Mr. S Muthuraju, Resolution Professional Of Mr. ShakthinathMariappan (Personal Guarantor) vs Mr. Arunachalam Tenzing

The facts of the case are :

The present Company Appeal has been preferred by the Appellant being aggrieved against the Judgment/order dated 11.03.2024, as it has been rendered by the Learned Adjudicating Authority while deciding IA/IBC/626/2024 which was filed in CP No. IB/260/2021, whereby the Appellant has been removed to function further as an IRP, as a consequent to the Impugned Order the newly impleaded Respondent Mr.Hari Karthik has been appointed as IRP with immediate effect.

The facts involved in the present Appeal are that the Appellant contends that he is a Resolution Professional, a Member of ICSI (Institute of Insolvency Professionals), (ICSI-IIP) and is an Insolvency Professional (IP) accordingly he has got registered with the IBBI, holding Registration No.IBBI/IPA-002/IP-N0009/2016-2017/10013.

M/s. Thirupur Suriya Textiles Pvt. Ltd. was put to Liquidation and as a consequence to the proceedings which were held under Section 10 of the I & B Code, the Adjudicating Authority on 14^th June 2019 passed an order of initiation of CIRP. The CIRP Proceeding was initiated in which the present Appellant was appointed as an IRP, though he was later on replaced by Mr. G.V. Ravikumar, as Resolution Professional by an Order dated 20^th September 2017.

On 11^th January 2018, Mr. G.V. Ravikumar was appointed as a Liquidator, as a consequence to which the Corporate Debtor, was put to Liquidation Proceedings. It happened so that a Disciplinary Proceeding was conducted by the Committee of Insolvency and Bankruptcy Board of India against the appellant by way of IBBI/BC/157/2023 dated 12^th April 2023 wherein the present Appellant had to face the Disciplinary Committee Proceedings owing to certain allegations which were levelled against him with regard to his mis-conduct, thus consequent to which the IBBI in exercise of its Powers under Section 196 of the Code, to be read with Regulation 3(1) and (3) of the IBBI Inspection and Investigation] Regulations, 2017 had submitted the Draft Inspection Report as contemplated under Regulation 6(1) of the Inspection Regulations against the Appellant which was responded by the present Appellant on 27^th June 2022.

Later on, it was based upon the findings of the Inspection Report, the present Appellant in CIRP Proceedings and based on the material which were made available against the present Appellant, a Show Cause Notice was issued against him on 29^th November 2022, on the basis and on consideration of the Reply submitted by the Appellant.

Ultimately, it was found that in the Proceedings which were held by way of MA/576A/2018 which was filed by the Liquidator of the Corporate Debtor under Section 60(5) Section 68 and 74 of the Code, it was disposed of by the Adjudicating Authority vide its order dated 27^th April 2021. The Suspended Directors of the Corporate Debtor, and later on the Bank of India were supposed to contribute to the assets of the Corporate Debtor but it was found that a sum of Rs.79,65,090/-was withdrawn by the IRP i.e. the Appellant during the Moratorium period as contemplated under Section 14 of the I & B Code. The Adjudicating Authority observed in the said order that this transaction which took place was during the period when the present Appellant was working as IRP, it was held to be in blatant breach of the Moratorium as prescribed under Section 14 of the Code.

Consequently, upon submissions being dealt with by the Disciplinary Committee, it was found that the actions of the Appellant was in apparent violation of the Code of conduct and particularly Section 17 which deals with the Management of affairs of the Corporate Debtor by the Interim Resolution Professional and holding after the proceedings that the Appellant was guilty of non-compliance of the mandatory procedural stipulations contemplated under Section 17(1)(b) to be read with Section 18(f) of the Code. The Disciplinary Committee in its order dated 27^th April 2023, observed that in the Provisional Balance Sheet which was filed on 28.02.2017, the details of the bank transactions, which they was suppose to be diligently maintained it showed that due to lack of diligence on the part of the IRP it was that during the Moratorium period, it has lead to a fraudulent withdrawal of Rs.79,65,090/-. Owing to the above, the IBBI by an Order dated 12^th April 2023, had suspended the Licence of the present Appellant thereby restraining him to function as an IRP. Contending thereof that his conduct happens to be in violation of the IBBI (Insolvency Professional Regulation of 2016) and Clause 125, 12 and 14 of the Code of conduct.

