TMI Blog2023 (2) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... irregularities or dehors the statutory provisions and the rules framed thereunder which is not the case - there was no violation of the statutory provisions in bringing about the replacement of the Resolution Professional by the CoC and all procedural compliances having been met, there is no room to hold the process to have been vitiated in any manner. Since the requirements laid down by IBC have been met, the Adjudicating Authority is duty bound to abide by the discipline of the statutory provisions. Whether the decision of the CoC to replace the Resolution Professional being the outcome of the wisdom of the CoC, is not subject to judicial review? - HELD THAT:- CoC had deliberated on the performance of the Resolution Professional before considering to move the resolution and putting the same to vote. Further, since the decision of the CoC to replace the Resolution Professional was taken by exercising of voting rights assigned to the creditors, it was not necessary for Adjudicating Authority to look into reasons or decide whether there were sufficient reasons for change of the Resolution Professional as the Adjudicating Authority cannot don the mantle of a supervising authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Order ) passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi, Court V) in IA No. 3757/2022 in CP (IB) No. 1731 of 2019. By the Impugned Order, the Adjudicating Authority rejected the application for replacement of Resolution Professional with one Mr. Sapan Mohan Garg though approved by the Committee of Creditors ( CoC in short) by a voting share of 76.69%. Aggrieved by this impugned order, the present appeal has been preferred by Venus India Asset-Finance Pvt. Ltd. ( VIAF in short), being one of the Financial Creditors of the Corporate Debtor which is under the rigours of Corporate Insolvency Resolution Process ( CIRP in short). 2. The brief facts of the case which are necessary to note for deciding the appeal are: - M.K. Overseas Private Limited Corporate Debtor was admitted into CIRP on 19.09.2019 following admission of Section 7 application filed by Mayoga Investment Private Limited, a financial creditor. Following initiation of CIRP, Mr. Suresh Kumar Jain was appointed as Interim Resolution Professional on 19.09.2019 and later confirmed as Resolution Professional by the CoC in the 2nd CoC meeting which concluded on 30.10.2019. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale adopted by the Adjudicating Authority in rejecting the application. Elaborating further, it was submitted that the Adjudicating Authority, disallowed the application for replacement of Resolution Professional on the ground that the IBC does not envisage any decision-making role for the CoC once it has approved the Resolution Plan and the Resolution Plan is pending adjudication of the Adjudicating Authority. 5. It has been further contended that a decision under Section 27 to replace the Resolution Professional can be taken up at any time during CIRP and that this has been expressly defined in the Regulation 2(e) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ( Regulations in short) and includes the time up to the approval of the Resolution Plan by the Adjudicating Authority and further time until the disposal of appeal under Section 62 of the IBC. Stating that the Adjudicating Authority has misconstrued the provisions of the IBC, the Learned Counsel for the Appellant further pointed out that Explanation to Regulation 18 clarifies the position in that in terms of the said Explanation, the CoC is well wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Section 28 would become impossible to perform if the CoC ceases to exist. Even the CIRP cost cannot be ratified if the CoC ceases to exist. It was therefore contended that the Adjudicating Authority has misunderstood, misconstrued and mis-applied the provisions of IBC. 8. The Learned Counsel for M/s Drip Capital Inc., having 0.5% voting share also stated that it had voted in favour of replacement of the Resolution Professional. 9. The Learned Counsel for the Respondent /Resolution Professional has contended that the appeal is not maintainable since it has been filed by VIAF in private and individual capacity and not representing the CoC. Further, in the absence of any Board resolution of VIAF authorising Ms. Prerna Bajaj to file the appeal, the appeal may be treated as non-instituted. 10. Making further submissions, the Learned Counsel for the Respondent/Resolution Professional while admitting that Section 27 of the IBC allows for replacement of the Resolution Professional but added that this replacement was only possible at any time during the Corporate Insolvency Resolution Process . Expanding on the words during the CIRP period , it was submitted that Section 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectly impacted the pending Resolution Plan and hence not permissible. The Resolution Plan would have been affected since it is the Resolution Professional who has to certify that the Resolution Plan complies with the requirements of IBC and that it is in compliance with Section 30(2) of the IBC. 13. Pointing out that the CoC in the 21st meeting proceedings has recorded that the representative from VIAF had submitted that an aggressive approach on the part of the Resolution Professional is required to close the CIRP is bound to indirectly reflect poorly on the part of the concerned Resolution Professional which would be prejudicial to his reputation. VIAF had indirectly commented on the performance of the Resolution Professional at a time when the Resolution Professional could not be blamed for delay in the approval of the Resolution Plan. The Resolution Professional had submitted the Resolution Plan before the Adjudicating Authority on 09.12.2020 within the permitted time frame of CIRP but the Plan could not reach its logical conclusion due to several rounds of hearing before the Adjudicating Authority and other related administrative reasons and not on account of any failing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essional as a resolution professional or to replace the interim resolution professional by another resolution professional. (3) Where the committee of creditors resolves under sub-section (2) - (a) to continue the interim resolution professional as resolution professional, it shall communicate its decision to the interim resolution professional, the corporate debtor and the Adjudicating Authority; or (b) to replace the interim resolution professional, it shall file an application before the Adjudicating Authority for the appointment of the proposed resolution professional. (4) The Adjudicating Authority shall forward the name of the resolution professional proposed under clause (b) of sub-section (3) to the Board for its confirmation and shall make such appointment after confirmation by the Board. (5) Where the Board does not confirm the name of the proposed resolution professional within ten days of the receipt of the