Ashwani Kumar Bhatia Vs Union of India (Madras High Court)
Madras High Court held that circular dated 21.12.2023 allowing creditor to recommend a Resolution Professional for appointment is neither ultra vires nor violative of provisions of the Insolvency and Bankruptcy Code [IBC]. Accordingly, writ petition dismissed.
Facts- These Writ Petitions are filed seeking a Writ of Declaration to annul the impugned circular, dated 21.12.2023, issued by the Insolvency and Bankruptcy Board of India (IBBI), the second respondent herein, on the grounds that it is ultra vires and violative of the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), particularly Sections 97(3), 97(4), and 97(5) of the IBC.
IBBI issued the circular, dated 21.12.2023 in exercise of its powers under Section 196 of the IBC to all registered Insolvency Professionals, recognized Insolvency Professional entities, and registered Insolvency Professional Agencies. The impugned circular aimed to clarify the submission of particulars and declarations by the Insolvency Professional in the application filed by the creditors in Part-IV in Form-C of the Insolvency and Bankruptcy (Application to the Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (the Personal Guarantors Rules).
Conclusion- Held that the IBBI scrutinises the Resolution Professionals and empanels them. Once the Resolution Professionals are empanelled, the IBBI will nominate one among them. As the creditor is given an option only to nominate from the panel, it can effectively be seen that the nomination is ultimately only by the IBBI. Therefore, the circular emerges as a practice direction and pragmatic tool for fulfilling the purposes of the IBC, thereby saving time and increasing efficiency. The debtor is always entitled to inform the adjudicating authority of any adverse circumstances, including potential conflicts of interest or any other valid grounds, which may disqualify a person from being a facilitator. The adjudicating authority holds the final power under Section 97(5) of the Act, and the order issued by the adjudicating authority is also subject to appeal. Hence, no prejudice is caused to the petitioners or personal guarantors. Thus, I hold that the impugned circular, dated 21.12.2023, is neither ultra vires nor violative of the provisions of the IBC.
