Venus India Asset Finance Pvt Ltd vs Mr. Suresh Kumar Jain

[Arising out of order dated 14.10.2022 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench, Court-V in IA (IB) No. 3757/2022 in CP(IB) No.1731 of 2019]

IN THE MATTER OF:

Venus India Asset-Finance Pvt. Ltd. Registered office at 198/12-13, 2nd Floor, Main Road, Ramesh Market, East of Kailash, New Delhi - 110065 ....Appellant

Vs.

Suresh Kumar Jain, Resolution Professional of MK Overseas Pvt. Ltd. Res Add: 3775/3, Kanhaiya Nagar, Delhi -110035 ....Respondent

Present:

For Appellant: Mr. Brijesh Kumar Tamber, Mr. Vinay Singh Bist, Advocates

For Respondents: Mr. P. Nagesh, Sr. Advocate Mr. Anoop Prakash, Ms. Prapti Singh and Ms. Parthvi Ahuja, Advocates for R-1. Mr. Kunal Tandon, Ms. Richa Sandilya and Shivangi Chawla, Advocates for Intervenor (HDFC Bank)

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 1 JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code, 2016 ("IBC" in short) by the Appellant arises out of the Order dated

14.10.2022 (hereinafter referred to as "Impugned Order") passed by the

Adjudicating Authority (National Company Law Tribunal, New Delhi, Court -

V) in IA No. 3757/2022 in CP (IB) No. 1731 of 2019. By the Impugned Order,

the Adjudicating Authority rejected the application for replacement of

Resolution Professional with one Mr. Sapan Mohan Garg though approved by

the Committee of Creditors ("CoC" in short) by a voting share of 76.69%.

Aggrieved by this impugned order, the present appeal has been preferred by

Venus India Asset-Finance Pvt. Ltd. ("VIAF" in short), being one of the

Financial Creditors of the Corporate Debtor which is under the rigours of

Corporate Insolvency Resolution Process ("CIRP" in short).

2. The brief facts of the case which are necessary to note for deciding the

appeal are: -

 M.K. Overseas Private Limited - Corporate Debtor was admitted into

CIRP on 19.09.2019 following admission of Section 7 application filed

by Mayoga Investment Private Limited, a financial creditor.

 Following initiation of CIRP, Mr. Suresh Kumar Jain was appointed as

Interim Resolution Professional on 19.09.2019 and later confirmed as

Resolution Professional by the CoC in the 2nd CoC meeting which

concluded on 30.10.2019.

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 2  The CoC comprises of VIAF (74.55%), HDFC Bank Limited (12.02%),

Yes Bank Ltd. (11.29%), Drip Capital Inc (2.05%) and Mayoga

Investments Ltd.(0.09%) with the voting shares assigned against their

names.

 The CoC approved the Resolution Plan on 02.12.2020 and the

application under Section 30(6) for approval of the Resolution Plan is

pending before the Adjudicating Authority from 09.12.2020.

 Later, the CoC in its 21st meeting voted and approved the replacement

of the Resolution Professional/Respondent with a voting share of

76.69% on 01.08.2022. The written consent of the newly proposed

Resolution Professional was also obtained before submission to the

Adjudicating Authority.

 The CoC resolution for replacement of the Resolution Professional was

voted in favour by 3 CoC members - VIAF, Drip Capital and Mayoga.

The resolution was not approved by one member, namely, HDFC Bank

while one member namely, Yes Bank had abstained from voting.

 The resolution for appointment of the new Resolution Professional, Mr.

Sapan Mohan Garg in place of the existing Resolution Professional, Mr.

Suresh Kumar Jain, was forwarded by the Appellant/VIAF for

confirmation to the Adjudicating Authority in terms of Section 27 of the

IBC. This application was rejected by the Adjudicating Authority.

 Aggrieved by this order, VIAF being one of the main Financial Creditors

having majority voting share on the CoC has preferred this appeal.

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 3

3. Making his submissions, the Learned Counsel for the Appellant stated

that in terms of Section 27(2) of the IBC, the CoC of a Corporate Debtor can

resolve to replace the Resolution Professional appointed under Section 22 of

the IBC with another Resolution Professional after putting such a resolution

to vote and passed by a voting share of 66%. It has been further submitted

that it is a settled principle that the CoC is not required to give reasons for

replacing the Resolution Professional. In the present case, it was pointed out

that the resolution for replacement of the existing Resolution Professional was

approved by the CoC by a voting share of 76.69%. However, in spite of having

followed the statutory prescription laid down for replacement of the

Resolution Professional, the proposal has been erroneously turned down by

the Adjudicating Authority.

