Union Bank of India Vs Islamuddin Kagzi (NCLT Jaipur)
The NCLT Jaipur considered an application filed by a Personal Guarantor under Section 98 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 11 of the National Company Law Tribunal Rules, 2016, seeking replacement of the Resolution Professional (RP) appointed in proceedings initiated under Section 95 IBC. The applicant contended that the Adjudicating Authority had the power under Sections 97 and 98 of the IBC to substitute the RP and that such power could also be exercised at the instance of a Personal Guarantor. The applicant further submitted that the RP’s role in personal guarantor proceedings was consultative and facilitative.
The Tribunal examined whether an RP appointed in proceedings under Section 95 could be replaced after admission under Section 100 IBC and whether the facts of the case justified such replacement. On a conjoint reading of Sections 97, 98, 99 and 100 IBC, the Tribunal held that the RP’s statutory functions continue even after submission of the report under Section 99 and admission under Section 100. Consequently, the jurisdiction of the Adjudicating Authority to consider replacement of the RP is not exhausted upon admission of the insolvency application.
The Tribunal further held that Section 98 IBC does not restrict the right to seek replacement of the RP exclusively to the creditor. A Personal Guarantor, being directly affected by the insolvency resolution process, is entitled to invoke the Tribunal’s jurisdiction under Section 98 where legally sustainable grounds are established.
