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Judgment
O R D E R
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
The appellant herein who is a Personal Guarantor who challenges the Impugned Order dated 10.09.2024, as it has been rendered by the NCLT, Chennai Bench in CP (IB) / 81 (CHE) / 2021, whereby application preferred under Section 95(1) of I & B Code, 2016, questioning the appointment of the IRP has been rejected.
The solitary ground for challenge, was on the ground that strict compliance of Sub Section (3) of Section 97 of I & B Code, 2016, was not made at the stage when the appointment of the IRP was being made. The question which emerges for consideration before us is, as to whether, the appellant herein who happens to be the Personal Guarantor, does at all have a legal right, at this stage to put a question to the appointment of the Resolution Professional as provided under the I & B Code, 2016.
The learned counsel appearing for the appellant while addressing this Tribunal, upon Sub Section (3) of Section 97, have referred upon the procedural flaw, that at the stage of appointment of the IRP, there are certain stipulated process and procedure which were required to be followed under Sub Section (3) of Section 97 and the same was done and that would vitiate the entire proceedings in itself, and particularly, at least the appointment of IRP. Sub Section (3) of Section 97 is extracted hereunder:
``(3) Where an application under section 94 or 95 is filed by the debtor or the creditor himself, as the case may be, and not through the resolution professional, the Adjudicating Authority shall direct the Board, within seven days of the filing of such application, to nominate a resolution professional for the insolvency resolution process.’’
If the provision of Sub Section (3) of Section 97 itself is taken into consideration, in fact, it is not a substantive provision, which can give a right, but rather, its a provision which is procedural nature only, which only governs the functioning of the learned Adjudicating Authority, regulating the process of appointment of the Interim Resolution Professional, for the purposes of carrying out the IRP (Insolvency Resolution Process) proceedings under Section 95 of the I & B Code, 2016.
It’s not that the appellant has been left remediless, when the Resolution Professional was appointed under Section 97, by the learned Adjudicating Authority, for the reason being that, under Section 98 itself, it governs and carves out an exception where the appellant could have adopted a recourse for putting a challenge to an order appointing the Resolution Professional under Section 97, and which could have called for even the replacement of IRP, subject to satisfying the conditions or any anomaly in appointment of the Resolution Professional under Section 97. For the purposes of brevity, Section 98 of I & B Code, 2016 is extracted hereunder:
``98. Replacement of resolution professional. –
(1)Where the debtor or the creditor is of the opinion that the resolution professional appointed under section 97 is required to be replaced, he may apply to the Adjudicating Authority for the replacement of the such resolution professional.
(2)The Adjudicating Authority shall, within seven days of the receipt of the application under sub-section (1) make a reference to the Board for replacement of the resolution professional.
(3)The Board shall, within ten days of the receipt of a reference from the Adjudicating Authority under sub-section (2), recommend the name of the resolution professional to the Adjudicating Authority against whom no disciplinary proceedings are pending.
(4)Without prejudice to the provisions contained in sub-section (1), the creditors may apply to the Adjudicating Authority for replacement of the resolution professional where it has been decided in the meeting of the creditors, to replace the resolution professional with a new resolution professional for implementation of the repayment plan.
(5)Where the Adjudicating Authority admits an application made under sub-section (1) or sub-section (4), it shall direct the Board to confirm that there are no disciplinary proceedings pending against the proposed resolution professional.
(6)The Board shall send a communication within ten days of receipt of the direction under sub-section (5) either-
(a)confirming appointment of the nominated resolution professional; or
(b)rejecting appointment of the nominated resolution professional and recommend a new resolution professional.
(7)On the basis of the communication of the Board under sub-section (3) or sub section (6), the Adjudicating Authority shall pass an order appointing a new resolution professional.
(8)The Adjudicating Authority may give directions to the resolution professional replaced under sub-section (7) –
(a)to share all information with the new resolution professional in respect of the insolvency resolution process; and
(b)to co-operate with the new resolution professional in such matters as may be required.’’
