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2022 (12) TMI 1056 - AT - Insolvency and BankruptcyReplacement of Liquidator of the Corporate Debtor - Appellant submitted that the 2nd and 3rd Respondent condoned the lapse of the Appellant for taking assignment in the present case without having Authorisations for Assignment (AFA) by imposing fine of Rs. 10,000/-. Valid Authorisations for Assignment (AFA) on the date of appointment as the Liquidator of the Corporate Debtor is there or not - AFA was deemed to have been issued in terms of Regulation 12A of the Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 or not? - AFA issued subsequent to taking up assignment by the Appellant, absolve Appellant of meeting requirement of Regulation 7A of IBBI Insolvency Professional Regulation 2016 or not - Whether, the Regulation 12A of the Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 will prevail over Regulation 7A of IBBI Insolvency Professional Regulation 2016? HELD THAT - The Appellant himself admitted that application for AFA was filed on 31.12.2019 and the same was rejected on 14.01.2020 hence this Appellate Tribunal feels that the argument the Appellant that he has deemed to have been received the AFA or renewed within 15 days does not seems to be correct - the appellant cannot claim that there was no requirement of issue of fresh AFA for his assignment as the Liquidator. The assignment as the Liquidator to which the Appellant got confirmed on 29-05-2020, is beyond the prescribed threshold date i.e. 31-12-2019. Therefore, this is non-compliance of the regulatory provisions. The Appellant got authorized and valid AFA by the 3rd Respondent only on 30.12.2020 which is way beyond the date of his appointment/assent as liquidator. Therefore, it is clear that as per Regulation 7A of IBBI (Resolution Professional) Regulation 2016, the Appellant did not hold valid AFA on the date of acceptance of the Assignment and the AFA cannot be ratified retrospectively in the absence of any such provisions in the law - this Appellate Tribunal considers that the Appellant did not possess the legally required AFA on the date of the acceptance of the assignment and the Appellant thus fails to meet the legal bar. Therefore, there is no error in the impugned order on these accounts. The Interim injunction order passed by the Hon ble Madras High Court confines only to the order with regard to action arising out of proceedings of the Disciplinary Committee and is silent on the issue of requirement of AFA by the Appellant, compulsory requirement of AFA as per Regulation 7A of IBBI (Insolvency Professional) Regulation 2016 and any stay on removed of the Appellant from Liquidator of the Corporate Debtor - this Appellate Tribunal do not find prima-facie any restrain on the Adjudicating Authority to adjudicate in this case and no conflict is found. Whether the Adjudicating Authority can remove the Liquidator? - HELD THAT - No Liquidator has any personal rights, to continue in Liquidation and the Adjudicating Authority, can order for Replacement of the Liquidator, recording sufficient reasons, as per Law - Further, since the Adjudicating Authority, is vested with the power, to appoint a Liquidator, under Section 33 and 34 of the I B Code, 2016. It is by the virtue of the Section 16 of the General Clauses Act, 1897, that an Adjudicating Authority, who also, has the power, to remove the Liquidator. This Appellate Tribunal without any ambiguity / simmering doubt, finds that there was no error in the impugned order. The Appeal, is devoid of merits and stand dismissed.
Issues Involved:
1. Validity of Authorisation for Assignment (AFA) on the date of Liquidator's appointment. 2. Impact of the Hon'ble Madras High Court's interim stay on the current case. 3. Authority of the Adjudicating Authority to remove the Liquidator. Detailed Analysis: Issue I: Validity of Authorisation for Assignment (AFA) (a) Whether the Appellant had valid AFA on the date of his appointment as the Liquidator: The Appellant was appointed as the Liquidator on 29.05.2020. Regulation 7A of IBBI (Insolvency Professional) Regulation 2016 mandates that no Insolvency Professional shall accept an assignment after 31.12.2019 without a valid AFA. The Appellant did not possess a valid AFA on the date of his appointment. (b) Whether the AFA was deemed to have been issued in terms of Regulation 12A: Regulation 12A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, states that if the AFA is not issued, renewed, or rejected within fifteen days of the application, it shall be deemed to have been issued. However, the Appellant's application for AFA was rejected on 14.01.2020, thus the argument of deemed issuance does not hold. (c) Whether the AFA issued subsequent to taking up the assignment absolves the Appellant of meeting the requirement of Regulation 7A: The Appellant received a valid AFA on 30.12.2020, which is after his appointment as Liquidator. Therefore, the subsequent issuance does not absolve the Appellant of the requirement to have a valid AFA at the time of appointment. (d) Whether Regulation 12A will prevail over Regulation 7A: The Hon'ble Madras High Court, in dismissing the Appellant's Writ Petition No. 13229 of 2020, upheld the requirement for an Insolvency Professional to obtain AFA from the appropriate IPA, as per Regulation 12A. Therefore, Regulation 7A stands valid and applicable. Issue II: Impact of the Hon'ble Madras High Court's interim stay: The interim injunction granted by the Hon'ble Madras High Court in W.M.P. No. 5088 of 2021 in W.P. No. 4458 of 2021 pertains only to the penalty imposed by the Disciplinary Committee and does not address the requirement of AFA or the removal of the Appellant as Liquidator. The Hon'ble Madras High Court's dismissal of Writ Petition No. 13229 of 2020 further validates the requirement of AFA. Issue III: Authority of the Adjudicating Authority to remove the Liquidator: The I & B Code, 2016, under Sections 33 and 34, and Section 276 of the Companies Act, 2013, provide grounds for removing a Liquidator. Section 16 of the General Clauses Act, 1897, states that the authority to appoint includes the power to suspend or dismiss. The power to remove a Liquidator is thus inherent in the Adjudicating Authority. The judgment in State of Tamil Nadu and Ors. vs. M.N. Sundararajan (1980) and Heckett Engineering Co. vs. Their Workmen (1977) further support this principle. The Principal Bench, NCLAT, in Company Appeal (AT) (Ins.) No. 1234 of 2022, confirmed that the Liquidator does not have a personal right to continue and can be replaced by the Adjudicating Authority for valid reasons. Conclusion: The Appellant did not possess a valid AFA on the date of his appointment as Liquidator, and the Hon'ble Madras High Court's interim stay does not impact the requirement of AFA or the removal of the Appellant. The Adjudicating Authority has the power to remove the Liquidator. The appeal is dismissed, and there is no error in the impugned order.
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