4. Challenging the impugned order, the Learned Counsel for the Appellant

has questioned the rationale adopted by the Adjudicating Authority in

rejecting the application. Elaborating further, it was submitted that the

Adjudicating Authority, disallowed the application for replacement of

Resolution Professional on the ground that the IBC does not envisage any

decision-making role for the CoC once it has approved the Resolution Plan

and the Resolution Plan is pending adjudication of the Adjudicating Authority.

5. It has been further contended that a decision under Section 27 to

replace the Resolution Professional can be taken up at any time during CIRP

and that this has been expressly defined in the Regulation 2(e) of the

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 4 Corporate Persons) Regulations, 2016 ("Regulations" in short) and includes

the time up to the approval of the Resolution Plan by the Adjudicating

Authority and further time until the disposal of appeal under Section 62 of

the IBC. Stating that the Adjudicating Authority has misconstrued the

provisions of the IBC, the Learned Counsel for the Appellant further pointed

out that Explanation to Regulation 18 clarifies the position in that in terms of

the said Explanation, the CoC is well within its right to convene a meeting

before the approval of a Resolution Plan by the Adjudicating Authority or till

the time an order for liquidation has been passed to discuss matters which

do not affect the Resolution Plan. Contending that the replacement of the

Resolution Professional/Respondent would not in any way affect the

Resolution Plan, it has been argued therefore that the Appellant along with

other members of the CoC were well within their rights to pass a resolution

seeking replacement of Resolution Professional in accordance with Section 27

of the IBC.

6. Further taking notice that the Adjudicating Authority in the Impugned

Order has observed that it would be prudent and advisable to continue with

the same Resolution Professional, the Learned Counsel for the Appellant

vehemently contended that the Adjudicating Authority has exceeded its

jurisdiction by going beyond the commercial wisdom of the CoC. It was

asserted that it is a settled law that the commercial wisdom of the CoC is

paramount and the present decision to replace the Resolution Professional

being their collective decision, the scope for judicial intervention is restricted.

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 5

7. It has been further submitted that it has been wrongly held by the

Adjudicating Authority that in the present case since the resolution plan had

already been approved by the CoC and thereafter placed before the

Adjudicating Authority for approval, this had rendered the CoC functus

officio. There is no provision in the IBC which puts a bar on the CoC to

convene its meeting after it has approved the Resolution Plan and the same

is pending approval before the Adjudicating Authority. It has been submitted

that Section 33(2) of the IBC expressly clarifies that the CoC continues to

function and is authorised to take decisions till the Resolution Plan is

approved by the Adjudicating Authority or a liquidation is ordered. In support

of their contention it was mentioned that this Tribunal in Gulabchand Jain

vs Ramchandra Choudhary in Company Appeal (AT) (Ins.) 142 of 2021

had taken a similar view and that this decision has been upheld by the

Hon'ble Supreme Court of India in Civil Appeal No. 5640/2021 of

17.09.2021. To hold the view that the CoC becomes functus officio after it

has approved the Resolution Plan would render the IBC unworkable since

some of the basic functions of the Resolution Professional as outlined in

Section 28 would become impossible to perform if the CoC ceases to exist.

Even the CIRP cost cannot be ratified if the CoC ceases to exist. It was

therefore contended that the Adjudicating Authority has misunderstood,

misconstrued and mis-applied the provisions of IBC.

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 6

8. The Learned Counsel for M/s Drip Capital Inc., having 0.5% voting

share also stated that it had voted in favour of replacement of the Resolution

Professional.

9. The Learned Counsel for the Respondent /Resolution Professional has

contended that the appeal is not maintainable since it has been filed by VIAF

in private and individual capacity and not representing the CoC. Further, in

the absence of any Board resolution of VIAF authorising Ms. Prerna Bajaj to

file the appeal, the appeal may be treated as non-instituted.

