IDBI Bank Limited Vs C.J. Davis (NCLAT Chennai)
Held that the decision in regard to appointment of IRP as RP or replacement of IRP by another RP falling within the ambit of Section 22 of I&B Code, 2016 is a decision based on commercial wisdom of CoC. Thus, decision of the CoC, in accordance with law the same cannot be interfered with by the Tribunals
Facts-
The Appellant submitted that the Adjudicating Authority rejected the Application filed by the Appellant /Financial Creditor under Section 22(3)(b) of the I& B Code, 2016. The above applications have been made by the Appellant praying the Bench to appoint Shri CA Mahalingam Suresh Kumar as Resolution Professional of the Corporate Debtor. However, the Learned Adjudicating Authority rejected the prayer of the Appellant, aggrieved by the same the present Appeal is preferred.
Conclusion-
Appointment of RP is governed by Section 22 which provides that the 1st Meeting of CoC shall be held within 7 days of constitution of CoC and the Coc may by a majority vote of not less than 66% of the voting share of Financial Creditors either resolve to appoint the IRP as a Resolution Professional or to replace the IRP by another Resolution Professional. It is now well settled that the decision in regard to appointment of IRP as RP or replacement of IRP by another RP falling within the ambit of Section 22 of I&B Code, 2016 is a decision based on commercial wisdom of CoC, which is not amenable to judicial review.
Held that admittedly the 1st CoC was held on 21.01.2022 and at Agenda Item No. B-4 the CoC in accordance with Section 22(2) of the I& B Code, 2016, was resolved unanimously resolved for appointment of Shri CA Mahalingam Suresh Kumar as the Resolution Professional in respect of the Corporate Debtor. This Tribunal is of the view that, since two Members of CoC participated it is deemed 100% voting share in favour of the Resolution and it is a unanimous. In any case, the Appellant is having the majority voting share accorded the Resolution for appointment of new RP.
Held that If the decision of the CoC, exercising their commercial wisdom in accordance with law the same cannot be interfered with by the Tribunals
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
The Present Appeal is filed against the Impugned Order dated 09.02.2022 passed by the Adjudicating Authority (National Company Law Tribunal, Kochi Bench, Kerala) in IA No. 26 of 2022 in CP (IB) No. 29/KOB/2021, whereby the Adjudicating Authority rejected the IA filed by the Appellant / Financial Creditor.
Brief Facts:
Appellant’s Submissions:
2.The Learned Counsel for the Appellant submitted that the Adjudicating Authority rejected the Application filed by the Appellant /Financial Creditor under Section 22(3)(b) of the I&B Code, 2016. The above applications have been made by the Appellant praying the Bench to appoint Shri CA Mahalingam Suresh Kumar as Resolution Professional of the Corporate Debtor. However, the Learned Adjudicating Authority rejected the prayer of the Appellant, aggrieved by the same the present Appeal is preferred.
3. It is submitted that the Appellant Bank filed Company Application before the Learned Adjudicating Authority under Section 7 of the I&B Code, 2016 seeking for Initiation of the CIRP against the Corporate Debtor and in the said Application, the Appellant had proposed to appoint Shri CA Mahalingam Suresh Kumar as the IRP after its internal selection process. However, the Learned Adjudicating Authority rejected the name as proposed by the Appellant for the reason that the proposed name was not finding in the NCLT, Kochi Bench’s list of Insolvency Professionals circulated by the IBBI and appointed the Respondent from the said list as the IRP to carry out the CIRP of the Corporate Debtor.
4. The IRP after analysis of the claims has constituted the CoC by naming the Appellant Bank as the major Financial Creditor of the Corporate Debtor by allotting 98.03% voting rights. The 1st CoC Meeting held on 21.01.2022 by the IRP as the Chairman in which various resolutions were proposed and the same was considered by the CoC and most importantly the CoC has proposed and recommended to appoint Shri CA Mahalingam Suresh Kumar as Insolvency Professional and valid Authorization For Assignment (AFA) issued by IBBI.
5. The CoC Members comprising of the Appellant Bank and South Indian Bank, after elaborate discussions about the experience and the past handled assignments of the IRP has unanimously decided to appoint Shri CA Mahalingam Suresh Kumar as an IRP and passed an unanimous resolution for replacement of the IRP and appointment of Shri CA Mahalingam Suresh Kumar as the RP in compliance with Section 22(2) of the I&B Code, 2016 and filed an Application before the Learned Adjudicating Authority.
