NCLAT intervenes in controversy over naming Resolution Professional and Authorized Representative

NCLAT intervenes in controversy over naming Resolution Professional and Authorized Representative

As per the Appellate Tribunal, the Adjudicating Authority was required to follow this procedure which was not done

The appeal filed by the Appellants (Prakash Shankar Mishra & Ors and Sampoorna Owners Welfare Association) being the Members of COC pertaining to the CIRP of the Corporate Debtor – M/s Dreamz Infra India Ltd has been remitted back to the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench) with certain directions.

The grievance of the Appellant was that despite provisions under Section 22 of the Insolvency and Bankruptcy Code, 2016 (IBC), the Adjudicating Authority did not appoint persons selected by the COC (Committee of Creditors) as Resolution Professional and Authorized Representative and appointed the present Respondents 1 and 2 (Ashok Kriplani & Anr.).

The Appellant argued that although the respondent proposed name of Konduru Prasanth Raju as the Authorized Representative for the Financial Creditors (home and shop buyers) of the Corporate Debtor, he sought setting aside the selection of Mr Raju which was approved by COC and proposed the name of one Suresh Kannan.

It was argued that the Adjudicating Authority went still further and appointed Respondent No. 1 as RP and the Respondent No. 2 as the Authorized Representative instead of Konduru Prasanth Raju and Hari T. Devadiga. The Counsel submitted that the Adjudicating Authority could not have done this.

The Respondent put forth that the orders passed by the Adjudicating Authority were in the interest of the CIRP proceedings and to protect the interest of the Corporate Debtor. He submitted that the appeal deserved to be rejected.

The NCLAT on 13 January 2021 opined that considering the provisions as found in Section 22 of IBC, it is the discretion of the COC whether or not to confirm the IRP appointed at the time of admission of the application under Section 7, 9 or 10 as the case may be. If the IRP is continued, it is required to be informed to the Adjudicating Authority as per Section 22(3)(a).

If the COC decides to replace the IRP, it has to file an application before the Adjudicating Authority to appoint proposed Resolution Professional. This was done when the application was filed informing the Adjudicating Authority regarding the selection of Konduru Prasanth Raju as RP.

Sub-Section (4) of Section 22 provides that the Adjudicating Authority in such situation should forward the name of the Resolution Professional proposed under Clause (b) of Sub-Section (3) to the IBBI (Insolvency and Bankruptcy Board of India) for confirmation and such appointment will be made after the confirmation by the Board.

Under Sub-Section (5) of Section 22, if the Board does not confirm the name of the proposed Resolution Professional within 10 days of the receipt of the name, then the Adjudicating Authority shall direct the IRP to continue to function as Resolution Professional until such time as the Board confirms the appointment of the Resolution Professional.

Section 21(6-A) has provision with regard to Authorized Representative. This Section is required to be read with Regulation 16A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Regulation 16A of these Regulations records procedure with regard to the selection of Resolution Professional to act as Authorized Representative.

The Appellant Tribunal further stated that when Section 21(6-A) is read with these Regulations, and Resolutions passed by COC are kept in view, it is apparent that the Adjudicating Authority was required to treat Hari T. Devadiga as the Authorized Representative whose name was even recognised by the Respondent No.1. It was noted that the Adjudicating Authority had no power to impose Resolution Professional of its choice.

As per the Appellate Tribunal, the Adjudicating Authority was required to follow this procedure which was not done and the Adjudicating Authority appeared to have asked Respondent No.1 if he was willing and went ahead to appoint Respondent No.1 - Ashok Kriplani as the Resolution Professional and Respondent No.2 – Viswanathan Sankaran as the Authorized Representative.