10. Making further submissions, the Learned Counsel for the

Respondent/Resolution Professional while admitting that Section 27 of the

IBC allows for replacement of the Resolution Professional but added that this

replacement was only possible at "any time during the Corporate Insolvency

Resolution Process". Expanding on the words "during the CIRP period", it

was submitted that Section 12 of the IBC prescribes the tenure of CIRP as

180 days which can go up to a maximum of 330 days after factoring in

extension/exclusion periods. The 330 days life span of CIRP of the present

Corporate Debtor stood completed on 24.12.2020. Since CIRP cannot survive

beyond 330 days, the applicability of Section 27 of IBC with regard to

replacement of Resolution Professional also ceases to exist after 330 days of

CIRP. Hence, in the present case the decision of the CoC on 28.07.2022 to

put to vote the agenda item for replacement of Resolution Professional and

completion of the voting process on 01.08.2022, both fall outside the life span

of the CIRP. Thus, the CoC had power to trigger Section 27 to replace the

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 7 Resolution Professional only up to 24.12.2020 while in the present case this

was done on 01.08.2022 which is more than 600 days of completion of CIRP

and hence not legally tenable.

11. It was further submitted that in the instant case the Resolution

Professional having placed the CoC approved plan before the Adjudicating

Authority and CIRP period of 330 days being over, the CoC had become

functus officio and hence could not have convened any meeting thereafter.

In support of their contention it was mentioned that this Tribunal in the

matter of ICICI Bank Ltd vs. Mr. Venkataramanarao Nagarajan in

Company Appeal (AT) (Ins.) No. 772 of 2018 has held that CoC becomes

functus officio after the expiry of the CIRP period and cannot take any

decision on replacement of Resolution Professional after expiry of CIRP

period. Even the Explanatory Clause to Regulation 18 on "Meetings of

Committees" added by an amendment dated 16.09.2022 which allows

meetings of CoC to be convened till the Resolution Plan is approved under

Section 31 or order for liquidation is passed under Section 33, it was

contended that benefit of this amendment cannot be extended in the present

case since the decision to replace the Resolution Professional was passed by

CoC on 01.08.2022 on which date this amendment had not come in force.

12. It has also been pointed out that the amendment of 16.09.2022 also

clearly states that meetings of CoC could only be convened for matters other

than matter which affects the pending Resolution Plan. In the present case,

since the agenda for the CoC meeting was also to consider passing a

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 8 resolution for replacement of Resolution Professional, this would have

directly impacted the pending Resolution Plan and hence not permissible.

The Resolution Plan would have been affected since it is the Resolution

Professional who has to certify that the Resolution Plan complies with the

requirements of IBC and that it is in compliance with Section 30(2) of the

IBC.

13. Pointing out that the CoC in the 21st meeting proceedings has recorded

that the representative from VIAF had submitted that an aggressive approach

on the part of the Resolution Professional is required to close the CIRP is

bound to indirectly reflect poorly on the part of the concerned Resolution

Professional which would be prejudicial to his reputation. VIAF had

indirectly commented on the performance of the Resolution Professional at a

time when the Resolution Professional could not be blamed for delay in the

approval of the Resolution Plan. The Resolution Professional had submitted

the Resolution Plan before the Adjudicating Authority on 09.12.2020 within

the permitted time frame of CIRP but the Plan could not reach its logical

conclusion due to several rounds of hearing before the Adjudicating

Authority and other related administrative reasons and not on account of

any failing on the part of the Resolution Professional. It has also been

pointed out that the Resolution Professional acts as an officer of the Court

and therefore the discretion of the CoC to replace the Resolution Professional

can be looked into by the Adjudicating Authority and not be allowed merely

on the grounds of commercial wisdom of the CoC.

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 9

14. I.A. No. 4539/2022 has also been filed in the matter on behalf of HDFC

Bank, bringing on record their objections to the replacement of Resolution

Professional at this juncture when the Resolution Plan is already pending

approval of the Adjudicating Authority. The Learned Counsel representing

HDFC Bank, in support of the Respondent/Resolution Professional

contended that the CIRP period of 330 days having been completed, the IBC

provisions do not provide any jurisdiction to the CoC to replace the

Resolution Professional and that such replacement would be prejudicial to

their interest.

15. We have duly considered the detailed arguments and submissions

advanced by the Learned Counsel for both the parties and perused the

records carefully.

