Monday, 27 September 2021

State Bank of India Vs. Mathur Sabapathy Viswanathan - This Adjudicating Authority cannot be a rubber stamp to admit the decision of the COC in the name of “collective commercial visdom”.

NCLT Chennai (06.09.2021) ) In State Bank of India Vs. Mathur Sabapathy Viswanathan [MA/80 (CHE)/ 2021in  IBA/ 578/ 2019] held that;

  • this Tribunal has observed that the reason stated by the Financial Creditor for the change of Resolution Professional on the ground of “operational need” is not explained.

  • This Adjudicating Authority cannot be a rubber stamp to admit the decision of the COC in the name of “collective commercial visdom”. Every decision needs to be as per the IBC Rules and Regulations and spirit of the IBC.


Excerpts of the order;

MA/80/CHE/2021 is an Application filed under Section 27 of IBC, 2016 by the sole Financial Creditor viz. State Bank of India, in relation to the Corporate Debtor viz. Leo PrimeComp Private Limited. It is seen from the record of proceedings that when the matter came up for hearing on 09.07.2021 this Tribunal has observed that the reason stated by the Financial Creditor for the change of Resolution Professional on the ground of “operational need” is not explained. 


Further, it was also observed in the said order that the person suggested by the Financial Creditor appears to be an ex-employee of the Financial Creditor bank. Hence, this Tribunal directed the Counsel for the Applicant to take instructions from the Financial Creditor as to why there is a need to change the RP at the 12th CoC meeting. 


Further, when the matter came up for hearing before this Tribunal on 15.07.2021, the Learned Counsel for the Applicant sought to withdraw this Application and taking into consideration the said representation this Tribunal has passed the following order; 

  • "Counsel for the Applicant is represented by Ld. Counsel Mr. R. Sugumaran. Ld. Counsel Mr. M.S. Viswanathan for the Respondent/RP is present. 

  • By order dated 09.07.2021, this Adjudicating Authority asked the Applicant to specify the reason for change of the RP in the 12th CoC meeting held on 05.02.2021 when the Corporate Debtor is about to go for liquidation. As to "operational need” for change of the RP, the Counsel for the Applicant has stated that the sole CoC member has taken a decision to replace the RP on the ground of operational need”. 

  • The Applicant was asked to file a detailed affidavit to satisfy this Adjudicating Authority explaining the “operational need” for change of the RP when the company is going for liquidation. No affidavit was filed till date. This Adjudicating Authority cannot be a rubber stamp to admit the decision of the COC in the name of “collective commercial visdom”. Every decision needs to be as per the IBC Rules and Regulations and spirit of the IBC. This application was taken up for hearing today. 

  • Counsel appearing on behalf of the Applicant states that he has got instructions from his client to withdraw this application. However, we do not find any reason for the same. Counsel for the Applicant states that meeting has not been conducted by the CoC. No resolution was passed for withdrawal of this application. Since State Bank of India is the sole Financial Creditor, this application was filed by the COC in the capacity of the sole Financial Creditor and is now seeking for withdrawal of this application as the only Creditor in the COC. 

  • The Petitioner is directed to file a detailed affidavit seeking permission to withdraw this application. 

  • The Registry is directed to forward a copy of this order to IBBI for records and confirmation. 

  • List this matter on 06.08.2021 for hearing and disposal.” 


In compliance to the aforesaid order, it is seen that the Financial Creditor has filed an Affidavit and the said Affidavit is taken on record. The Financial Creditor is permitted to withdraw the present Application and accordingly MA/80/CHE/2021 stands dismissed as withdrawn. 


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1 comment:

  1. It is apparent from section 27:-
    COC May form an “Opinion” to replace the RP appointed under section 22.
    Here word “ Opinion” itself express that COC must have the basis on which they need to replace RP which was appointed under section 22 and COC on application before AA must state the reasons.
    Here one point again arise, Section 27 provides those RP can be replaced which was appointed under 22.
    Is any RP appointed under 27 also be replace as per section 27 in either case? In my opinion AA have discretionary power in such case to replace RP appointed under 27 section subject to circumstances and fact to attain object of IBC and time bound process principles.

    ReplyDelete

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The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.