Replacement Of RP As Per Section 27 Is Complete When The Resolution Is Passed With 66% Voting Share: NCLT Allahabad

Background Facts

Corporate Insolvency Resolution Process was initiated against M/s Quality Steels Products Limited (“Corporate Debtor”) vide an order dated 20.12.2021 and Mr. Varun Goel was appointed as the Interim Resolution Professional (“IRP”). In the 1^st meeting of the Committee of Creditors (“CoC”), the IRP was confirmed to be appointed as the Resolution Professional (“RP”). Various public announcements were made which were published in newspapers and on the website of the Insolvency and Bankruptcy Board of India. However, in the 7^th meeting of the CoC held on 28.06.2022, the CoC approved the replacement of the RP by 76.51% votes in favour of the replacement. Consequently, Mr. Gagan Gulati was appointed as the RP. Hence the present application seeking replacement of RP was filed by the CoC through one of the Financial Creditors namely Advent Infraprojects Private Limited having a 76.51% voting percentage in the CoC.

Observations of the Tribunal

The Tribunal observed that under section 27 of IBC, an RP may be replaced at any time during the CIRP. The CoC can propose to replace the RP by a vote of 66% of voting share and subject to the written consent of the proposed RP. In the present case, the CoC approved the replacement of RP by 76.51% votes in favour of the replacement and the proposed RP, Mr. Gagan Gulati, had also provided his consent on affidavit which has been filed on 22.08.2022. So the requirements of section 27 were fulfilled. It was observed that if the requirements of section 27 are fulfilled, the CoC is required to forward the name of the proposed RP to the Tribunal for confirmation.

It was further observed that there were allegations by the present RP, Mr. Varun Goel, and counter allegations by the CoC. However the Tribunal refused to go into the merits of the contentions as the change of RP is strictly governed by section 27 of IBC. Reliance was placed on the NCLAT judgment of Sumant Kumar Gupta Vs. Committee of Creditors of M/s Vallabh Textiles Company Ltd. in Company Appeal (AT) (Insolvency) No. 1037 of 2022, wherein it was held that Section 27 of IBC does not contemplate an hearing opportunity to be given to the Resolution Professionals by the Adjudicating Authority before approving the proposal of a new Resolution Professional. It was further held in the aforesaid NCLAT judgment that the scheme of Section 27 of IBC does not indicate that the Resolution Professional is to be made a party and is to be issued a notice before taking a decision on appointment of another Resolution Professional.

The Tribunal thus observed that replacement of an RP is complete as per the scheme of Section 27 when the resolution is passed with the requisite 66% voting share.

With the aforesaid observations, the Tribunal allowed the application

Case:Committee of Creditors of M/s Quality Steels Product Limited vs Varun Goel, Interim Resolution Professional in the matter of M/s Mahajagdamba Tubes Pvt. Ltd. vs M/s Quality Steels Product Limited

Case No. IA No.209/2022 in CP (IB) No.174/ALD/2019

Counsels for the Applicant-Adv. Anil Mehrotra along with Adv. Srijan Mehrotra

Counsel for the Respondent -Adv. Shubham Agarwal

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