16. The two points which need to be answered in the present facts of the

case are as follows:

(i) Whether the CoC in passing a resolution to replace the Resolution

Professional in the facts of the present case has committed any

breach of the IBC and regulations framed thereunder; and

(ii) Whether the decision of the CoC to replace the Resolution

Professional being the outcome of the wisdom of the CoC, is not

subject to judicial review.

17. To answer the first question, it would be useful to go through the

statutory provisions which govern the appointment of Resolution Professional

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 10 and also the replacement of Resolution Professional. Section 22 outlines the

modalities for appointment of Resolution Professional while Section 27

prescribes the procedure to be followed for replacement of the Resolution

Professional. The relevant statutes are as reproduced below: -

Section 22 of IBC - Appointment of resolution professional.

(1) The first meeting of the committee of creditors shall be held within

seven days of the constitution of the committee of creditors.

(2) The committee of creditors, may, in the first meeting, by a majority

vote of not less than sixty-six per cent. of the voting share of the

financial creditors, either resolve to appoint the interim resolution

professional as a resolution professional or to replace the interim

resolution professional by another resolution professional.

(3) Where the committee of creditors resolves under sub-section (2) --

(a) to continue the interim resolution professional as resolution

professional, it shall communicate its decision to the interim

resolution professional, the corporate debtor and the

Adjudicating Authority; or

(b) to replace the interim resolution professional, it shall file an

application before the Adjudicating Authority for the appointment

of the proposed resolution professional.

(4) The Adjudicating Authority shall forward the name of the

resolution professional proposed under clause (b) of sub-section (3) to

the Board for its confirmation and shall make such appointment after

confirmation by the Board.

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 11 (5) Where the Board does not confirm the name of the proposed

resolution professional within ten days of the receipt of the name of

the proposed resolution professional, the Adjudicating Authority shall,

by order, direct the interim resolution professional to continue to

function as the resolution professional until such time as the Board

confirms the appointment of the proposed resolution professional.

Section 27 - Replacement of Resolution Professional by Committee of Creditors

(1) Where, at any time during the corporate insolvency resolution

process, the committee of creditors is of the opinion that a resolution

professional appointed under section 22 is required to be replaced, it

may replace him with another resolution professional in the manner

provided under this section.

(2) The committee of creditors may, at a meeting, by a vote of sixty-six

per cent. of voting shares, propose to replace the resolution

professional appointed under section 22 with another resolution

professional.

(3) The committee of creditors shall forward the name of the insolvency

professional proposed by them to the Adjudicating Authority.

(4) The Adjudicating Authority shall forward the name of the proposed

resolution professional to the Board for its confirmation and a

resolution professional shall be appointed in the same manner as laid

down in section 16.

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 12 (5) Where any disciplinary proceedings are pending against the

proposed resolution professional under sub-section (3), the resolution

professional appointed under section 22 shall continue till the

appointment of another resolution professional under this section.

18. Given this statutory construct for appointment and replacement of a

Resolution Professional, we now proceed to examine how the CoC has

approached the issue of replacement of Resolution Professional in the present

case. It is an admitted fact that the CoC in its 21st meeting at agenda item 3

had put to vote the decision to replace Mr. Suresh Kumar Jain-Resolution

Professional by Mr. Sapan Mohan Garg and on conclusion of voting on

01.08.2022 with 76.69% vote share had resolved to replace the Resolution

Professional. Before we go into the resolutions that were passed in this

meeting, we may take notice of the voting results as under:

Agenda Item No. 3

To discuss and decide on the replacement of resolution professional and to discuss and decide the remuneration of mr. sapan mohan garg Voted Abstained Name of Voting Voted for % Voted By voting By not Members share % against % % voting % Venus India 74.55 74.55 -- -- --

Asset Finance Pvt. Ltd HDFC Bank 12.02 -- -- -- 12.02 Limited Yes Bank 11.29 -- -- 11.29 -- Limited Drip Capital 2.05 2.05 -- -- -- INC Mayoga 0.09 0.09 -- -- -- Investments Limited Total 100.00 76.69 0 11.29 12.02

