While the Indian Bankruptcy Code has vested significant powers in the hands of the resolution professional (RP), the National Company Law Appellate Tribunal (NCLAT) has ruled that these are not without limits. It has clarified that the bankruptcy court has the powers to replace an RP if it is not satisfied with the functioning. It was hearing an appeal by Devendra Padamchand Jain, the RP for VNR Infrastructures, against his removal by the Hyderabad bench of the National Company Law Tribunal (NCLT). “We hold that the adjudicating authority has jurisdiction to remove the resolution professional if it is not satisfied with its functioning of the resolution professional, which amounts to non-compliance of sub-section (2) of Section 30 of the I & B Code,” the order said. The ruling, the first of its kind on the subject, is expected to be cited as a precedent in all future instances. In the matter of VNR Infrastructures, the RP had appealed that the order passed by the NCLT replacing the appellant as resolution professional with a liquidator, and not appointing him as the liquidator, was beyond its jurisdiction. According to the appeal, the tribunal is required to appoint the resolution professional as the liquidator for the purpose of resolution process. However, the NCLT had removed the RP and appointed TSN Raja as the liquidator in VNR Infrastructures.
“The bench is also of the prima facie view that the existing RP has not assisted the Adjudicating Authority to the satisfaction during various hearings held,” the NCLT had said in its August-2017 order. The appellate tribunal ruled that the adjudicating authority is empowered to replace an RP in case the resolution plan submitted is rejected for failure to meet the requirement mentioned under sub-section (2) of Section 30 of the Insolvency and Bankruptcy Code (IBC). Under Section 30 (2) of the Code, the resolution professional shall examine each resolution plan to confirm it provides for the payment of insolvency resolution process costs, repayment of the debts of operational creditors and does not contravene any of the provisions of the law.
The counsel representing State Bank of India (SBI) informed the NCLAT that the newly-appointed liquidator, Raja, had held meeting with all the stakeholders on September 29, 2017 and appointed valuers to assess the assets, collected claims from various agencies and is running the business as a going concern to save bank guarantees and security deposits. “The financial creditors have no grievances against Raja and have full faith in him,” the counsel told NCLAT. According to the NCLAT order, lenders listed as respondents include State Bank of India (SBI), Indian Overseas Bank (IOB), Punjab National Bank (PNB), Bank of India (BoI), Bank of Baroda (BoB) and IFCI.