6. The Learned Adjudicating Authority rejected the Application on the ground that the Respondent IRP is eligible to be appointed as RP and he offered himself to be appointed as RP on the 1st CoC Meeting for a professional fee of Rs.1,50,000/- per month. Further, the Learned Adjudicating Authority was of the view that the present IRP is eligible to be appointed as an RP since there is no adverse comments against him and there is no reason to replace him. Further, the Learned Adjudicating Authority was of the view that Shri CA Mahalingam Suresh Kumar cannot be appointed as the RP of the Corporate Debtor as his name is not available in the panel issued by the IBBI for Kochi Bench for the period from 01.01.2022 to 30.06.2022 or in the earlier panel from 01.07.2021 to 31.12.2021, therefore, he cannot be appointed as the RP.
7. The Learned Adjudicating Authority erred in rejecting the Application on the ground that appointing IRP from the panel of IP’s circulated by IBBI and not considering the appointment of IRP as proposed by the Appellant is in contravention of provisions of law. Since as per Section 16(2) of IBC, it is mandatory on the part of the Learned Adjudicating Authority to appoint the proposed IRP as long as there is no disciplinary proceedings against the said RP and who holds valid Authorization For Assignment (AFA). The Learned Adjudicating Authority failed to take into consideration that the Appellant Bank being the Member of CoC and holding more than 98% voting rights, passed resolution for appointment of Shri CA Mahalingam Suresh Kumar and rejecting the Application is in gross violation of the Appellant’s rights under law and the impugned order is arbitrary and liable to be set aside.
8. The Learned Adjudicating Authority erred in rejecting the Application for appointment of RP in contravention to Section 22(4) and (5) of the I&B Code, 2016 and has acted beyond its power as it has no equity jurisdiction to decide whether it can appoint or reject the RP proposed to be appointed by the CoC. The Learned Counsel relied upon the judgments of this Tribunal in support of his case.
9. In view of the reasons as stated above, the Learned Counsel prayed this Bench to allow the Appeal and set aside the impugned order passed by the Adjudicating Authority.
Respondent’s Submissions:
10. The Respondent filed reply and submitted that the Hon’ble Adjudicating Authority primarily found that the IRP proposed by the Appellant was handling too many assignments and appointed the Respondent from the panel of IRP maintained by the IBBI. It is submitted that despite rejection of the name proposed by the Appellant, the CoC in its meeting dated 21.01.2022 in which the Appellant hold 98.03% voting share appointed again Shri CA Mahalingam Suresh Kumar as RP replacing the Respondent stating that the CoC approved the appointment and the same is in the domain of CoC members exercising their commercial wisdom.
11. The Learned Counsel further submitted that from the IBBI website the proposed RP is handling many assignments when he was given consent to function as RP. The IP (Insolvency Professional) must refrain from taking too many assignments, if he is unlikely to devote adequate time to each of the assignments under Clause 22 of the Code of conduct of the IP.
12. In view of the aforesaid reasons the Learned Counsel prayed this Bench to dismiss the Appeal.
Analysis / Appraisal:
13. Heard the Learned Counsel for the parties perused the pleadings, documents and citations relied upon by the respective parties. The point for consideration is whether the decision taken by the CoC in their commercial wisdom can be interfered with.
14. The Appellant filed Section 7 Application before the Learned Adjudicating Authority seeking initiation of CIRP against the Corporate Debtor and the Application was admitted on 21.12.2021 and appointed the Respondent Mr. C.J. Davis as the Interim Resolution Professional. The IRP on analysing the claims, constituted the CoC by naming the Appellant as the major Financial Creditor of the Corporate Debtor by allotting 98.03% voting rights. The 1st CoC Meeting held on 21.01.2022 and the IRP acted as Chairman in which various Resolutions were proposed and the same was considered by the CoC. In the said CoC one of the Resolution that has been proposed and recommended to appoint Shri CA Mahalingam Suresh Kumar an Insolvency Professional as Resolution Professional of the Corporate Debtor by circulating his consent. The Appellant had produced the Minutes of the Meeting dated 21.01.2022 along with the Appeal. The constitution of CoC is as under:
