Besides Section 27, RP Can Be Replaced On A Finding Given By NCLT Over His Conduct Or Any Proven Fact: NCLAT Delhi
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Indevar Pandey (Technical Member), has held that an application filed for replacement of Resolution Professional, which is not filed under Section 27 of IBC, can be entertained when NCLT has given a finding on the...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Indevar Pandey (Technical Member), has held that an application filed for replacement of Resolution Professional, which is not filed under Section 27 of IBC, can be entertained when NCLT has given a finding on the conduct of Resolution Professional or in presence of any proven fact.
The NCLAT upheld the rejection of an application filed by a minority shareholder of the Corporate Debtor seeking replacement of Resolution Professional over mere allegations.
Background Facts
Ansal Urban Condominiums Pvt. Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT. Mr. Rajesh Ramnani was appointed as the Resolution Professional.
Katra Realtors Pvt. Ltd. (“Appellant”) is a minority shareholder having 8.785% shareholding in the Corporate Debtor. The Appellant filed an application before the NCLT seeking replacement of the Resolution Professional, while raising allegations of bias and unlawful conduct.
On 24.01.2024, the NCLT observed that under Section 27 of IBC a Resolution Professional can be replaced by the Committee of Creditors (“CoC”) by passing a resolution with 66% voting share. However, the Appellant has no locus to seek replacement of Resolution Professional since he is a shareholder and not a CoC member. The NCLT rejected the application for being in contravention of IBC.
The Appellant filed an appeal before the NCLAT against the NCLT order dated 24.01.2024. The Resolution Professional submitted that the Appellant's group company has already filed an application, challenging transactions and admission of claims, which is pending adjudication. Further, the Appellant has filed the application merely to create obstacles in CIRP.
NCLAT Verdict
The Bench held that when that an application for replacement of Resolution Professional is not filed under Section 27 of IBC, then the same can only be entertained when there are findings on the conduct of Resolution Professional by NCLT or any proven fact.
“Any application for replacement dehors Section 27 process can be entertained only when there are findings on conduct of the Resolution Professional by the Adjudicating Authority or some proved fact, merely on allegation as has sought to be made by the Applicant, the Adjudicating Authority shall not enter into enquiry and decide the allegations for the purpose of deciding the application filed by the Appellant.”
The Bench opined that the NCLT cannot act upon mere allegations and conduct enquiry to decide allegations raised by Appellant for replacing the Resolution Professional. While upholding the NCLT order, the Bench dismissed the appeal. Liberty has been granted to the Appellant to file a fresh application if the NCLT arrives at a finding.
Case title: Katra Realtors Pvt. Ltd. v Mr. Rajesh Ramnani, RP of Ansal Urban Condominiums Pvt. Ltd. & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 382 of 2024.
Counsel for Appellants: Mr. Abhijeet Sinha, Mr. Gaurav Mitra, Sr. Advocates with Mr. Sujoy Datta, Ms. Nishtha Khurana, Mr. Vibhor Kapoor, Ms. Kinjal Goyal, Ms. Garima Dhankar, Ms. Lavanya Pathak, Ms. Mahima Shikhawat, Advocates.
Counsel for Respondent: Mr. Shivansh Kumar, Mr. Sameer Rohatgi, Advocates for R1 Mr. Rajesh Ramnani, RP Mr. Atul Sharma, Advocate for Homebuyers.