Tribunal says CoC’s commercial wisdom must prevail, expunges adverse remarks against former RP, and sends fee dispute back to NCLT
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, has upheld the replacement of former Resolution Professional (RP) S. Viswanathan in the insolvency proceedings of Maylari Agro Products Ltd., holding that the Committee of Creditors (CoC) was within its rights to seek a change in the insolvency professional.
The appeal arose from two NCLT orders dated 30 November 2021. In one, the Bengaluru Bench of the NCLT replaced Viswanathan with a new RP, Shirley Mathew, after Canara Bank, which held 84.60% voting share in the CoC, voted for his removal. In the other, the NCLT dismissed Viswanathan’s plea seeking reconfirmation as RP.
Viswanathan challenged the orders before the NCLAT, arguing that the tribunal had not properly examined the allegations against him, that he was denied a fair hearing, and that the CoC could not act at the whim of a dominant creditor. He also sought payment of alleged unpaid professional fees of Rs. 17.83 lakh and reimbursement of CIRP expenses of Rs. 3.38 lakh, besides expunging adverse remarks made against him in the NCLT order.
Canara Bank defended the replacement, submitting that the CoC’s decision fell squarely within its commercial wisdom and that the insolvency process had progressed smoothly after the appointment of the new RP. The bank also pointed out that the CIRP was ultimately completed with a resolution plan of Rs. 5.05 crore, approved unanimously by the CoC.
The NCLAT agreed that the RP has no vested right to continue in office. It held that while an RP must function independently and not at the dictates of a creditor, the commercial wisdom of the CoC, especially when backed by a majority vote, cannot be interfered with unless the RP is being asked to act contrary to the Insolvency and Bankruptcy Code or the regulations.
At the same time, the appellate tribunal found that the adverse observations made by the NCLT against Viswanathan had a bearing on his professional reputation and were not necessary to retain. It therefore expunged the remarks contained in paragraphs 4, 5, 6, 7, 9 and 10 of the impugned order.
On the issue of fees and expenses, the NCLAT declined to decide the quantum itself. It held that the claim would require examination of the work done, the agreed fee structure, the objections of the parties and the CoC’s stance on remuneration. The tribunal granted Viswanathan liberty to approach the NCLT for adjudication of his claim, directing that the matter be decided in accordance with law, preferably within two months.
Accordingly, the NCLAT disposed of both appeals by upholding the replacement of the RP, expunging the adverse remarks, and leaving the fee dispute open for consideration by the NCLT.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - Resolution Professional - Committee of Creditors has no unfettered right in the Resolution Professional to continue - Replacement of RP on basis of CoC's commercial wisdom upheld - However, adverse remarks affecting professional reputation of former RP expunged - Claim for professional fees and CIRP expenses relegated to NCLT for adjudication.
Statutory provision(s): Section 22, Section 27, Section 61 of the Insolvency and Bankruptcy Code, 2016
S. Viswanathan v. Canara Bank, (NCLAT)(Chennai Bench) : Law Finder Doc id # 2986880