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 13

19. Next we may peruse the resolutions as passed in the said CoC meeting:-

"RESOLVED THAT pursuant to section 27 read with section 22, and

other applicable provisions of Insolvency and Bankruptcy Code, 2016

read with regulation 3(1A), 31(D) and 34 of IBBI (Insolvency Resolution

Process for Corporate Persons) Regulations, 2016 and in accordance

with rules and regulations made thereunder, approval of committee of

creditors be and is hereby accorded for replacement of Mr. Suresh

Kumar Jain, Resolution Professional of M/s M.K. Overseas Private

Limited, bearing Registration No. IBBI/IPA-001/IP-P01179/2018-

19/11839 and appointment of Mr. Sapan Mohan Garg an Insolvency

Professional, bearing Reg. No. IBBI/IPA-002/IP-N00315/2017-

2018/10903, as Resolution Professional in the mater of the Corporate

Insolvency Resolution Process of M/s M.K. Overseas Private Limited."

"RESOLVED FURTHER THAT pursuant to sub section 3 of Section 27

of the IBC, 2016 the member of Committee of Creditors hereby

authorizes Venus India Asset-Finance Private Limited, CoC member

having voting rights of 74.55% to file necessary application for

appointment of Mr. Sapan Mohan Garg, an Insolvency Professional

(Registration No.IBBI/IPA-002/IP-N00315/2017-2018/10903) with

Hon'ble NCLT for appropriate directions and orders in the regard and

to do all such acts, deeds, and matters as may be necessary to give

effect to this resolution."

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 14

20. We, therefore, find that Section 27 of the IBC empowers the CoC to

replace a Resolution Professional who has been appointed under Section 22

of the IBC at any time during the CIRP. In the present case, we find that the

CoC after passing a resolution with majority vote to replace the Resolution

Professional has thereafter filed an application before the Adjudicating

Authority along with the written consent from the proposed Resolution

Professional in the specified form. It is also noted that against a requirement

of 66% voting share, the requisite resolution has been passed with 76.69%

vote share. We also note that the CoC had also resolved that the application

for replacement of the Resolution Professional will be presented before the

Adjudicating Authority by VIAF and this resolution has also been complied

with. This nullifies the contention of the Respondent/Resolution Professional

that the present appeal having been filed by VIAF is not maintainable since

VIAF had been clearly authorized to represent on behalf of the CoC before the

Adjudicating Authority. VIAF is therefore entitled to defend the interests of

the CoC when the matter has come up for appeal.

21. The statutory provisions and related Regulations framed thereunder

having laid down in unambiguous terms the manner and procedure for

replacement of the Resolution Professional and the CoC having acted in

conformity with those provisions, the CoC was well within its rights to replace

the Resolution Professional with a new one of its own choice. There is no

disagreement that the replacement of Resolution Professional is complete

when the required decision is taken by the CoC in its meeting with requisite

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 15 majority. Interference would be warranted only if the decision of the CoC was

suffering from material irregularities or dehors the statutory provisions and

the rules framed thereunder which is not the case. We, therefore, hold that

there was no violation of the statutory provisions in bringing about the

replacement of the Resolution Professional by the CoC and all procedural

compliances having been met, there is no room to hold the process to have

been vitiated in any manner. Since the requirements laid down by IBC have

been met, the Adjudicating Authority is duty bound to abide by the discipline

of the statutory provisions.

22. This now brings us to the second question identified by us in that

whether the replacement of the Resolution Professional being integral to the

wisdom of the CoC which is not subject to judicial review.

23. Before diving into the facts of the present case, it may be pertinent to

state a few well-acknowledged precepts in the context of the IBC. The IBC

adumbrates a new ethos of insolvency resolution with a creditor-in-control

regime as opposed to the debtor-in-possession format of the legacy laws. One

of the most distinguishing features of the Code is that all the major decisions

from the initiation till the end of the CIRP is taken by the CoC and in the

conduct of this resolution process, it is aided by the Resolution Professional.

