The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Rakesh Kumar (Judicial Member) and Ms. Shreesha Merla (Technical Member), while adjudicating an appeal filed in Srigopal Choudary v SREI Equipment Finance Ltd., has upheld the Adjudicating Authority’s decision to remove the Resolution Professional of Shree Ram Urban Infrastructure Ltd.
The Bench has held that an authority empowered to appoint also has the right to remove/dismiss. Further, if the Resolution Professional is not convening the meeting of CoC for his replacement, then Adjudicating Authority can invoke its inherent jurisdiction and replace the Resolution Professional.
SREI Equipment Finance Ltd. (“Financial Creditor”) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Shree Ram Urban Infrastructure Ltd. & Ors. (“Corporate Debtor”). The Adjudicating Authority admitted the Corporate Debtor into CIRP. Mr. Srigopal Choudhary (“Appellant/Mr. Srigopal”) was appointed as the Interim Resolution Professional and later confirmed as the Resolution Professional.
However, the Adjudicating Authority vide an order dated 28.11.2022 had replaced Mr. Srigopal Choudhary with another Resolution Professional namely, Mr. Sapan Mohan Garg. It was alleged that Mr. Srigopal’s inaction resulted in the breach of the mandatory timelines of the CIRP. Further, no concrete steps were taken by him towards the CIRP and no Expression of Interest (EOI) was issued to attract prospective resolution applicants.
The removal of Mr. Srigopal Choudhary from the position of Resolution Professional was challenged before the NCLAT. Further, the appointment of Mr. Sapan Mohan Garg as the Resolution Professional was challenged before the NCLAT in another appeal bearing Company Appeal (AT) (Ins) No. 1472 of 2022 (“Company Appeal”).
Proceedings Before Supreme Court
In the meanwhile, Civil Appeal No.7050/2022 was pending before the Supreme Court. The said appeal was filed by Kalpataru Properties Pvt. Ltd. (“Kalptaru”), showing its willingness to bring money in account of the Corporate Debtor amounting to Rs. 75.30 Crores, in terms of the arbitral award, if the Resolution Professional executes the sale deed after receiving the amount. The Supreme Court vide an Order dated 14.11.2022 had disposed off the Civil Appeal No.7050/2022, while directing Kalpataru to deposit the money and Mr. Srigopal Choudhary (Resolution Professional) to execute the sale deed in favour of Kalptaru within 10 days’ period from deposit of the amount. Further, the Supreme Court categorically stated in the Order that no impediment should be created to the execution of the Order.
Subsequently, on 06.12.2022 the Company Appeal (AT) (Ins) No. 1472 of 2022 came up for hearing before the NCLAT Bench and status quo was granted till 19.12.2022. IIRF India Realty XII Ltd. challenged the order of status quo order of NCLAT before the Supreme Court, as it impeded the implementation of Supreme Court’s Order dated 14.11.2022. The Supreme Court Bench vide an order dated 12.12.2022 set aside the status quo order dated 06.12.2022 and observed that, “We fail to appreciate how a status quo order could have been passed by a Bench of the NCLAT seeking to impede the implementation of the order of this Court. If there was a grievance about the implementation of the order of the Court, only this Court could have got into it. We consider the conduct of the Bench not only inappropriate but almost bordering on contempt. We strongly deprecate the order passed by the NCLAT Bench…”
The Supreme Court directed the Company Appeal (AT) (Ins) No. 1472 of 2022 to be heard by an NCLAT Bench presided over by the Chairman.
On 10.01.2023 the appeal filed by Mr. Srigopal was heard by NCLAT. The Bench while placing reliance on Supreme Court judgment in M/s. Heckett Engineering Co. v Their Workmen, (1977) 4 SCC 377, observed that it is settled law that the Authority who appoints can also remove the appointee.
“We are of the opinion that the Adjudicating Authority being the appointing authority of IRP/RP was well within its jurisdiction to pass an order for removal of the RP particularly in a situation where the RP had not taken any steps to convene a meeting of the CoC for the purposes of removal of RP.”
The Bench observed that under Section 27 of IBC the Resolution Professional can replaced by the CoC alone. However, if the Resolution Professional is not convening the meeting of CoC for his replacement, then Adjudicating Authority can invoke its inherent jurisdiction and replace the Resolution Professional. The Bench upheld the order dated 28.11.2022 of the Adjudicating Authority and dismissed the appeal. Further, a direction has been given to IBBI to conduct an inquiry against Mr. Srigopal Choudhary.
Case Title: Srigopal Choudary v SREI Equipment Finance Ltd.
Case No.: Company Appeal (AT) (Ins) No. 1443 of 2022
Counsel for Appellant: Dr. U.K. Chaudhary, Sr. Advocate with Mr. Mansumyer Singh, Mr. Jaitegan Singh Khurana, Mr. Manpreet Kaur, Advocates
Counsel for Respondent: Mr. Krishnendu Datta, Sr. Advocate with Mr. Anirban Bhattacharya, Ms. P. Vora, Mr. S. Buxy, Mr. Srikanth, Mr. D. Sachdeva, Advocates for R-1. Mr. P. Nagesh, Sr. Advocate with Mr. Rajeshwar Singh, Mr. Apoorva Agrawal, Mr. Sarthak,Mr.Hemant Sharma, Advocates for Indiabulls Housing. Mr. Abhijeet Sinha, Mr. Akash Chatterjee, Mr. Shahanulla, Mr. Krishan Kumar, Advocates for IIRF
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