NCLAT (20.12.2022) in CA V. Venkata Sivakumar Vs. IDBI Bank Ltd. [Company Appeal (AT) (CH) (Ins.) No. 269/2022 & I.A. Nos. 571, 572 & 623/2022] held that;
In view of the above detailed examination this ‘Appellate Tribunal’ considers that the ‘Appellant’did not possess the legally required ‘AFA’ on the date of the acceptance of the assignment and the ‘Appellant’ thus fails to meet the legal bar. Therefore, there is no error in the ‘impugned order’ on these accounts.
In other words, the power to terminate the appointment by compulsory retirement or otherwise is a necessary adjunct of the power of appointment and is exercised as an incident to or consequences of the power” “
The Liquidator does not have any personal right to continue in the Liquidation Process and the reasons which have been noted in the order are sufficient to exercise even the inherent power by NCLT to replace the Liquidator. It is not a fit case to interfere in exercise of our Appellate Jurisdiction.”
This clearly establishes that, no Liquidator, has any `personal rights’, to continue in `Liquidation’ and the ‘Adjudicating Authority’, can order for `Replacement’ of the ‘Liquidator’, recording sufficient reasons, as per `Law’.
Further, since the ‘Adjudicating Authority’, is vested with the power, to `appoint a Liquidator’, under Section 33 and 34 of the I & B Code, 2016. It is by the virtue of the Section 16 of the General Clauses Act, 1897, that an ‘Adjudicating Authority’, who also, has the power, to remove the `Liquidator’.
Excerpts of the Order;
The present `Appeal’, is filed against the ‘impugned order’ dated 01.07.2022, passed in IA/815/IB/2020 in CP/1307/IB/2018, by the ‘Adjudicating Authority’, [`National Company Law Tribunal’, Chennai Bench (Court – II)], whereby, the ‘Adjudicating Authority’, dismissed the `Petition’, filed under the ‘Insolvency & Bankruptcy Code, 2016’ (in short ‘I & B Code’, 2016).
Brief Facts:
# 2. Mr. V. Venkata Sivakumar is the ‘Appellant- in-person’ herein and is an `Insolvency Professional’ who was the ‘Liquidator’ of ‘The Jeypore Sugar Company Ltd.’ (“Corporate Debtor”) and was subsequently replaced by the ‘Adjudicating Authority’ on the application of the 1st Respondent vide ‘impugned order’ dated 01.07.2022 in IA/815/IB/2020 in CP/1307/IB/2018.
‘IDBI Bank Limited’ is the 1st Respondent herein and is a ‘Secured Financial Creditor’ of the ‘Corporate Debtor’ having a stake of 43.57% of the `Liquidation Process’.
‘Insolvency Bankruptcy Board of India’ (“IBBI”)’ is the 2nd Respondent and is the ‘Regulator’, under I & B Code, 2016.
Indian Institute of Insolvency Professionals of ICAI (IIIPI) is the 3rd Respondent herein which is a professional body authorised to issue ‘Authorisation for Assignment’ (in short ‘AFA’).
# 3. ‘The Jeypore Sugar Company Ltd.’ (“Corporate Debtor”) was incorporated in 1936 and was engaged in manufacturing of sugar and allied products having factories located in Andhra Pradesh and Orissa. On failure to make repayments of various loans taken from the financial creditors including from the 1st Respondent herein, an Application under Section 7 of the I & B Code, 2016 was admitted by the ‘Adjudicating Authority’ on 25.02.2019 and the ‘Appellant’ herein was appointed as ‘Interim Resolution Professional’ and subsequently confirmed the ‘Appellant’ as a ‘Resolution Professional’. After the expiry of 330 days of the ‘Corporate Insolvency Resolution Process’, the ‘Adjudicating Authority’ ordered for liquidation of the ‘Corporate Debtor’ on 29.05.2020 and appointed the ‘Appellant’ as ‘Liquidator’.
# 4. It is the case of the 1st Respondent that during annual performance review of all ‘Insolvency Professionals’ empanelled with the bank, declarations were called for verification and review to decide on continuation of the services of ‘Insolvency Professionals’ and as part of this exercise an e-mail was sent to the ‘Appellant’ on 21.07.2020 asking him to submit the required documents and a self- declaration was received from the ‘Appellant’ through e-mail on the same day i.e. 21.07.2020 confirming that all the information/ undertakings/ affirmations/ documents submitted by the ‘Appellant’ at the time of empanelment continued to be valid, effective and in force and further confirmed that the ‘Appellant’ shall be bound by the terms and conditions contained in the original letter of empanelment dated 06.10.2018 issued by the 1st Respondent. It has been further been brought out the notice of this ‘Appellate Tribunal’ by the 1st Respondent that Serial No. 8 of the ‘Terms & Conditions’ of the letter ‘Empanelment’, the ‘‘Insolvency Professionals’’ shall comply to requirements of the Code, the Rules, Regulations and Guidelines framed thereunder, the Model bye-laws of IPA with which he is enrolled and the resolutions passed and directives given by the IBBI.
