Tribunal Orders Re-Initiation of Insolvency Process Citing Gross Misconduct by Resolution Professional
The National Company Law Tribunal (NCLT), Mumbai Bench, has rejected the resolution plan submitted by Authum Investment and Infrastructure Limited for Vas Infrastructure Limited. The tribunal, comprising Shri Ashish Kalia and Shri Sanjiv Dutt, found significant material irregularities committed by the Resolution Professional (RP), Mr. Ashok Kumar Golechha, which undermined the integrity and fairness of the insolvency resolution process.
The tribunal noted that the RP submitted false and misleading representations regarding the ownership of assets of the corporate debtor and failed to comply with statutory duties under Sections 18, 25, and 29 of the Insolvency and Bankruptcy Code (IBC), 2016. The RP was also found to have acted in collusion with the suspended management of the corporate debtor, leading to the rejection of the resolution plan and the initiation of a fresh Corporate Insolvency Resolution Process (CIRP) with a new RP.
The sole Committee of Creditors (CoC) member, Canara Bank, was also criticized for not disclosing crucial findings of fund diversion by the corporate debtor and failing to initiate proceedings under Section 73 for false representation by the corporate debtor.
In its detailed order, the NCLT highlighted several instances of misconduct by the RP, including the false representation of land ownership in the Information Memorandum and the failure to act on evidence of fraudulent transactions. The tribunal has directed the Insolvency and Bankruptcy Board of India (IBBI) to investigate the conduct of the RP and consider initiating disciplinary action.
The tribunal has mandated the re-initiation of the CIRP to be completed within 120 days, emphasizing the need for strict compliance with statutory provisions to ensure a fair and transparent process.
Bottom line:-
Insolvency Resolution Process - Material irregularities committed by the Resolution Professional (RP) can vitiate the insolvency resolution process, frustrate its objectives, and undermine its sanctity, integrity, and fairness.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 18, 25, 29, 30(6), 31, 66, 61(3); Regulation 35A of CIRP Regulations; Section 29 of Indian Contract Act, 1872.
Mr. Ashok Kumar Golechha, (NCLT)(Mumbai Bench) : Law Finder Doc id # 2937619