Consequent to which while exercising its power under Section 220(2) of the Code, to be read with Regulation 13 of IBBI Regulation 2017 the Appellant registration was suspended for a period of one year.

It is admitted by the Appellant that there is nothing contrary to the above records and that the said Order of Suspension as passed by the IBBI on 12^th April 2023, has attained finality, as it has not been put to challenge.

The interpretation which has been drawn by the Appellant by putting a challenge to the Impugned Order, where he has been removed to function as an IRP of Corporate Debtor, it was an order of only calling upon the Appellant to explain as to why the Proceedings of IBBI was not brought by him to the Notice of the Tribunal. He contends that the Impugned Order which was passed by the Adjudicating Authority was without giving him an opportunity, and furthermore the said order will not have retrospective effect thus would have no bearing with regards to the CIRP Proceedings, in which he has already been appointed as an IRP.

He contends to plead that the Order of Suspension dated 12^th April 2023, will have prospective operation and will not apply to the Proceedings of CIRP, in which the Appellant has already been appointed as an IRP and thus he was supposed to be permitted to continue with the CIRP proceedings despite the order dated 12.04.2023, suspending him as IRP, passed by the IBBI.

As far as the contention of the Learned Counsel for the Appellant is concerned with regards his authority to function as IRP, in the CIRP Proceedings which has already been initiated prior to the order dated 12^th April 2023, owing to the fact that the said Order of Suspension of his Authority to function as IRP by exercising the powers under Section 220(2) of the Code, would operate prospectively. The contention raised by the Counsel for the Appellant is not accepted by this Tribunal for the reason being that by an Order dated 12^th April 2023 his Licence to function as an IRP before this Tribunal, it was as issued in his favour by the IBBI was suspended. We are of the view that the suspension will relegate back to the date on which the Registration was granted and as soon as the said Order of suspension as IRP was passed on 12^th April 2023, he will lack an authority to still to function as an IRP even in the pending Proceedings or any Proceeding which is to be carried henceforth, since having held to be ineligible to function as such, his incapacity, would be his incapacity right from the date he was registered by IBBI.

The argument extended by the Appellant of not being Heard prior to passing of the order is not acceptable by this Tribunal, for the reason being that the legal corollary of passing of the Order dated 12^th April 2023, which remain unchallenged, will have its automatic legal consequences of incapacitating the Appellant to function as an IRP, after his suspension on 12^th April, 2023. Hence, no prejudice as such would be caused to the Appellant because of the alleged plea of not being Heard for the reason being that there was Legal Discrepancy of his capacity to function as IRP, which was faced by the Appellant owing to the reason which was assigned by the IBBI in its order of 12^th April 2023, while suspending his Licence. Coupled with the fact that on the grounds which has been taken by the Learned Counsel for the Appellant under the given peculiar circumstances of the instant Appeal, will not be attracted and in view of the fact; that when the very genesis of his right to function as an IRP has been laid to rest and suspended by the IBBI the Registering Body, authorising the Appellant to function as an IRP. He would be rendered incapacitated to function in the said capacity and so far as action taken by the Order dated 12^th April 2023 by the IBBI, was after taking due recourse to the Code of Conduct as contemplated in the IBBI (Insolvency Professional) Regulations, 2016 and thus, since he lacked his authority to further function as an IRP in the CIRP Proceedings which was initiated as a consequence of order dated 14^th June 2019 passed in the instant proceeding of Liquidation, consequent to order under Section 10. The Tribunal finds that, in any manner, whatsoever in passing the Order of removing the present Appellant and substituting him with the new IRP Mr. S. Hari Karthik to take over as an IRP, as such the Impugned Order does not call for any interference in the exercise of the Appellate jurisdiction under Section 61 of the I&B Code.

Thus, the appeal lacks merits and the same is accordingly dismissed.