The Resolution Professional is tasked with facilitating and conducting the

entire CIRP and in doing so is expected not only to address and balance the

interests of all stakeholders but also to act as the link between the

Adjudicating Authority and CoC during CIRP. Further in the matter of the

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 16 Swiss Ribbons (P) Ltd. v. Union of India (2019) 4 SCC 17, the Hon'ble

Supreme Court has held that the IRP/ Resolution Professional is an

administrator of the IBC Code and is expected to function under the guidance

and the directions of the CoC that controls the Corporate Debtor. Given this

backdrop, the importance of seamless functioning of the CoC and the

Resolution Professional needs no special emphasis. The relationship between

the Resolution Professional and the CoC needs to be extremely transparent

and one of trust and confidence with no scope for friction. It is therefore a

logical corollary that if the Resolution Professional loses the trust of the CoC

and the CoC as per its wisdom decides to replace the Resolution Professional

that discretion ought to be allowed to prevail in the interest of smooth and

effective completion of CIRP. In such circumstances, when the CoC

contemplates change of Resolution Professional, the Adjudicating Authority

in terms of the statutory construct has to merely look into two basic check

boxes which is whether the CoC has resolved to that effect with 66% vote

share and whether the proposed Resolution Professional has given his written

consent and not look at anything beyond. Both these conditionalities stand

met in the present case.

24. We however find that in the present case the Adjudicating Authority

has held that in their opinion it would be "prudent and advisable" to continue

with the same Resolution Professional given that 330 days have already

passed from the date of initiation of CIRP and no adverse references have

been received by the CoC regarding the performance of the Resolution

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 17 Professional. Further it has held the decision of the CoC to replace the

Resolution Professional at this juncture to be "untenable and misconceived"

when Resolution Plan has already been submitted to Adjudicating Authority

and that this is not in conformity with the provisions of the Code as the Code

does not envisage any role or decision to be taken by the CoC after it has

approved the Resolution Plan.

25. The view taken by the Adjudicating Authority is that 330 days of CIRP

having expired on 24.12.2020, the Resolution Plan has reached an advanced

stage and in this backdrop cognisance has to be taken that the overarching

objective of the IBC is to complete CIRP in a time-bound manner so that the

value of assets of the Corporate Debtor is not depleted is well taken. We

notice that the same objective of bringing the CIRP to a closure was also one

of the triggers for holding the 21st meeting of CoC. In view of the sluggish rate

of CIRP progress, the CoC by majority vote felt that a new Resolution

Professional with a more aggressive approach is needed to complete the CIRP

as against the view taken by the Adjudicating Authority that replacement of

the existing Resolution Professional would only delay the process. This

amounts to the collective wisdom of the CoC being substituted by that of the

Adjudicating Authority which approach is hit by the well settled principle of

supremacy of the collegiate wisdom of the CoC.

26. It is also the case of the Respondent/Resolution Professional that

though Section 27 allows for replacement of the Resolution Professional but

this replacement was only possible at "any time during the Corporate

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 18 Insolvency Resolution Process" and that in the instant case the Resolution

Professional having already placed the CoC approved resolution plan before

the Adjudicating Authority and CIRP period of 330 days being over, the CoC

could not have convened any meeting thereafter. The Learned Counsel for the

Respondent/Resolution Professional argued that the Adjudicating Authority

has therefore rightly held that though replacement of Resolution Professional

can be done when the required decision is taken by the CoC in its meeting

with requisite majority, however, it is required for the Adjudicating Authority

to examine the locus standi of the CoC whether it is empowered to take such

decisions after approving Resolution Plan.

27. Rebutting the stand taken by the Respondent/Resolution Professional,

it has been submitted by the Learned Counsel for the Appellant that Section

27 expressly mandates that the CoC is vested with the power to replace the

Resolution Professional "at any time during the Corporate Insolvency

Resolution Process" and the CIRP period continues until the Resolution Plan

is approved. To buttress their claim, it has been pointed out that Regulation

2(e) defines CIRP. As per this definition, CIRP means the Insolvency

Resolution Process for Corporate Persons as laid down under Chapter II of

Part II of the IBC and that Chapter II of Part II of the IBC ends only with the

approval of the Resolution Plan by the Adjudicating Authority. Thus, it has

been argued that CIRP continues till the Resolution Plan is approved by the

Adjudicating Authority and in the present case the Resolution Plan not having

been approved so far, the decision to change the Resolution Professional lies

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 19 squarely within the exclusive domain of the CoC which it can decide by way

of voting. It has also been contended that the jurisdiction of Adjudicating

Authority is circumscribed by the provisions of IBC and they cannot reverse

the decision supported by majority in the CoC.

