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TMI Blog2025 (4) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... . Angad Varma, Mr. Prashant Kumar, Ms. Nikita Menon, Mr. Kevin Chadha, Mr. Adithya Devarayan, Ms. Mallika Kamal, Advocates, for R2 JUDGMENT ( Hybrid Mode ) [Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial)] These appeals were elaborately heard at the Admission Stage itself. The Appellant, in the instant company appeals, who happens to be the personal guarantor, has questioned the propriety of the Impugned Order dated 06.11.2024, as rendered in IA No. 447/2024 in CP (IB) No. 15/BB/2023, which is under challenge in Company Appeal (AT) (CH) (Ins) No. 29/2025. 2. In the other connected company appeal, that is Company Appeal (AT) (CH) (Ins) No. 34/2025, the Appellant who happens to be a personal guarantor, questions the propriety of the Impugned Order dated 06.11.2024 as rendered in IA No. 445/2024 in CP(IB)No.14/BB/2023. 3. The Ld. Senior Counsel for the Appellant in both these appeals, has confined his argument from a very limited perspective, as to whether at the stage of considering the report submitted by the Resolution Professional under Section 99(7) of the I & B Code, 2016, an elaborate hearing is required to be considered and recorded by the Ld. Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2022, said proceedings before the DRT, Bengaluru Bench, were later on withdrawn against the Appellants. The issue would be as to whether the withdrawal of the proceedings pending before the DRT, Bengaluru Bench on the basis of the settlement agreement of 01.02.2022, would at all have a bearing on the proceedings initiated under Section 95 of the I & B Code, 2016, which is altogether an absolutely and independent proceedings drawn under special statute where a factum of default is established prima facie for the purposes of putting the Corporate Debtor to face the IRP proceedings. 7. It is submitted that IHFL had assigned debt to the Indiabulls Asset Reconstruction Company Private Limited (IBARCL) on 30.09.2020, who further assigned the debt to Asset Care and Reconstruction Enterprise Limited (ACRE) i.e. Respondent No. 2 herein, on 26.04.2021. The settlement agreement dated 01.02.2022 was entered into between the Appellants herein, IHFL, IBARCL, ICCL (India Bulls Commercial Credit Limited), and Catalyst Trusteeship Limited with regards to the debt owed by the principal borrower, Raffles Residency Private Limited Company. But the settlement agreement was terminated by Catalyst Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the connected company appeal, the facts remain the same. The Appellant herein has argued that, the very fact of acceptance of the report in the Company Petition (IB) No.14/BB/2023 and consequentially deciding the IA No. 445/2024 which was similar to IA No. 447/2024, is bad, because the same suffers from the vices of having not provided an effective personal hearing and therefore, the actions thus taken therein is in apparent violation of the principles of natural justice. The Appellants contend that since as a consequence of the Impugned Order passed, there had been a deprivation for the Appellants, from putting up their case as against the report submitted by the Resolution Professional under Section 99 of the I & B Code, 2016, which stood accepted, consequentially, resulting into admission of the Application filed under Section 95 of the I & B Code, 2016, and consequent initiation of Insolvency Resolution Process (IRP) against them which would not be sustainable in the eyes of law. 11. In other words, what the Ld. Senior Counsel for the Appellant intends to argue is that, at the stage of deciding the respective IAs, i.e., IA No. 445/2024 and IA No. 447/2024 which contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant has the information, and furnished the explanation, which is sought under Sub-Section 4 of Section 99 of the I & B Code, 2016 and that after such examinations as envisaged under Section 99(6) he may recommend either the acceptance or the rejection of the application by submitting the report under Section 99(7). Hon'ble Apex Court has further added that the report has to record reasons, and a copy of such has to be furnished to the debtor/creditor, and that, upon submission of report, the role of Resolution Professional prior to adjudication process ends, and the matter then lies within the jurisdiction of the Ld. Adjudicating Authority, who has to pass an order either admitting or rejecting the application within 14 days from the date of submission of the report under Section 99 of the I & B Code, 2016, Hon'ble Apex Court has further held that the role of Resolution Professional under Section 99 of the I & B Code, 2016, is only that of a facilitator and that his role is to gather relevant information which will aid the Ld. Adjudicating Authority to adjudicate on the admissibility of an application preferred under Section 94 or Section 95 of the I & B Code, 2016. 13. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... catory function is taken over by the Ld. Adjudicating Authority to commence the proceedings, which stands initiated only at the stage of Section 100 of the I & B Code, 2016, that the Resolution Professional does not have the kind of power which the Ld. Adjudicating Authorities has and no power has been provided to the Resolution Professional under the provisions contained under Part III of the Code to take over assets or the business, and that the role of Resolution Professional is purely recommendatory in nature and it cannot bind the creditor, the debtor or, the Ld. Adjudicating Authority. 