In an unique challenge, JSA has successfully obtained orders from the NCLT, Delhi and NCLAT, New Delhi to replace a Resolution Professional in the personal insolvency of Shantanu Jagdish Prasad (Educomp) in an application under Section 98 of the Code. The NCLT, Delhi and NCLAT finally interpreted the standard language of the IBBI suspension order which gives liberty that the “respective CoC/SCC, as the case may be, will decide about continuation of existing assignment of Mr. Sandeep Bhatt” to hold that this liberty does not disentitle an independent financial creditor from filing for replacement of a suspended RP under Section 98 of the Code. The NCLT, Delhi also clarified that the appointment of the replaced RP the entire proceedings under Section 95 would not need to be undertaken all over again, particularly when the RP was not suspended while submitting its report under Section 99 of the Code.
The Tribunal also clarified that a suspended IP is left with no authority to discharge function in the capacity and that the suspension will relegate back to the date on which the Registration was granted. The Tribunal reaffirmed that as soon as an order of suspension is passed, the RP will lack any authority to function as an IRP in pending proceedings or any proceeding carried on henceforth as he is ineligible to function as such and his incapacity, would be his incapacity right from the date he was registered-by IBBI.
As a background, the NCLT, Delhi admitted Shantanu Jagdish Prasad (Educomp) into personal insolvency resolution process on an application under Section 95 of the Code filed by State Bank of India and appointed Mr. Sandeep Kumar Bhatt as the Resolution Professional. However, the IBBI passed an order (prior to the admission order) suspending the Resolution Professional for a period of 2 years. The State Bank of India filed an application under Section 98(1) of the Code for replacement of the RP arguing, inter alia, that the RP has no authority to discharge its functions. The RP contested his replacement relying on the language of IBBI suspension order which stated that the “respective CoC/SCC, as the case may be, will decide about continuation of existing assignment of Mr. Sandeep Bhatt” and therefore, State Bank of India by itself did not have any authority to file for the replacement of RP under Section 98 of the Code. He further argued that the current RP is representing many other Creditors despite being under suspension and no one has sought his replacement till date. Even the personal guarantor argued that if the current RP is replaced and new RP is appointed, all the steps taken by the current RP would turn otiose and redundant and the new RP has to take the steps afresh from the initial stage as his appointment is in terms of the provisions of Section 97 of the Code.
The NCLT, Delhi and NCLAT finally interpreted the standard language of the IBBI suspension order which gives liberty that the “respective CoC/SCC, as the case may be, will decide about continuation of existing assignment of Mr. Sandeep Bhatt” to hold that this liberty does not disentitle an independent financial creditor from filing for replacement of a suspended RP under Section 98 of the Code. The NCLT, Delhi also clarified that the appointment of the replaced RP will Section 95 would not need to be undertaken all over again, particularly when the RP was not suspended while submitting its report under Section 99 of the Code.
The Tribunal also clarified that a suspended IP is left with no authority to discharge function and that the suspension will relegate back to the date on which the Registration was granted. The Tribunal reaffirmed that as soon as an order of suspension is passed, the RP will lack any authority to function as an IRP in pending proceedings or any proceeding carried on henceforth as he is ineligible to function as such and his incapacity, would be his incapacity right from the date he was registered-by IBBI.
Our Disputes Team Comprised Partners – Dheeraj Nair and Manish Jha, Principal Associate – Vishrutyi Sahni and Associate – Muskaan Gupta.
Dheeraj is a Partner with JSA since 2009. Dheeraj has over two decades of experience advising and representing clients on complex arbitrations, litigations and regulatory proceedings.