28. Attention has also been adverted to Explanation to Regulation 18 to

state that it clearly empowers the CoC to hold meetings till the resolution plan

is approved under sub-section (1) of section 31 or order for liquidation is

passed under section 33. It may be relevant to reproduce the same as under:

Regulation 18

"18. Meetings of the committee.

(1) A resolution professional may convene a meeting of the committee as and when he considers necessary.

(2) A resolution professional may convene a meeting, if he considers it necessary, on a request received from members of the committee and shall convene a meeting if the same is made by members of the committee representing at least thirty three per cent of the voting rights.

(3) A resolution professional may place a proposal received from members of the committee in a meeting, if he considers it necessary and shall place the proposal if the same is made by members of the committee representing at least thirty three per cent of the voting rights."

"Explanation: For the purposes of sub- regulation (2) it is clarified that meeting (s) may be convened under this sub-regulation till the resolution plan is approved under sub-section (1) of section 31 or order for liquidation is passed under section 33 and decide on matters

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 20 which do not affect the resolution plan submitted before the Adjudicating Authority."

29. The Learned Counsel for the Respondent/Resolution Professional

argued that this cannot come to the help of the Appellant since this

Explanation was inserted by an amendment which came about on

16.09.2022 which was subsequent to the date of CoC meeting when the

decision was taken to replace the Resolution Professional. This was refuted

by the Learned counsel for the Appellant on the ground that an Explanatory

clause being clarificatory in nature it cannot be held to be prospective. We are

also not persuaded to subscribe to the contention of the

Respondent/Resolution Professional since the applicability of the

Explanatory clause cannot be pegged with reference to any particular point

of time as it is intended to remove any obscurity or vagueness or ambiguity

in the Regulation. The explanatory clause now allows CoC meetings to be held

until the Resolution Plan is approved. In the instant case too, the 21st CoC

meeting has been held prior to the approval of the Resolution Plan. The two

being in harmony, we are inclined to agree with the Appellant's stand that the

CoC was entitled to hold the meeting.

30. We also find force in the argument made by the Learned Counsel of the

Appellant that on the one hand the Respondent / Resolution Professional

have contended that the CoC could not have held a meeting to replace the

Resolution Professional since 330 days of CIRP is over but on the other hand

have raised no objections to two other items taken up in the same meeting

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 21 including ratification of expenses incurred by Resolution Professional and

other CIRP expense. This clearly depicts approbation and reprobation at the

same time and therefore cannot be countenanced.

31. The reliance placed by the Learned Counsel for the

Respondent/Resolution Professional on the judgement of this Tribunal in the

matter of ICICI Bank Ltd vs. Mr. Venkataramanarao Nagarajan in

Company Appeal (AT) (Ins.) No. 772 of 2018 is distinguishable from the

facts of the present case since in that case no Resolution Plan had been

approved by the CoC and the Resolution Professional had filed application for

liquidation and order of liquidation had been passed. Hence, this judgement

does not come to the aid of the Respondent/Resolution Professional. Further

it has also been submitted by the Learned Counsel for the Respondent/

Resolution Professional that this Tribunal in the matter of Sanjay Kumar

Ruia v. Catholic Syrian Bank Ltd. & Anr. in Company Appeal (AT) (Ins.)

No. 560 of 2018 has held that after completion of 270 days, the CoC ceased

to exist and thereby they have no jurisdiction to replace a Resolution

Professional. The said judgment is also not applicable since the facts are

distinguishable since in that case there was no Resolution Plan.

32. Coming to the findings of the Adjudicating Authority that the conduct

of the Resolution Professional has been satisfactory and that no adverse

references were received by the CoC regarding the performance of the

Resolution Professional, we have done a fact-check by going through the

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 22 proceedings of the 21st CoC meeting at Annexure A-3 in the Appeal Paper

Book. The relevant excerpts are as extracted below:

"Mr. Jogendra Singh from HDFC Bank enquired about

the reason for the change of Resolution Professional

and Mr. Arjun Sethi from Yes Bank also enquired about

the reason of change in Resolution Professional after

the gap of 3 years.

Mr. Saket Misra from Venus India Asset-Finance Private

Limited submitted that three years have passed and fair

amount of progress have been made but aggressive

approach on the part of Resolution Professional is

required to close the CIRP and we expect that proposed

Resolution Professional will take up aggressively as

huge amount of capital is involved."

