9911796707
TMI Blog2025 (4) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... lative of the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), particularly Sections 97(3), 97(4), and 97(5) of the IBC. 2. IBBI issued the circular, dated 21.12.2023 in exercise of its powers under Section 196 of the IBC to all registered Insolvency Professionals, recognized Insolvency Professional entities, and registered Insolvency Professional Agencies. The impugned circular aimed to clarify the submission of particulars and declarations by the Insolvency Professional in the application filed by the creditors in Part-IV in Form-C of the Insolvency and Bankruptcy (Application to the Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (the Personal Guarantors Rules). 3. The grievance of the petitioners is that paragraph No.3 of the mentioned circular pertains to cases in which a creditor files an application. It states that the creditor may recommend the name of the Insolvency Professional proposed for appointment in the case. Furthermore, it clarifies that in such instances, the proposed Insolvency Professional, to be appointed as the Resolution Professional, must also provide the details of the declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Second) Guidelines, 2023, dated 08.12.2023, which confers powers on IBBI as per Rule 8(2) of the Rules in conjunction with the impugned circular dated 21.12.2023. IBBI is required to maintain a panel, and according to the guidelines, this panel must be shared in advance with the Adjudicating Authority to prevent administrative delays. The circular aims to avoid delay and is not illegal. 7. Mr.Srinath Sridevan, the learned Senior Counsel for the petitioner, will first guide this Court through the scheme of the IBC. Part-I of the IBC contains the preliminary provisions. Part-II addresses Insolvency Resolution and Liquidation of Corporate Persons. Part-III concerns Insolvency Resolution and Bankruptcy for individuals and partnership firms. Chapter-III of Part-II focuses on the Insolvency Resolution Process. Under this process, creditors are entitled to initiate proceedings as per Section 95. According to Section 95(1), a creditor may apply to the Adjudicating Authority by submitting an application either personally or through a Resolution Professional. Section 95(4) of the IBC requires the application to include details and documents relating to the debts owed by the personal guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Professional nominated by the IBBI, and Section 97(4), where the IBBI is required to share a panel of Insolvency Professionals with the adjudicating authority. Thus, the impugned circular effectively varies and amends the very provisions of the IBC. 10. Mr.Srinath Sridevan, learned Senior Counsel, would further contend that the impugned circular was issued under Section 196 of the IBC. Section 196 deals with the powers and functions of the IBBI. Section 196(p) provides that the IBBI, subject to the general direction of the Central Government, issues necessary guidelines to the insolvency professional agencies, Insolvency Professionals, and information utilities. Section 196(t) of the IBC stipulates that the IBBI, subject to the general direction of the Central Government, can make regulations and guidelines on matters relating to insolvency and bankruptcy as may be required under the IBC. However, this does not grant the IBBI the power to override the very provisions of the IBC. The IBBI cannot delegate its power to the creditor while exercising the authority under Section 196. 11. Mr.Srinath Sridevan, learned Senior Counsel, would further contend that if the Resolution P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CI Bank and Anr. [(2018) 1 SCC 407], recognized that efficiency and expediency are essential for the successful implementation of the IBC. The circular is issued in furtherance of this principle. There is nothing for this Court to interfere with within the limited scope of judicial review under Article 226 of the Constitution of India. The judgment of the Hon'ble Supreme Court of India in State of Maharashtra and Ors. Vs. Prabhu [(1994) 2 SCC 481] is referenced. The judgment of the Hon'ble Supreme Court of India in Swiss Ribbons Private Limited and Anr. Vs. Union of India and Ors. [(2019) 4 SCC 17] is cited to argue that the circular merely elaborates on procedural aspects recognized in that judgment. The learned Counsel contends that there is nothing arbitrary in the circular. 14. Mr.M.S.Viswanathan, learned Counsel for the third respondent, Canara Bank, would submit that only after due verification of the IBBI portal and credentials, Mr.Ramachandran Subramanian recommended for appointment by the third respondent bank. After considering the issue, the adjudicating authority appointed him as the Resolution Professional. His name appears on the panel. The learned Counsel wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings against the RP from the database shared by the Insolvency and Bankruptcy Board of India, appoints the proposed RP by an Order under sub-section (5) of section 97 of the Code. 3. In certain cases, the creditor may file the application itself recommending the name of the insolvency professional to be appointed as RP. It is hereby clarified that in such cases, the insolvency professional proposed to be appointed as RP shall also provide the particulars of and declaration in Part IV of Form C of the IRP PGCD Rules to the creditor for the consideration of the AA. 4. This is issued in exercise of the powers under section 196 of the Code." (Emphasis supplied) Thus, it is evident that even in cases that are not filed through a Resolution Professional, when a creditor files applications against personal guarantors, the creditor is not given the discretion to recommend the name of the Insolvency Professional to be appointed as the Resolution Professional. When such a recommendation is made, the circular further clarifies that the details of the Resolution Professional and the declaration in Part-IV of Form-C of the Personal Guarantor Rules must also be provided by the cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the interim-moratorium under Section 96 is to protect the debtor from further legal Proceedings; and (ix) The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution." (Emphasis supplied) Thus, it is evident that the Resolution Professional assumes a facilitative role in collating facts and submitting a report to the adjudicating authority. 19. The report is again recommendatory in nature. Throughout the entire examination of the application, the debtor is not deprived of an opportunity to participate in the process. It has been held that judicial determination occurs only when the adjudicating authority decides under Section 100. Thus, if the role of the Insolvency Professional is merely to evaluate the facts to facilitate resolution and submit a report that is primarily recommendatory, the allegation of any inherent bias cannot be accepted. Simply because the creditor chooses from the IBBI panel at the time of filing an application and recommends a name does not, by itself, prejudice the debtor in any way. The role is not that of a decision-making authority, but rather a facilitator. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application is filed through the Resolution Professional, the procedure for the adjudicating authority is to direct the IBBI to confirm that there are no disciplinary proceedings pending against the Resolution Professional. If there are no such proceedings, the appointment must be made. If the adjudicating authority rejects the appointment, the IBBI must nominate another Resolution Professional. 22. When the application is filed by the creditor himself, the adjudicating authority will direct the IBBI to nominate a Resolution Professional within seven days. Within ten days of this request, the board shall make a nomination. The adjudicating authority may then accept the nomination and appoint the individual nominated by the IBBI, who will subsequently be provided a copy of the application for the insolvency resolution process. 23. In this regard, if the creditor is allowed to recommend at the outset, the entire episode of the Resolution Professional becoming aware of any conflict of interest, etc., at a later stage, and once again having the process start all over is effectively mitigated as the Resolution Professional provides their consent and the details of the professional a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