15. In fact, on a simpliciter reading of the language of Section 99 of the I & B Code, 2016, one will also come to the same conclusion. The said Section is extracted hereunder: - "99. Submission of report by resolution professional. (1) The resolution professional shall examine the application referred to in section 94 or section 95, as the case may be, within ten days of his appointment, and submit a report to the Adjudicating Authority recommending for approval or rejection of the application. (2) Where the application has been filed under section 95, the resolution professional may re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the relevant information from various sources including the personal guarantors to arrive at a conclusion as to whether, under the given set of circumstances the application under Section 95 of I & B Code, 2016, can be taken up for consideration. Thus, the said report to be presented under Section 99 of I & B Code, 2016, has to be considered only for the purposes of stepping into the stage of Section 100 of the I & B Code, 2016, and that the acceptance or rejection of the application is exclusively the prerogative of the Ld. Adjudicating Authority. The use of the expressions therein such as "examine the application", "satisfies the requirements", & "recommend" leave no doubt that the Resolution Professional's report under Section 99 does not have any element of adjudicating a right of any of the parties, as against whom the process under Section 95 of the I & B Code, 2016, is contemplated to be initiated. It is to be held that there cannot be any iota of doubt, that the function of the Resolution Professional in this context is not adjudicatory in nature, that the Resolution Professional is not meant to perform any adjudicatory function or to arrive at a binding conclusion on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Apex Court, arises both in the context of a purely judicial or a quasi- judicial action, as well an administrative action which has an adverse impact on the individual or the entity against, which the action is initiated. Dwelling on the issue as to what would be the necessity of hearing the parties to the proceedings at the stage of preparation of report under Section 99 of I & B Code, 2016, Hon'ble Apex Court, in the matters of Dilip B Jiwrajka (Supra), after summarizing the rationale and the implication of principles of natural justice has come to a conclusion, there is no violation of principles of natural justice under Section 95 to Section 100 of the I & B Code, 2016, as during these stages, the Debtor is not at all deprived of an opportunity to participate in the process of the examination of an application by the Resolution Professional, and as no judicial determination, takes place until the Ld. Adjudicating Authority decides, whether at all to accept or reject an application under Section 95 of the I & B Code, 2016. Para 86 of Dilip B Jiwrajka (Supra) is extracted hereunder: - 86. We summarise the conclusion of this judgment below: 86.1. No judicial adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction under Section 100 of the I & B Code, 2016 and that the principles of natural justice will be made applicable, as soon as the proceedings reaches to the stage or Section 100 of the I & B Code, 2016, at the stage of determining, whether to accept or reject the application based on the report of Resolution Professional under Section 99 of I & B code, 2016. 20. The question would be as to whether in both the appeals, the orders sought to be challenged, which were passed in IA No. 447/2024 and IA No. 445/2024, by the Ld. Adjudicating Authority, were passed without giving adequate opportunity to the Appellants to present their case, thus depriving them of their right of defence, which is violative of the principles of natural justice as expounded by the Hon'ble Apex Court in the matters of Dilip B Jiwrajka (Supra). Ld. Senior Counsel states that an order under Section 100 of the Code can only be passed after hearing the Appellants, that they were not heard, that on 28.06.2024 the right of Appellants to file reply/response was forfeited, that on 19.08.2024 Appellant sought time which was not given and that, on 11.09.2024 the matter was reserved for orders without hearing him and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on the available record. 3. List the case on 28.06.2024." c. CP(IB) No. 15/BB/2023: order delivered on 28.06.2024 Ι.Α.No.447/2024 : 1. Heard the learned counsels for the parties. 2. On 29.04.2024 & 14.06.2024, the Respondent was granted time to file reply to the report filed by the RP. In spite of availing sufficient time, no reply has been filed by the Respondent till date. In this circumstances, the right to file reply of the Respondent is forfeited. 3. List the matter on 31.07.2024. In the other company petition CP(IB)No. 34/BB/20203, almost similar orders have been passed. 23. Hence, in as much as the contention raised that, the principles of ratio propounded by Dilip B Jiwrajka (Supra) was violated, we are of the view that at the stage of the submission of the report under Section 99 of the I & B Code, 2016, which only facilitates the Ld. Adjudicating Authority to collate the necessary material in order to adjudicate on the need for initiation of the IRP proceeding under Section 95 of the I & B Code, 2016, no principle of natural justice has been violated, and that the Resolution Professional has given sufficient opportunities to present their ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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