# 5. Regulation 7A of “IBBI” ‘Insolvency Regulation 2017’ mandates the ‘Insolvency Professionals’ to have the ‘AFA’ in order to take assignments and without which they cannot be engaged in any capacity under the Provision of I & B Code, 2016. The 1st Respondent has claimed that an e-mail was sent on 06.08.2020 requesting the ‘Appellant’ to furnish a copy of ‘AFA’ issued by the 3rd Respondent and on the same date the ‘Appellant’ informed that he is not interested in getting empanelled with the 1st Respondent due to several assignment with the ‘Appellant’. The 1st Respondent again sent an email on 06.08.2020 to the ‘Appellant’ to furnish the copy of ‘AFA’ since he has been continuing on the panel of the bank. However, the 1st Respondent did not get any response from the ‘Appellant’. It is case of the 1st Respondent that he approached the 3rd Respondent and checked IDBI website and came to know that the ‘Appellant’ did not have valid ‘AFA’.
# 6. On coming to the knowledge that the ‘Appellant’ did not have ‘AFA’ on the relevant date and has suppressed the facts, the 1st Respondent moved an application to the ‘Adjudicating Authority’ for ‘Appellant’s’ removal in IA/815/IB/2020 in CP/1307/IB/2018 and the ‘Adjudicating Authority’ vide ‘impugned order’ dated 01.07.2020 replaced the ‘Appellant’ by new liquidator Mr. S. Hari Karthik under provision of Section 33 & 34 of I & B Code, 2016 r/w Section 16 of ‘General Clauses Act, 1897’ r/w Section 276 of the ‘Companies Act, 2013’.
# 7. Aggrieved by the ‘impugned order’, the ‘Appellant’ has preferred the present appeal before this ‘Appellate Tribunal’.
Findings
# 45. Heard Learned Counsel for the Appellant and the Respondents and also perused records made available to us. Several issues have been raised in the Appeal which are required to be deliberated upon before coming to final conclusion.
(I) (a) Whether the ‘Appellant’ had valid Authorisations for Assignment (“AFA”) on the date of his appointment as the ‘Liquidator’ of the ‘Corporate Debtor’?
(b) Whether, the ‘AFA’ was deemed to have been issued in terms of Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016.
(c) Whether, the ‘AFA’ issued subsequent to taking up assignment by the ‘Appellant’, absolve ‘Appellant’ of meeting requirement of Regulation 7A of IBBI ‘Insolvency Professional’ Regulation 2016.
(d) Whether, the Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 will prevail over Regulation 7A of IBBI ‘Insolvency Professional’ Regulation 2016.
(II) Whether the order passed by Hon’ble Madras High Court in W.M.P. No. 5088 of 2021 in W.P. No. 4458 of 2021 WP No. 4458 of 2021 has any bearing on the current case?
(III) Whether the ‘Adjudicating Authority’ can remove the ‘Liquidator’ ?
# 46. Issue (I) (a) Whether the ‘Appellant’ had valid Authorisations for Assignment (“AFA”) on the date of his appointment as the ‘Liquidator’ of the ‘Corporate Debtor’?
(b) Whether, the ‘AFA’ was deemed to have been issued in terms of Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016.
(c) Whether, the ‘AFA’ issued subsequent to taking up assignment by the ‘Appellant’, absolve ‘Appellant’ of meeting requirement of Regulation 7A of IBBI ‘Insolvency Professional’ Regulation 2016.
(d) Whether, the Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 will prevail over Regulation 7A of IBBI ‘Insolvency Professional’ Regulation 2016.
Before examining these issues, it will be necessary to look into provisions of the I & B Code, 2016, related Regulations and Bye Laws.
Reading the Regulation 7A of IBBI (Resolution Professional) Regulation 2016, it is clear that no Insolvency Professional shall accept or undertake any assignment after 31.12.2019 unless he holds a valid ‘AFA’ on the date of acceptance or commencement of such assignment.
The ‘Appellant’ was appointed as the ‘Liquidator’ by the order of ‘Adjudicating Authority’ on 29.05.2020. After carefully examining the dates of the letter by the 3rd Respondent and the ‘impugned order’ of ‘Adjudicating Authority’, it is clear that the ‘Appellant’ did not have the valid AFA on date of acceptance of the ‘Liquidator’.
