Tribunal Rules Appointment Does Not Violate Insolvency and Bankruptcy Code, 2016, Emphasizes Adjudicating Authority's Independent Role and Validates IBBI Circular on Resolution Professional Nomination
In a significant ruling dated September 7, 2026, the National Company Law Tribunal (NCLT), Hyderabad Bench, dismissed a challenge to the appointment of a Resolution Professional (RP) in a personal guarantor insolvency case, reinforcing the procedural framework under the Insolvency and Bankruptcy Code, 2016 (IBC). The judgment in I.A. No. 722 of 2026 in C.P.(IB) No. 105/95/HDB/2025 was delivered by a bench comprising Mr. Rajeev Bhardwaj (Judicial Member) and Mr. Sanjay Puri (Technical Member).
The applicant, Mr. M. Indrasena Chowdary, a personal guarantor, sought to recall the appointment of Mr. Murali Mohan Chevuturi as the Resolution Professional, appointed pursuant to a petition filed under Section 95 of the IBC by the financial creditor, SREI Equipment Finance Limited. The applicant contended that since the insolvency application was filed by the creditor directly and not through a Resolution Professional, the mandatory procedure under Section 97(3) and (4) of the IBC - requiring the Adjudicating Authority to direct the Insolvency and Bankruptcy Board of India (IBBI) to nominate an RP - was bypassed. Further, he argued that the creditor had no right to propose the RP's name, and the process violated statutory provisions and raised apprehensions of bias.
The Tribunal examined the statutory scheme of Sections 95 and 97 of the Code, alongside Rules framed under the Code, particularly the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 ("IRP PGCD Rules"). Rule 7(2) mandates that applications under Section 95 be filed in Form-C, and Rule 8 contemplates the IBBI sharing a panel of Insolvency Professionals with the Adjudicating Authority, facilitating appointment.
Crucially, the Tribunal referred to the IBBI Circular dated December 21, 2023, which clarified that when a financial creditor files the application itself, it may recommend the name of an RP, who must furnish declarations and consent in Part IV of Form-C. The Adjudicating Authority retains the ultimate power to appoint the RP after independent scrutiny under Section 97(5).
The Tribunal relied on precedents including the National Company Law Appellate Tribunal's decision in Anita Goyal v. Vistra ITCL (India) Ltd. (2025) and the Madras High Court's ruling in Ashwani Kumar Bhatia v. Union of India (2025), both of which upheld the validity of the IBBI Circular and the practice of creditor-proposed RP appointments. The Tribunal emphasized that mere recommendation by a financial creditor does not constitute appointment, and objections based solely on apprehensions of bias without concrete evidence of conflict of interest or disqualification are unsustainable.
In the present case, the proposed RP, Mr. Murali Mohan Chevuturi, provided his consent and declarations as required, and the Adjudicating Authority independently appointed him after due consideration. The Tribunal found no merit in the applicant's challenge, noting that the procedure followed was consistent with the law and regulatory framework designed to enhance efficiency without compromising the independent role of the Adjudicating Authority.
Consequently, the application to recall the appointment and set aside the order dated July 8, 2025, was dismissed.
This judgment provides clarity on the interplay between the Code's provisions and the IBBI's regulatory mechanisms, confirming that a financial creditor's proposal of an RP in a Section 95 application does not violate Section 97, provided the Adjudicating Authority independently verifies the RP's eligibility and consent before appointment.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Appointment of a Resolution Professional proposed by a Financial Creditor in a creditor-filed application under Section 95 does not violate Section 97, provided the Adjudicating Authority independently appoints the Resolution Professional after examining the requisite declarations and consent.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 95, 97, 98; Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 Rules 7(2), 8; IBBI Circular dated 21.12.2023
