Right To Replace Resolution Professional Not Provided To Operational Creditor, Only CoC Can Replace RP: NCLT Chennai

Brief Facts and Contentions

Giriraj Enterprises (operational creditor/applicant), filed an application under section 60(5) of the IBC seeking to be pleaded as a party in a pending application bearing (IA/1512/CHE/2024). The applicant argued that being an operational creditor, it had rights to the participate in the CIRP including in the appointment or replacement of a resolution professional. It was further contended that State Bank of India , a lender, was trying to derail the CIRP. It was further submitted that the SBI had not authority to replace the RO and the committed of creditor (CoC) was only empowered to replace the RP under section 27 of the IBC. It was also contended that it was necessary for the applicant to be impleaded as a party so that it could protect its interest.

NCLT's Analysis

The NCLT observed that only CoC is empowered to replace the RP under section 27 of the IBC and the operational creditor has no say as far as the replacement of the RP is concerned. Additionally, operational creditors are not part of the CoC and they don't have voting rights in the CoC either. The tribunal observed that principle of natural justice mandates that every party should be heard and no action should be taken without providing an equal opportunity to the parties involved. However, operational creditors do not have any voting rights nor they are a part of the CoC. Therefore, the tribunal held that plea of the applicant that it should be heard cannot be countenanced as the principle of natural justice does not extend to the operational creditor when it comes to replacement of the RP. The sole authority to replace the RP rests with CoC.

The tribunal held that on reading of section 27 of the Insolvency and Bankruptcy Code it is clear that the right of replacement of RP is not provided to the operational creditor and necessary party required for adjudication will be heard in lines of Principle of Natural justice. However we don't find any reasons to go beyond the statute and implead Operational creditor in an application sought for replacement of RP

Conclusion

The NCLT concluded that the operational creditor cannot be allowed to become a part of the RP replacement process because such a right is not provided to them within the statutory framework of the IBC. Accordingly, the present application was not allowed and dismissed.

Case Title: Giriraj Enterprises v. State Bank of India and Anr.

Court: NCLT, Chennai

Case Reference: IA/1693/2024 IN IA(IBC)/1512/CHE/2024 IN IBA NO.1099 OF 2019

Judgment Date: 14/10/2024

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