INDEPENDENCE OF IRP OR RP VIS A VIS CORPORATE CREDITOR- SUPREME COURT REVERSE ORDER OF NCALT – views of author find approval- however, author request honorable judges that reasoned and elaborate judgments to avoid further disputes.

[DEV KUMAR KOTHARI]

Recent judgment:

Honorable Supreme Court’s judgment dated 19082020 in case of STATE BANK OF INDIA VERSUS M/S METENERE LTD. [2020 (8) TMI 682 - SC ORDER]

Earlier article:

Independence of IRP/ RP – law specifically provides for independence from Corporate Debtor only and not from Corporate Creditor. NCLAT/ NCLT ask for substitution of IRP / RP - not justified and is not as per law and general practices.   An Article By: - DEV KUMAR KOTHARI August 26, 2020

In this article links for relevant provisions and chain of judgments are provided so the same are not reproduced. Readers are requested to refer the earlier articles.

In above article author had discussed provisions, various aspects and practices and opined that the orders of NCLT and NCALT holding that the IRP/ RP should also be independent of Corporate Creditor is not correct and the order is based on presumption, bias and conjecture. Author had given several reasons for such views expressed by him.

Views of author find approval in judgment of the Supreme Court:

Author was working on this subject and document of earlier article was created on 21082020 and the article was published on 26082020. At that time the judgment of the Supreme Court though dated 19082020 was not found in search and was not available to author for incorporation in the article.  Therefor reasoning and conclusions of author as expressed in the article were independent, in fact in the order of NCLT and NCLAT also we find that not much was said in favour of appointment of Ex-officer of Corporate Creditor / SBI except admitting that there was no disqualification attached to the IRP.

The judgment of the Supreme Court (with highlights added by author):

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2570 OF 2020

STATE BANK OF INDIA .. APPELLANT(S)

VERSUS

M/S METENERE LTD. .. RESPONDENT(S)

O R D E R

Heard learned counsel for the parties at length. We are prima facie satisfied that the approach adopted by the National Company Law Appellate Tribunal, New Delhi (NCLAT) is not correct that merely Resolution Professional who remained in the Service of SBI and is getting pension, was  disentitled to be Resolution Professional.

 

However, since Mr. Tushar Mehta, learned Solicitor General as well as Mr. Krishnan Venugopal, learned senior counsel have agreed for appointment of new Resolution Professional by NCLT, let new Resolution Professional be appointed by the NCLT forthwith within a week in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.

We may observe that the change of Resolution Professional shall not reflect adversely upon the integrity of concerned Resolution Professional, who

has been replaced.

Since the impugned order does not reflect the correct approach, the same shall not be treated as a precedent.

 

Accordingly, the civil appeal is disposed of.

..............…….J.

[ ARUN MISHRA ] 

...................J.

[ B.R. GAVAI ]

....................J.

[ KRISHNA MURARI ]

NEW DELHI,

AUGUST 19, 2020.

Observations of author:

The judgment of the Supreme Court is of a larger  bench consisting of three judges.

Counsels of parties were heard at length.

However, the honourable Judges, have expressed their views described as

1.   “ We are prima facie satisfied that the approach adopted by the National Company Law Appellate Tribunal, New Delhi (NCLAT) is not correct”
2.   that merely Resolution Professional who remained in the Service of SBI and is getting pension, was  disentitled to be Resolution Professional.
    
3. Since the impugned order does not reflect the correct approach, the same shall not be treated as a precedent.

Views of author:

The matter was important, may be for this reason it was heard by a larger bench. With due respect to their lordships, author feel that the way in which the judgment is written can lead to further litigation because of the following reasons:

1. It is based on prima facie satisfaction,
2. No reason has been given,
3. No provisions have been discussed about independence of  IRP/ RP vis a vis  debtor but no such provision about independence with creditor no discussion has been made about provision which mandates that the Corporate Creditor shall, in application mention the name of proposed IRP/ RP. That is a vital aspect.
4. No discussion has been made about absence of any  rights of Debtor to raise an objection on independence of proposed IRP/ RP.
5. No discussion has been made as to  mere expression of doubts by  debtor and confirming the same by  NCLT and NCALT who rendered judgments based on presumption of bias and not for any valid reason.
6. When the matter was heard at length, the honourable judges could preferred to ask their PS to mention important arguments in the judgment.
7. In view of author, the mention  in the judgment that
    
    “ Since the impugned order does not reflect the correct approach, the same shall not be treated as a precedent”.
    
   is also likely to raise disputes because once the order of NCALT is held to be incorrect, by the Supreme Court, it goes without saying that the views expressed by NCALT are not correct and does not remain valid and binding. The judgment  of the Supreme Court is binding and is settled law.
   However, this sort of mention in the judgment can create fertile ground to argue that the Supreme Court has not declared law on the subject.
    
   With due respect author feels that their lordships must be assisted by efficient team of legal assistants of judges,  secretaries, and court officers including counsels of parties. In times of use of computer enabled services, it is easy to write elaborate , reasoned judgments to settle disputes and declare law finally. In this regard and on similar subjects readers can refer to earlier articles by author on similar subject. For example,  two earlier articles of author:

1. THEIR LORDSHIPS OF THE SUPREME COURT NEED MORE CAREFUL ASSISTANCE OF SECRETARIES, COURT OFFICERS INCLUDING COUNSELS FOR PARTIES. An Article By: - CA DEV KUMAR KOTHARI  May 14, 2020.
2.  Reasoned orders and judgments: Authorities, Tribunals, Courts and even Supreme Court must pass reasoned and speaking order.  C.A. DEV KUMAR KOTHARI  June 22, 2010