{"id":237401,"date":"2020-10-13T18:43:19","date_gmt":"2020-10-13T13:13:19","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=237401"},"modified":"2020-10-30T11:40:54","modified_gmt":"2020-10-30T06:10:54","slug":"nclats-decoder-on-appointment-of-a-person-as-resolution-professional-will-an-ex-employee-of-financial-creditor-be-eligible-for-appointment-read-on","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2020\/10\/13\/nclats-decoder-on-appointment-of-a-person-as-resolution-professional-will-an-ex-employee-of-financial-creditor-be-eligible-for-appointment-read-on\/","title":{"rendered":"[SC ALERT] NCLAT’s decoder on appointment of a person as Resolution Professional: Will an ex-employee of Financial Creditor be eligible for appointment? Read on"},"content":{"rendered":"

SUPREME COURT ALERT<\/span><\/h3>\n

This NCLAT Order has been set aside by the Supreme Court, the detailed report of which can be found at the end of this piece.<\/span><\/h4>\n

National Company Law Appellate Tribunal (NCLAT):\u00a0<\/strong>The Coram of Justice Bansi Lal Bhat (Judicial Member), V.P. Singh and Shreesha Merla, Technical Members, addressed a grievance with regard to the appointment of Resolution Professional.<\/p>\n

Independent Umpire?<\/span><\/h3>\n

Ex-employee of Financial Creditor appointed as Resolution Professional | NCLT’s position<\/span><\/h4>\n

State Bank of India (Financial Creditor) had filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 with regard to initiation of Corporate Insolvency Resolution Process before the National Company Law Tribunal, Delhi.<\/p>\n

NCLT on noting the objection regarding the proposed ‘Interim Resolution Professional’ — Shailesh Verma directed the Financial Creditor to perform it’s statutorily mandatory obligation by substituting the name of the \u2018Resolution Professional\u2019 to act as an \u2018Interim Resolution Professional\u2019 in place of Shailesh Verma as it was of the view that Shailesh Verma having worked with the State Bank of India for 39 years before his retirement in 2016, there was an apprehension of bias and was unlikely to act fairly <\/span>and could not be expected to act as an Independent Umpire.<\/span><\/p>\n

No disqualification<\/span><\/h4>\n

Aggrieved with the above position, Financial Creditor preferred the instant appeal on the ground that the proposed \u2018Interim Resolution Professional\u2019 Shailesh Verma fulfils the requirement for appointment as \u2018Interim Resolution Professional\u2019\/ \u2018Resolution Professional\u2019 under the \u2018I&B Code\u2019 and admittedly bears no disqualification.<\/span><\/p>\n

Question for Consideration<\/span><\/h4>\n
\n
\n
\n
\n

Whether an ex-employee of the \u2018Financial Creditor\u2019 having rendered services in the past, should not be permitted to act as \u2018Interim Resolution Professional\u2019 at the instance of such \u2018Financial Creditor\u2019, regard being had to the nature of duties to be performed by the \u2018Interim Resolution Professional\u2019 and the \u2018Resolution Professional\u2019?<\/p>\n<\/blockquote>\n

Analysis\u00a0<\/span><\/h3>\n

Regulation 3(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that an Insolvency Professional shall be eligible for appointment as a \u2018Resolution Professional\u2019 for the \u2018Corporate Insolvency Resolution Process\u2019 of a \u2018Corporate Debtor\u2019 if he or his partners and directors of the Insolvency Professional Entity are independent of the \u2018Corporate Debtor\u2019.<\/span><\/p>\n

In view of the above-stated regulation, Mr Shailesh Verma came under the ambit of a qualified Insolvency Professional and neither he nor any of his associates were alleged to be connected with the ‘Corporate Debtor’ in a manner rendering him ineligible to act as a \u2018Resolution Professional\u2019.<\/span><\/p>\n

Tribunal referred to the Supreme Court’s decision in\u00a0Ranjit Thakur v. Union of India,\u00a0<\/em>(1987) 4 SCC 611<\/a>, wherein following was held:<\/p>\n

\n
\n
\n
\n

\u201c17. As to the tests of the likelihood of bias what is relevant is the reasonableness of the apprehension in that regard in the mind of the party. The proper approach for the judge is not to look at his own mind and ask himself, however, honestly, \u201cAm I Biased?\u201d; but to look at the mind of the party before him.\u201d<\/p>\n<\/blockquote>\n

Tribunal’s Opinion<\/span><\/h3>\n

Coram on considering the given set of circumstances opined that the apprehension of bias expressed by the ‘Corporate Debtor’ qua the appointment of Shailesh Verma as proposed \u2018Interim Resolution Professional\u2019 at the instance of the Appellant — \u2018Financial Creditor\u2019 cannot be dismissed offhand and the Adjudicating Authority was perfectly justified in seeking his substitution.<\/span><\/p>\n

The said position was notwithstanding the fact that Mr Shailesh Verma was not disqualified or ineligible to act as an \u2018Interim Resolution Professional\u2019.<\/span><\/p>\n

Hence, no legal flaw in the impugned order of NCLT was found. [State Bank of India v. Metenere Ltd., Company Appeal (AT) (Insolvency) No. 76 of 2020, decided on 22-05-2020]<\/p>\n

\n

Supreme Court Alert<\/span><\/h3>\n

Supreme Court:<\/strong> The 3-Judge Bench of Arun Mishra, B.R. Gavai and Krishna Murari, JJ., set aside the NCLAT’s Order with regard to the appointment of Resolution Professional.<\/p>\n

In the above background, Bench observed at the outset that NCLAT’s approach was not correct that merely Resolution Professional who remained in the service of SBI and is getting pension, was disentitled to be Resolution Professional.<\/p>\n

Solicitor General, Tushar Mehta as well as Senior Counsel, Krishnan Venugopal agreed for the appointment of new Resolution Professional by NCLT.<\/p>\n

Hence, the Bench held that new Resolution Professional be appointed by the NCLT in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.<\/p>\n

While concluding the order, Court observed that the change of Resolution Professional shall not reflect adversely upon the <\/span>integrity of Resolution Professional concerned, who has been replaced.<\/span><\/p>\n

\n
\n
\n

Since the impugned order does not reflect the correct approach, the same shall not be treated as a precedent.[State Bank of India v. Metenere, 2020 SCC OnLine SC 837<\/b><\/a>, decided on 19-08-2020]<\/span><\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

SUPREME COURT ALERT This NCLAT Order has been set aside by the Supreme Court, the detailed report of which can be found <\/p>\n","protected":false},"author":8808,"featured_media":153604,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[30247,43781,25934,30361,43782,29785,22014,34025,10971],"class_list":["post-237401","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-bias","tag-cirp","tag-financial-creditor","tag-ibc","tag-independent-umpire","tag-law","tag-nclat","tag-resolution-professional","tag-sbi"],"yoast_head":"\n[SC ALERT] NCLAT's decoder on appointment of a person as Resolution Professional: Will an ex-employee of Financial Creditor be eligible for appointment? 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