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TMI Blog2024 (2) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... g opportunity to Personal Guarantor. The role of RP has been elaborately examined by the Hon ble Supreme Court in the aforesaid case and it is held that RP does not perform any adjudicatory function, nor even can take an administrative decision. The role of RP has been held to be only facilitator. The judgment relied by learned Senior Counsel for the Appellant in SHANKARLAL AGGARWALA VERSUS SHANKARLAL PODDAR [ 1963 (1) TMI 40 - SUPREME COURT] has no application in the facts of the present case. Insofar as the submission of the Appellant(s) that Adjudicating Authority failed to take into consideration that authorization was not filed by the RP, it is always open for the Appellant to take such or other pleas as permissible at the time of adjudication of issue, including any defect in the Application under Section 95 and the said question also does not require any consideration at the stage when RP is appointed. Of course, if there is any invalidity or shortcomings while appointing the RP, Section 98 is there for the debtor or creditor, which provides for replacement of the RP. There is no error in the impugned order passed by the Adjudicating Authority appointing the RP - Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in these Appeal(s); Shri Namit Suri, learned Counsel has appeared for Bank of Maharashtra. 4. The learned Counsel for the Appellant(s), challenging the impugned order contend that Applications filed under Section 95 sub-section (1) was ex-facie barred by limitation. The account having declared NPA on 27.07.2016 and the Applications having been filed only on 16.03.2023, the Applications being barred by time, ought not to have been entertained and the Adjudicating Authority committed error in appointing a RP in the said Applications. It is submitted that Adjudicating Authority cannot be used as a Forum to recover a time barred debt. The Adjudicating Authority has also failed to take into consideration the requirement for appointment of RP under Section 95 of the Code. Due to non-filing of Authorization for Assignment ( AFA ) by the RP, the RP cannot be appointed. The learned Counsel for the Appellant(s) further submit that the Report, which is to be submitted by RP under Section 99 is a Report confining to procedural requirements on an Application filed under Section 95. The RP is not supposed to submit any Report regarding the question of limitation, since Report under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor to initiate insolvency resolution process.- (1) A creditor may apply either by himself, or jointly with other creditors, or through a resolution professional to the Adjudicating Authority for initiating an insolvency resolution process under this section by submitting an application. (2) A creditor may apply under sub-section (1) in relation to any partnership debt owed to him for initiating an insolvency resolution process against- (a) any one or more partners of the firm; or (b) the firm. (3) Where an application has been made against one partner in a firm, any other application against another partner in the same firm shall be presented in or transferred to the Adjudicating Authority in which the first mentioned application is pending for adjudication and such Adjudicating Authority may give such directions for consolidating the proceedings under the applications as it thinks just. (4) An application under sub-section (1) shall be accompanied with details and documents relating to- (a) the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the request. (6) The resolution professional shall examine the application and ascertain that (a) the application satisfies the requirements set out in section 94 or 95; (b) the applicant has provided information and given explanation sought by the resolution professional under subsection (4). (7) After examination of the application under sub-section (6), he may recommend acceptance or rejection of the application in his report. (8) Where the resolution professional finds that the debtor is eligible for a fresh start under Chapter II, the resolution professional shall submit a report recommending that the application by the debtor under section 94 be treated as an application under section 81 by the Adjudicating Authority. (9) The resolution professional shall record the reasons for recommending the acceptance or rejection of the application in the report under sub-section (7). (10) The resolution professional shall give a copy of the report under sub-section (7) to the debtor or the creditor, as the case may be. 9. Section 100 provides for Admission or rejection of application . The scheme under the IBC pertaining to Personal Gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that the right to file such representation is sufficient compliance of audi alterum partem requirements. 