submit a report within 10 days as per Section 99 of the IBC, 2016.

This detailed analysis of the judgment provides insights into the legal aspects, procedural requirements, and considerations regarding the initiation of CIRP against a Personal Guarantor by a Financial Creditor under the Insolvency and Bankruptcy Code.