Suspended Board of Directors Has No Power To Replace RP Under IBC: NCLAT, Chennai
LIVELAW NEWS NETWORK
2 March 2022 8:27 AM IST
The NCLAT, Chennai in a Bench consisting of Justice M. Venugopal, Judicial Member and Kanthi Narahari, Technical Member in the case of Anil Kumar Ojha v. Chandramouli Ramasubramaniam Resolution Professional of SLO Industrial Ltd. & Anr. held that the suspended Board of Directors has no power under the IBC to appoint a Resolution Professional. The power to do so has only been vested...
The NCLAT, Chennai in a Bench consisting of Justice M. Venugopal, Judicial Member and Kanthi Narahari, Technical Member in the case of Anil Kumar Ojha v. Chandramouli Ramasubramaniam Resolution Professional of SLO Industrial Ltd. & Anr. held that the suspended Board of Directors has no power under the IBC to appoint a Resolution Professional. The power to do so has only been vested in the Committee of Creditors (CoC) and then the Adjudicating Authority (AA).
The NCLAT dismissed the appeal filed by the Appellant filed u/s 60(5) of the IBC, challenging the order of the Adjudicating Authority which refused to admit the Application of the Appellant u/s 60(5) and held that the suspended Board of Directors has no right to change the RP and imposed a cost of Rs. 1 Lakh on the Appellant.
Appointment Of RP
The Bench observed that Section 22 of the Code allows the 'Financial Creditors' to be involved in the appointment of the 'Resolution Professional'. The RP is to be appointed on the first meeting of the CoC. The Interim Resolution Professional can continue, or be replaced by a majority of 66% votes of the CoC. An application to replace the IRP is to be addressed to the Adjudicating Authority, which sends it to the IBBI for confirmation. After the confirmation is received, the RP shall be appointed.
Displacement Of RP
As per the terms of Section 27, the RP may be replaced during CIRP by the CoC with a 66% majority of voting share. Thus, the power to displace the RP is vested with the CoC. In case no name is proposed by the CoC, an Adjudicating Authority is called upon to propose a person's name from the IBBI.
Based on the above observations, the Tribunal held that a suspended Board of Directors does not have the power under the IBC to replace a RP.
Counsel for Appellant: Ms. C. Jayachithra, Advocate
