116 B, Mittal Towers, Nariman Point, Mumbai, India

The Resolution Professional (“RP”) plays an important role in the process of resolution of insolvency of a corporate or bankruptcy of a guarantor to the corporate debtor. The Bankruptcy Law Reforms Committee (BLRC) in its final report dated 4.11.20151 also emphasized on the role of an RP which stated that “Insolvency professionals form a crucial pillar upon which rests the effective, timely functioning as well as credibility of the entire edifice of the insolvency and bankruptcy resolution process.” However, there are certain limitations with which the RP is required to work in the Corporate Insolvency Resolution Process, which have been elucidated in its recent judgment by the National Company Law Appellate Tribunal (“NCLAT/ Appellate Tribunal”) in the matter of Sharavan Kumar Vishnoi Vs. Upma Jaiswal & Ors.2

The Appellate Tribunal in its above mentioned ruling inter alia held that the RP is not a competent authority for deciding the eligibility of the Resolution Applicant for submission of the Resolution Plan in accordance with Section 29A of the Insolvency and Bankruptcy Code, 2016 (“Code”).

The Appellate Tribunal was hearing an appeal filed by the RP challenging order dated March 02, 2022, passed by the National Company Law Tribunal (“NCLT”), Allahabad Bench, whereby NCLT directed the RP to place all the Resolution Plans before the Committee of Creditors (“CoC”) of the corporate debtor along with the opinion he sought on the contravention of various provisions of the Code by the concerned resolution applicant.

FACTS OF THE CASE:

Ms. Upma Jaiswal, one of the Resolution Applicants preferred an application before the NCLT Allahabad Bench seeking specific directions to RP of Renu Residency Pvt. Ltd. (“Corporate Debtor”) for placing the resolution plan as submitted by her before the CoC of the Corporate Debtor. The RP opposed the same, stating the fact that Ms. Uma Jaiswal is ineligible under Section 29A of the Code and therefore, the plan cannot be placed before the CoC for their due consideration.

The Hon’ble NCLT, Allahabad Bench while hearing the said application as filed by Ms. Uma Jaiswal directed the RP to place all the resolution plans before the CoC along with his opinion on contravention of the various provisions of the Code.

Further, the NCLT in terms of the judgment as passed by the Hon’ble Supreme Court in ArcelorMittal India Private Limited V/s. Satish Kumar Gupta (2019) 2 SCC 1, upheld that the RP is a mere facilitator and not a gatekeeper in terms of deciding the eligibility for submission of a Resolution Plan by the Resolution Applicants in terms of Section 29A of the Code.

Contentions of the Appellant:

It was contented by the RP before the Appellate Tribunal that in the opinion obtained by RP, the Resolution Applicant, Ms. Uma Jaiswal was not eligible as per Section 29A of the Code and thus the resolution plan as submitted by her was not placed before the CoC for its consideration.

Further, an alternative resolution plan as submitted by another Resolution Applicant was already under due consideration and at a very advanced stage of negotiations before the CoC. Thus, the NCLT directing for considering the plan of Ms. Upma Jaiswal is not only unlawful by defeating the basic purpose of the Code i.e. timely essence for resolution of the Corporate Debtor.

Contentions by the Respondent:

It was contested by Ms. Upma Jaiswal. It was submitted on her behalf that the question as to whether the plan as submitted by her is to be rejected or approved is the prerogative of the CoC, not theRP. At best the RP can provide his opinion with regard to the eligibility of the Resolution Applicant that whether he/she is eligible to submit a resolution plan as per Section 29A read with the other provisions of the Code and Regulations contained therein. The RP cannot on its own withhold any plan and refuse to submit the same before the CoC for their consideration.

NCLAT’s Decision:

The Appellate Tribunal after considering the contentions of both parties duly upheld the decision of the NCLT, Allahabad Bench, relying upon the judgment of ArcelorMittal India Private Limited v/s. Satish Kumar Gupta (supra) as passed by the Apex Court and the ratio as culled out in paras 80 & 81, which reads as follows:

“....80. However, it must not be forgotten that a Resolution Professional is only to “examine” and “confirm” that each resolution plan conforms to what is provided by Section 30(2). Under Section 25(2)(i), the Resolution Professional shall undertake to present all resolution plans at the meetings of the Committee of Creditors. This is followed by Section 30(3), which states that the Resolution Professional shall present to the Committee of Creditors, for its approval, such resolution plans which confirm the conditions referred to in sub-section (2). This provision has to be read in conjunction with Section 25(2)(i), and with the second proviso to Section 30(4), which provides that where a resolution applicant is found to be ineligible under Section 29A(c), the resolution applicant shall be allowed by the Committee of Creditors such period, not exceeding 30 days, to make payment of overdue amounts in accordance with the proviso to Section 29A(c). A conspectus of all these provisions would show that the Resolution Professional is required to examine that the resolution plan submitted by various applicants is complete in all respects, before submitting it to the Committee of Creditors. The Resolution Professional is not required to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time-being in force, including Section 29A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to “decide” whether the resolution plan does or does not contravene the provisions of law....”

Conclusion:

The NCLAT relying on the ratio of the Apex Court judgment in the matter of ArcelorMittal India Private Limited v/s. Satish Kumar Gupta (supra) dismissed the Appeal filed by the RP. The NCLAT upheld the decision of the NCLT and thereby once again reinforced that the RP cannot take any decision on the resolution plans submitted and is required to only ensure that the resolution plans submitted are complete in all respects as per the provisions of the Code and Regulations before they are placed before the CoC for consideration. The final decision to decide on the eligibility and compliance of the other provisions of the Code is left with the CoC.

  1. https://ibbi.gov.in/BLRCReportVol1_04112015.pdf
  2. Comp. App. (AT) (Ins.) No. 371 & 374 of 2022