name of the proposed resolution professional, the Adjudicating Authority shall, by order, direct the interim resolution professional to continue to function as the resolution professional until such time as the Board confirms the appointment of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing % Venus India Asset Finance Pvt. Ltd 74.55 74.55 -- -- -- HDFC Bank Limited 12.02 -- -- -- 12.02 Yes Bank Limited 11.29 -- -- 11.29 -- Drip Capital INC 2.05 2.05 -- -- -- Mayoga Investments Limited 0.09 0.09 -- -- -- Total 100.00 76.69 0 11.29 12.02 19. Next we may peruse the resolutions as passed in the said CoC meeting:- RESOLVED THAT pursuant to section 27 read with section 22, and other applicable provisions of Insolvency and Bankruptcy Code, 2016 read with regulation 3(1A), 31(D) and 34 of IBBI (Insolv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed thereunder having laid down in unambiguous terms the manner and procedure for replacement of the Resolution Professional and the CoC having acted in conformity with those provisions, the CoC was well within its rights to replace the Resolution Professional with a new one of its own choice. There is no disagreement that the replacement of Resolution Professional is complete when the required decision is taken by the CoC in its meeting with requisite majority. Interference would be warranted only if the decision of the CoC was suffering from material irregularities or dehors the statutory provisions and the rules framed thereunder which is not the case. We, therefore, hold that there was no violation of the statutory provisions in bringing about the replacement of the Resolution Professional by the CoC and all procedural compliances having been met, there is no room to hold the process to have been vitiated in any manner. Since the requirements laid down by IBC have been met, the Adjudicating Authority is duty bound to abide by the discipline of the statutory provisions. 22. This now brings us to the second question identified by us in that whether the replacement of the Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Professional given that 330 days have already passed from the date of initiation of CIRP and no adverse references have been received by the CoC regarding the performance of the Resolution Professional. Further it has held the decision of the CoC to replace the Resolution Professional at this juncture to be untenable and misconceived when Resolution Plan has already been submitted to Adjudicating Authority and that this is not in conformity with the provisions of the Code as the Code does not envisage any role or decision to be taken by the CoC after it has approved the Resolution Plan. 25. The view taken by the Adjudicating Authority is that 330 days of CIRP having expired on 24.12.2020, the Resolution Plan has reached an advanced stage and in this backdrop cognisance has to be taken that the overarching objective of the IBC is to complete CIRP in a time-bound manner so that the value of assets of the Corporate Debtor is not depleted is well taken. We notice that the same objective of bringing the CIRP to a closure was also one of the triggers for holding the 21st meeting of CoC. In view of the sluggish rate of CIRP progress, the CoC by majority vote felt that a new Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CoC which it can decide by way of voting. It has also been contended that the jurisdiction of Adjudicating Authority is circumscribed by the provisions of IBC and they cannot reverse the decision supported by majority in the CoC. 28. Attention has also been adverted to Explanation to Regulation 18 to state that it clearly empowers the CoC to hold meetings till the resolution plan is approved under sub-section (1) of section 31 or order for liquidation is passed under section 33. It may be relevant to reproduce the same as under: Regulation 18 18. Meetings of the committee. (1) A resolution professional may convene a meeting of the committee as and when he considers necessary. (2) A resolution professional may convene a meeting, if he considers it necessary, on a request received from members of the committee and shall convene a meeting if the same is made by members of the committee representing at least thirty three per cent of the voting rights. (3) A resolution professional may place a proposal received from members of the committee in a meeting, if he considers it necessary and shall place the proposal if the same is made by members of the committee representi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case since in that case no Resolution Plan had been approved by the CoC and the Resolution Professional had filed application for liquidation and order of liquidation had been passed. Hence, this judgement does not come to the aid of the Respondent/Resolution Professional. Further it has also been submitted by the Learned Counsel for the Respondent/ Resolution Professional that this Tribunal in the matter of Sanjay Kumar Ruia v. Catholic Syrian Bank Ltd. Anr. in Company Appeal (AT) (Ins.) No. 560 of 2018 has held that after completion of 270 days, the CoC ceased to exist and thereby they have no jurisdiction to replace a Resolution Professional. The said judgment is also not applicable since the facts are distinguishable since in that case there was no Resolution Plan. 32. Coming to the findings of the Adjudicating Authority that the conduct of the Resolution Professional has been satisfactory and that no adverse references were received by the CoC regarding the performance of the Resolution Professional, we have done a fact-check by going through the proceedings of the 21st CoC meeting at Annexure A-3 in the Appeal Paper Book. The relevant excerpts are as extracted bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case too, the Appellant while filing the application for replacement of the Resolution Professional has desisted from making any adverse observations on his performance and thus cannot be held to have acted in any manner contrary to law or having not adhered to the precepts laid down in the above judgments. 34. It has also been pointed out by the Learned Counsel for the Appellant that the impugned order contains submissions of the Resolution Professional which were not part of the records. Specific reference was made in respect of para 6 of the impugned order which records allegations and responses which were neither pleaded nor orally made in the first place and therefore there was no occasion to return the said findings. As no allegations were made against the Resolution Professional in the application filed by the Appellant before the Adjudicating Authority and there was no other pleading on record or argument to that effect, there was absolutely no occasion to embark upon a detailed discussion on the conduct of the Resolution Professional as has been done in the impugned judgment. This fact was not denied by the Learned Counsel for the Respondent/Resolution Professional. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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