The appellant had rather submitted that he has invoked Section 98 by filing a proceeding before the learned Adjudicating Authority and the same was decided by the Order of 04.02.2022. The proceedings thus decided by the learned Adjudicating Authority by the Order of 04.02.2022, admittedly has attained finality, as it is not the case of the appellant that the said order dated 04.02.2022 was put to challenge before any superior forum, available to the Appellant under law.
If the order itself of 04.02.2022, is taken into consideration and particularly the observations, which has been made by the learned Adjudicating Authority while deciding his application under Section 98, the relevant observations have been made in Para 14 of the said Order, whereby, all the issues regarding appointment of IRP have been left open to be considered at the stage when the report is submitted under Section 99 and it is placed for its consideration under Section 100. The relevant Para 14 is extracted hereunder:
``14. The RP is directed to exercise all the powers as provided u/s 99 of the IBC and the rules made thereunder. RP is further directed to make the recommendations with reasons in writing for acceptance or rejection of this application within the stipulated time as envisaged under the provisions of section 99 of the code. The RP shall provide a copy of the report under sub-section 7 of section of section 99 to the creditor as soon as the same is filed before this Authority.’’
The learned counsel for the appellant has attempted to interpret the directions issued in Para 14 of the said Order (which remained unchallenged) that as if, the direction given in the Order of 04.02.2022, which was initiated, by invoking the provisions contained under Sub Section (1) of Section 98, it had rather left it open, for the appellant to question the anomaly in appointment of the Resolution Professional, on the pretext of non-compliance of Sub Section (3) of Section 97, in fact, is a misnomer, because, no such direction was reserved, rather, it would be left open for being questioned, at the stage, when the report itself is subjected for consideration after the proceedings carried beyond the stage of Section 100 of I & B Code, 2016.
The learned counsel for the appellant submitted that, in fact, the appointment of the Resolution Professional is in violation of the provisions contained under Sub Section (3) of Section 97, though, his status admittedly being that of a Personal Guarantor, though, he admits the fact that the order of 04.02.2022 stands affirmed, since not being challenged, he attempts to carve out an exception that order dated 04.02.2022, may not be depriving him to put a question to the appointment of the IRP by adopting recurring action for a challenge, by raising an objection even at the stage of Section 99 and even on its dismissal by the Impugned Order he can yet again approach the learned NCLT, thereby reviving the waiver, which he has given to the order of 04.02.2022, rejecting his objection under Section 98(1) of I & B Code, 2016.
The contention of the learned counsel for the appellant with regards to the impropriety of the procedural flaw committed in appointment of the IRP, as it has been argued by the Appellant, while taking us to the provisions contained under Sub Section (3) of Section 97, we feel it apt to observe that, the Impugned Order, as it has been rendered by the learned Adjudicating Authority on 10.09.2024, though, the appellant has got no legal right as such, to question the appointment of the Resolution Professional in his status of Personal Guarantor, except for Section 98, which he has already exhausted, coupled with the observation and the finding, which has been recorded therein, by the learned Adjudicating Authority regarding to the processes adopted and the eligibility of the Resolution Professional thus appointed. It has been observed that the IRP’s name was approved by the Board and after the appointment of IRP, no objection thereafter was even raised by the Board or as to their appointments.
In fact, a public notice was also issued after the appointment of the IRP, even then to no objection, to the appointment as such was ever raised, hence, at this stage, we do not think that, it would be a fit case where a de novo opportunity could be given to the appellant to bring back the proceedings to the stage of Section 98, when he himself has not put a challenge to the order of 04.02.2022, coupled with the fact that the finding which has been recorded in the Impugned Order itself satisfies the parameters which are prescribed under Sub Section (3) of Section 97, coupled with the fact that the appellant has got no statutory sustainable right as such to put a challenge to the appointment of the IRP, we do not find any merit in this appeal, which could be ventured into, while exercise of our Appellate Jurisdiction. Consequently, the Company Appeal (AT) (CH) (INS) No. 402 / 2024, lacks merits and the same is accordingly dismissed. All connected pending Interlocutory Applications, if any, would stand closed.