33. This clearly shows that CoC had deliberated on the performance of the

Resolution Professional before considering to move the resolution and putting

the same to vote. Further, since the decision of the CoC to replace the

Resolution Professional was taken by exercising of voting rights assigned to

the creditors, it was not necessary for Adjudicating Authority to look into

reasons or decide whether there were sufficient reasons for change of the

Resolution Professional as the Adjudicating Authority cannot don the mantle

of a supervising authority. More importantly, the relevant section 27 does

not prescribe the need to assess the performance of the Resolution

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 23 Professional while seeking his replacement. It has been pointed out by the

Appellant that this Tribunal in the matter of State Bank of India vs. Ram

Dev International Ltd. in Company Appeal (AT) (Ins.) No. 302 of 2018

held that it is not desirable for the CoC to record its opinion or comments

about the Resolution Professional while seeking his replacement so that no

harm is caused to his present and future appointment as Resolution

Professional. We also find that the Adjudicating Authority in the impugned

order has observed that in terms of judgement of this Tribunal in Sumant

Kumar Gupta vs Committee of Creditors in Company (AT) Ins No. 1037

of 2020 and in the matter of Bank of India vs Nithin Nutritions Private

Limited in Company (AT) Ins No. 497 of 2020, the CoC is not required to

give reasons in matters relating to Sections 22 and 27 of IBC and yet have

gone ahead on their own to comment on the functioning of the Resolution

Professional. The statutory framework of the IBC also does not mandate that

the CoC is required to adduce reasons for replacing the Resolution

Professional. We find that in the present case too, the Appellant while filing

the application for replacement of the Resolution Professional has desisted

from making any adverse observations on his performance and thus cannot

be held to have acted in any manner contrary to law or having not adhered to

the precepts laid down in the above judgments.

34. It has also been pointed out by the Learned Counsel for the Appellant

that the impugned order contains submissions of the Resolution Professional

which were not part of the records. Specific reference was made in respect of

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 24 para 6 of the impugned order which records allegations and responses which

were neither pleaded nor orally made in the first place and therefore there was

no occasion to return the said findings. As no allegations were made against

the Resolution Professional in the application filed by the Appellant before the

Adjudicating Authority and there was no other pleading on record or argument

to that effect, there was absolutely no occasion to embark upon a detailed

discussion on the conduct of the Resolution Professional as has been done in

the impugned judgment. This fact was not denied by the Learned Counsel for

the Respondent/Resolution Professional. Similarly in para 7 of the impugned

order, reference was made to a short affidavit of M/s Drip Capital on record

when no such affidavit had been filed clearly indicates factual errors in the

impugned order. We hold that placing reliance on extraneous record by the

Adjudicating Authority in arriving at the impugned order is not sustainable in

the eyes of law.

35. This now brings us to that part of the impugned order wherein the

Adjudicating Authority has rejected the application of the Appellant to replace

the Resolution Professional by advising the CoC to continue with the same

Resolution Professional. It is well settled that the IBC does not postulate

jurisdiction for the Adjudicating Authority to undertake scrutiny of the

justness of the majority opinion expressed by financial creditors by way of

voting. The insolvency regime introduced under the IBC has placed fetters on

the power of interference by the Adjudicating Authority. Applying this

principle in the instant case, we are of the view that the Adjudicating Authority

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 25 being a creature of IBC Code and the statutory provisions therein not having

invested jurisdiction and authority upon it to review the decision exercised by

the CoC to replace the Resolution Professional, the rejection of the application

for the replacement of the Resolution Professional is a transgression of

jurisdiction and therefore deserves to be set aside.

36. For the reasons recorded above, we set aside the impugned order dated

14.10.2022 and allow the replacement of Mr. Suresh Kumar Jain by

appointing Mr. Sapan Mohan Garg as Resolution Professional, who will act in

accordance with law. Mr. Suresh Kumar Jain may submit his claims for fees

and other costs, if any incurred, before the CoC and the CoC is directed to

consider the claims and entitlements, if any, expeditiously. This appeal is

allowed with the above observations. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 09.02.2023

PKM

Company Appeal (AT) (Ins.) No. 1395 of 2022 & I.A. No.4539 of 2022 26