2022 (11) TMI 647 - AT - Insolvency and Bankruptcy

Seeking replacement of IRP - seeking replacement on the ground that the Interim Resolution Professional is working under the influence of the Suspended Board of Directors - bonafide intention or not - existence of nexus between Corporate Debtor and the Interim Resolution Professional - HELD THAT - The principle of an interpretation of the Statute is that when the language employed in the Relevant Section / towards a Proviso of Code / Act / Statute then it has to be read in a simple / plain and harmonious manner without causing any volatile harm to the language used therein and not in any other manner. The ingredients of Section 22 (3) of the Insolvency Bankruptcy Code 2016 very clearly confers power on the Committee of Creditors to replace the Interim Resolution Professional by preferring an Application before the Adjudicating Authority for the Appointment of the Proposed Resolution Professional (along with the Written Consent from the Proposed Resolution Professional in the Specified Form) - When the ingredients of Section 22 (3) (b) of the Code explicitly spells out for the Appointment of the proposed Resolution Professional then this Tribunal is of the considered opinion that the invocation of Rule 11 of the National Company Law Appellate Tribunal Rules 2016 cannot be pressed into service in the teeth of the I B Code 2016 showering Powers only on the Committee of Creditors to replace the Interim Resolution Professional. This Tribunal holds that the conclusion arrived at by the Adjudicating Authority (National Company Law Tribunal Bengaluru Bench Bengaluru) observing that the said Interlocutory Application is not maintainable for the Replacement of the Interim Resolution Professional is free from any Legal Flaw - Appeal dismissed.

Summary

Issues Involved:
1. Maintainability of the application for replacement of the Interim Resolution Professional (IRP) by the ex-director of the Corporate Debtor.
2. Allegations of bias and lack of independence against the IRP.
3. Interpretation of Section 22(3) of the Insolvency and Bankruptcy Code (IBC), 2016.
4. Applicability of Rule 11 of the National Company Law Appellate Tribunal (NCLAT) Rules, 2016.

Issue-Wise Detailed Analysis:

1. Maintainability of the Application for Replacement of the IRP:
The Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench, Bengaluru) dismissed the application filed under Section 60(5) of the IBC, 2016 by the ex-director of the Corporate Debtor for the replacement of the IRP. The Authority held that the application was not maintainable as it was not filed by the Committee of Creditors (CoC) or the Resolution Professional (RP). The Tribunal found "No Merits" in the application and dismissed it as not maintainable.

2. Allegations of Bias and Lack of Independence Against the IRP:
The Appellant, a suspended director/shareholder of the Corporate Debtor, contended that the IRP was acting under the influence of the suspended Board of Directors and not independently. The Appellant alleged that the IRP had allocated shares in the CoC to entities/persons related to the Corporate Debtor, indicating a lack of bona fide intention and bias. The Appellant sought the replacement of the IRP on these grounds.

3. Interpretation of Section 22(3) of the IBC, 2016:
The Tribunal posed a query regarding the Appellant's standing to file the appeal under Section 22(3) of the IBC, 2016, which empowers only the CoC to replace the IRP. The Tribunal emphasized that the language of Section 22(3) is clear and confers the power to replace the IRP exclusively on the CoC, which must file an application before the Adjudicating Authority for the appointment of a proposed Resolution Professional along with the latter's consent in the specified form.

4. Applicability of Rule 11 of the NCLAT Rules, 2016:
The Appellant invoked Rule 11 of the NCLAT Rules, 2016, which pertains to the inherent powers of the Tribunal. However, the Tribunal held that the invocation of Rule 11 could not override the explicit provisions of the IBC, 2016, which grant the power to replace the IRP solely to the CoC. The Tribunal stated that the statutory language must be read in a plain and harmonious manner without causing any harm to its intent.

Conclusion:
The Tribunal concluded that the Adjudicating Authority's decision to dismiss the application for the replacement of the IRP was free from any legal flaw. The Tribunal held that the application was not maintainable as it was not filed by the CoC, as required by Section 22(3) of the IBC, 2016. Consequently, the appeal was dismissed for lack of merits, and no costs were awarded.