76. Hence, the petitioners' assertion that the statutory framework, as interpreted and applied by the adjudicating authority, results in a violation of natural justice lacks merit. The reliance on State Bank of India v Rajesh Agarwal does not help the case of the petitioners, as the court in that case established that exceptions to natural justice must be confined to the 'narrowest possible limits.' The court underscored that the waiver of prior hearing is permissible only in situations where its inclusion would obstruct the entire process. In that case, the court specifically addressed the duties of banking authorities, emphasizing the obligation to adopt fair procedures and afford borrowers a hearing before classifying their accounts as fraud accounts, given the serious penal and civil consequences. The court further held that reasoned orders must be passed when categorizing an account as a fraud account. It then clarified that no hearing is required before lodging an FIR. In other words, it held that the principles of audi alteram partem must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional is empowered to seek information or an explanation in connection with the application, such information or explanation must be relevant to and bearing a connection with the nature of the application itself. 78. Even when the resolution professional seeks information from a third party, the information cannot be of a roving nature, but must be relatable to the application which has been filed under Section 94(1) or, as the case may be, Section 95. Sub-section (3) of Section 99 provides that where a debt for which an application has been filed by the creditor is registered with an information utility, the debtor shall not be entitled to dispute the validity of the debt. This provision in subsection (3) operates only in relation to the recommendatory function of the resolution professional. That provision cannot operate to bind the adjudicatory function of the adjudicating authority when it exercises its jurisdiction under Section 100. 10. The conclusion of the above judgment has been recorded in paragraph 86, which is as follows: 86. We summarise the conclusion of this judgment below: (i) No judicial adjudication is involved at the stages envisaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s very clear. The Adjudicating Authority should consider the issue pertaining to jurisdictional fact at the stage of Section 100 and there is no adjudication contemplated at the stage when RP is appointed under Section 97, sub-section (5). The conclusion recorded in paragraph 86 (iii) clearly lays down the aforesaid. The submission of the Appellant(s) that Applications were barred by time, ought to have been considered at the time when Adjudicating Authority appointed the RP, thus, cannot be accepted. 12. Another submission, which was raised by the Appellant(s) is that the RP while submitting a Report under Section 99, is not supposed to submit any Report as to whether Application is barred by time or not. The submission is that under Section 99, sub-section (6) only examination is as to whether Application satisfies the requirements set out in Section 94 or 95 or not. The scheme as delineated in Section 99 indicates that Report, which is required to be submitted by RP under Section 95, recommending for approval or rejection of the Application also contemplate reasons for recommendation. When RP is recommending for approval or rejection, the Report has to contain reasons for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort either recommending the acceptance or rejection of the application together with the reasons in support of the report. 67. The provisions of Section 99 thus leave no manner of doubt that the process which takes place before the resolution professional is not an ex parte process in the absence of a debtor against whom the insolvency resolution process is sought to be initiated. Though, the ultimate report of the resolution professional has only a recommendatory value, the legislature has ensured that the recommendation is made after taking into account the information or, as the case may be, the explanation that is furnished by the debtor. Thus, it cannot be said that there is any element of bias in a report submitted by an RP who is nominated by the creditor. In the decision in Ravi Ajit Kulkarni v. State Bank of India, it has been emphasized that under Section 98 of the IBC, the debtor retains the option to replace the RP appointed under Section 97 by filing an appropriate application with the adjudicating authority. 13. The Hon ble Supreme Court has clearly held that role of the RP is only of a facilitator. We, thus, do not accept the submission of the Appellant(s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s behalf by the official liquidators. On the other hand there was the 1st respondent and not to speak of him, the large body of unsecured creditors whose interests, even if they were not represented by the 1st respondent, the Court was bound to protect. If the sale of which confirmation was sought was characterised by any deviation from the conditions subject to which the sale was directed to be held or even otherwise was for a gross undervalue in the sense that very much more could reasonably be expected to be obtained if the sale were properly held in view of the figure of Rs 3,37,000 which had been bid by Nandlal Agarwalla, it would be the duty of the Court to refuse the confirmation in the interests of the general body of creditors and this was the submission made by the 1st respondent. There were thus two points of view presented to the Court by two contending parties or interests and the Court was called upon to decide between them. And the decision vitally affected the rights of the parties to property. In this view we are clearly of the opinion that the order of the Court was, in the circumstances, a judicial order and not an administrative one and was therefore not inheren ..... X X X X Extracts X X X X X X X X Extracts X X X X
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