In a case of Power Finance Corporation Limited Vs Mahender Khandelwal, NCLT of Hyderabad has held that the Power to replace an Interim Resolution Professional (IRP) and appoint a new individual as Resolution Professional solely and absolutely vested with the Committee of Creditors (COC).
NCLT further held that the pre-requisites for replacing the Interim Resolution Professional is meeting the requirement under section 22 of the IBC, 2016 and the same could not be done without recording of the reasons.
K Anantha Padmanabha Swamy (Judicial Members) has passed the order.
Here an application under section 7 IBC was filed by the Financial Creditor i.e Power Finance Corporation Limited against the corporate debtor KSK Mahanadi Power Company Ltd.
The same was admitted in October, 2019 and Mahender Khandelwal was appointed as an Interim Resolution Professional.
Thereafter, in 2020 committee of creditors were appointed and in their fourth meeting, Mahender Khandelwal was replaced by them and appointed Sumit Binani as new Interim professional in terms of section 22 IBC.
While the financial creditor has moved an application under section 22(3) IBC to confirm the appointment of Sumit Binani as Resolution professional, and Mahender khandelwal also moved a separate application to Coc to reconsider their application.
Khandelwal broadly argued that-
- Financial creditor application is required to be dismissed on the ground that there was no Coc resolution in its favour to file the application for approval.
- Replacement of him was not justified in view of the fact that an order passed by the Insolvency and Bankruptcy Board of India in connection with Kahndelwal’s term a Resolution professional for Bhushan Power and Steel, inter alia barring him from taking fresh assignments, which had already been stayed by the Delhi High Court.
- Coc was duly informed about the proceedings before Delhi High Court and in the absence of any legal bar on his appointment, COCs decision was devoid of any reasoning and merit.
- The decision of the replacement was taken at a very belated stage of CIRP i.e. three months, which would hamper the interest of the Corporate Debtor.
However, the Financial creditor at later stage submitted that Sumit Binani’s appointment as a Resolution professional was taken by 89.6% majority and was thus unequivocal in nature.
Further Financial Creditor, inter alia contended as follows-
- Interim professionals had no vested right to be appointed as a Resolution professional.
- The decision of the Coc was non justifiable if conditions under section 22 IBC are complied with.
- The commercial wisdom of the Coc prevailed on the facts of any case and any transgression of the same was in violation of the spirit of IBC.
After observing all the arguments made by the parties, NCLT opined that a mere technical objection regarding the authorization on behalf of Coc to one of its members could not construe a valid ground for rejection of plea under section 22 IBC when the appointment was backed by the majority votes and did not cause any hardship to any member of the coc.
It further stated that COC under section 22 IBC has full power to replace the Interim Resolution professional for recording any reasons of the same, it said-
“It is prerogative of the CoC whether to continue the IRP as then RP or to replace the IRP with another RP.”
NCLT held that power to replace IRP is on Coc and only the pre-requisites was meeting the requirements as per section 22 of IBC.
NCLT therefore dismissed Khandelwal’s application and allowed Financial creditor’s Application.
It further directed the registry to forward the name of the proposed resolution professional to IBBI for its confirmation.
Fnacila credito/CoC was represented by Advocate Bishwajit Dubey from Cyril Amarchand Mangaldas.
Wegeras Kahdelwal was represented by senior advocate L Ravichandran and Advocate Ranjana Roy Gawai.