Mr. Rajesh Bhatia vs Canara Bank & Anr.

Primarily, the gist of the argument of the Learned Counsel for the Appellants who had been the petitioners in the respective Company Petitions is that, at the stage when the Learned Adjudicating Authority was appoints the Resolution Professional under Section 97, no consultation of any nature whatsoever is required to be made with the creditors who are instrumental in the initiation of proceedings under Section 95, as it may vitiate the process and influence the decision of Learned Adjudicating Authority which can be detrimental to them. The Appellants further contend that consultation with Financial Creditor during appointment of Resolution Professional would be in violation of Section 97 of I & B Code and particularly, the provision as contained under Sub-Section (3) of Section 97 of I & B Code which according to the Appellant, if it is read in harmony with Sub-Section (4) of Section 97 of I & B Code, since the appointment of the Resolution Professional mean an exclusive prerogative of the Learned Adjudicating Authority, exercise of this power should not be affected by any influence brought upon by its creditors who have instituted the very proceedings against them, the personal guarantors. Thus, in other words, the Appellant contended that, the appointment of the Resolution Professional since being a violation of Sub-Section (4) of Section 97 to be read with Sub-Section (3) of Section 97, that itself would be sufficient grounds for the Appellant to file a Company Petition as against the proceedings initiated against him under Section 95 of I & B Code.

Apparently, the ground as pleaded and argued seem to be very logical enough because of the alleged defects which have been claimed to have chanced in the appointment of the Resolution Professional allegedly to be in violation of Sub-Section (4) of Section 97 to be read with Sub-Section (3) of Section 97 of I & B Code. But the fact remains that the Appellant admits the fact that there had been a credit facility extended to the Corporate Debtor of which the Appellant was a personal guarantor and that the account was declared as a Non-Performing Asset on 29.08.2022, the Financial Creditor initiated proceeding under Section 95 of I & B Code. This and the ground behind Section 95 proceedings have not been challenged by the Appellants. The Learned Counsel for the Appellants has confined his challenge to the Impugned Order passed by the Learned Adjudicating Authority on 20.03.2024, with regards to the appointment of Resolution Professional. To us, this challenge is not sustainable in view of the ratio laid down by the Hon’ble Apex Court in Writ Petition (Civil) No.1281 of 2021, Dilip B Jiwrajka Vs Union of India & Ors, where the Hon’ble Apex Court in a proceeding held under Section 95 of I & B Code, has held that at up to the stage of Section 100 since none of the steps contemplated between Section 95 to 100 have any element of a judicial adjudication of any right of the party against whom the proceedings are expected to drawn under Section 95 of the Code, it has held that no person can have a cause to file a petition until or unless there is an admission of Section 95 proceedings by passing of an order under Section 100. Thus the stages of the proceedings from Section 95 to Section 100 do not have any adjudicatory effect and since it would be inclusive of Section 97 in itself, the entire cause agitated by the Appellant in the Company Petition as well as in the Company Appeal cannot be subjected to a judicial scrutiny either by the NCLT or this Appellate Tribunal as against the order passed by the NCLT. It is exclusively on the aforesaid ground that the Learned Tribunal has observed that since the entire exercise of powers of appointment of a Resolution Professional is being exclusively vested with the Learned Adjudicating Authority and particularly, the personal guarantor has got no role to play till the stage under Section 100 is achieved, and accordingly hold that the proceedings drawn by the Appellant by way of the aforesaid Company Petition is not tenable.

Further, if the Order of the Learned Tribunal is considered, the Learned Tribunal has protected the interest of the Appellant in the light of the provisions contained under the I & B Code, where all objections at the hands of the Appellant have been left open to be agitated, once the Resolution Professional submits the report under Section 99 of I & B Code. It was observed that since the Resolution Professional thus appointed under Section 97 is vehement for the purposes of collating the records, to enable the Learned Adjudicating Authority to pass an order under Section 95 of I & B Code, it does not materially affect any personal right of the Appellant to enable him to file Company Petition and the consequential Company Appeal too, as all his rights are safeguarded by raising an objection to the report of Resolution Professional to be submitted. That is why the Learned Adjudicating Authority has observed that the Resolution Professional who has been thus appointed under Section 97 would collate all facts and records relevant to the application, would examine the application as per the provisions of Sub-Section (6) of Section 97 and after examining the records will submit its report under Section 99 of the Code to Learned Adjudicating Authority for either accepting or rejection of application.

Owing to the fact that up to the stage of Section 99, which obviously includes within itself Section 97 too, the Appellant cannot be said to be aggrieved persons since the proceedings not being judicial proceedings their petition are not sustainable.

Since, as per the Impugned Order under challenge and even as per Sub-Section (6) of Section 97, all rights of the Appellant are safeguarded by filing an objection against the report to be submitted, they cannot be said to be aggrieved persons by any of the actions taken up to the stage of Section 97 of I & B Code.

Since, the Impugned Order itself protects the interest of the Appellant leaving all issues open to be argued and objected, no prejudice is caused to the Appellants, and lastly, so far as the Judgment of Dilip B Jiwrajka is concerned, since it is a ratio already decided by the Hon’ble Apex Court and it still holds good in the light of the observations made in para 86 of the Impugned Order (which has not been extracted have to avoid loading this Judgment). Therefore, the Appellants have got no material sustainable rights to be pressed either in the Company Petition or in the instant Company Appeal as against the Impugned Order. Thus, both the Appeals lack merit and deserve to be dismissed. Based on the above reasoning, the Appeal CA (AT) (CH) (Ins) No.143/2024 and the Appeal CA (AT) (CH) (Ins) No.150/2024 are dismissed. The connected pending Interlocutory Applications, if any, are closed.