Further, all the assignments as an ‘Interim Resolution Professional’, ‘Resolution Professional’, ‘Liquidator’ etc. are to be treated as independent assignments and one assignment cannot automatically give extension to next assignment. It is thus, natural that the ‘Appellant’ needs to comply to the requirements of the particular appointment. In this case, the criteria need to be met at the different stages and at the time of liquidation, the ‘Appellant’ is duty bound to comply with the Regulations. It has already been seen that the Regulation 7A of IBBI (Insolvency Professional) Regulation 2016 mandated the ‘Appellant’ to have a valid ‘AFA’.
It is the case of the ‘Appellant’ that he need not to comply with Regulation 7A in strict sense since he had applied for AFA well in time on 29.12.2019 much before accepting the assignment of the ‘Liquidator’. As per Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016, the ‘AFA’ was deemed to have been received on expiry of 15 days from the date of application. The ‘Appellant’ received the communication of rejection of his application only on 16.07.2020 on telephone, hence the ‘Appellant’ was under valid assumption of having received deemed approval of the ‘AFA’ and therefore, did not contravene any laws. The ‘Appellant’ further submitted that he had wide experience and has been doing insolvency work for many years with excellent track record and his application was rejected on very technical issues like fee etc.
With reference to conflict between Regulation 7A of the IBBI (Insolvency Professional) Regulation 2016 and Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 this ‘Appellate Tribunal’ has noted from the averments and the records available w.r.t. Writ Petition No. 13229 of 2020 in which the ‘Appellant’ had challenged the constitutional validity of the very concerned Regulation and Bye Laws before the Hon’ble Madras High Court. The Hon’ble Madras High Court after examining the issues in great details dismissed the said Writ Petition and this issue was also mentioned in the order disposing this Writ, the relevant portion of which reads as under:-
“13….. In every case, such AFA is required to be obtained from the appropriate IPA in which such IP in enrolled as a professional member…..
….Accordingly, as per Regulation 12A of the Model Bye – Laws IPA Regulations, he is required to apply for and obtain the AFA from the IIIPI.”
[emphasis supplied]
The ‘Appellant’ himself admitted that application for ‘AFA’ was filed on 31.12.2019 and the same was rejected on 14.01.2020 hence this ‘Appellate Tribunal’ feels that the argument the ‘Appellant’ that he has deemed to have been received the ‘AFA’ or renewed within 15 days does not seems to be correct
Therefore, the appellant cannot claim that there was no requirement of issue of fresh AFA for his assignment as the ‘Liquidator’. The assignment as the ‘Liquidator’ to which the ‘Appellant’ got confirmed on 29-05-2020, is beyond the prescribed threshold date i.e. 31-12- 2019. Therefore, this is non-compliance of the regulatory provisions.
The ‘Appellant’ got authorized and valid ‘AFA’ by the 3rd Respondent only on 30.12.2020 which is way beyond the date of his appointment/assent as liquidator. Therefore, it is clear that as per Regulation 7A of IBBI (Resolution Professional) Regulation 2016, the ‘Appellant’ did not hold valid ‘AFA’ on the date of acceptance of the Assignment and the ‘AFA’ cannot be ratified retrospectively in the absence of any such provisions in the law.
In the case of Tax Officer, Alleppey vs MC Ponnoose & Ors. (1969) 2 SCC 351 at paragraph 5, it was held that in absence of any Rule/Regulation, there can be no retrospective application for a statute, wherein it has been as follows:
“5……. The courts will not, therefore, ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the legislature. The Parliament can delegate its legislative power within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the Courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect…
In view of the above detailed examination this ‘Appellate Tribunal’ considers that the ‘Appellant’ did not possess the legally required ‘AFA’ on the date of the acceptance of the assignment and the ‘Appellant’ thus fails to meet the legal bar. Therefore, there is no error in the ‘impugned order’ on these accounts.
# 47. Issue No. (II) Whether the order passed by Hon’ble Madras High Court in W.M.P. No. 5088 of 2021 in W.P. No. 4458 of 2021 WP No. 4458 of 2021 has any bearing on the current case?
The ‘Appellant’ had filed a Writ Petition under Article 226 of the ‘Indian Constitution’ before the High Court Judicature in Madras / the Madras High Court in Writ Petition No. 4458 of 2020 & 4463 of 2021 and WMP No. 5086 & 5088 of 2021. This ‘Appellate Tribunal’ notes from the averment of the ‘Appellant’ that the Hon’ble High Court Judicature in Madras gave the interim stay as requested by the ‘Appellant’ in W.M.P No. 5088 of 2021 in W.P. No. 4458 of 2021.
Hence, it will be necessary to look into the relevant portion of all these documents.
(a) Impugned Orders passed in DCNo. IIIPI/DC/29/2020-21 dated 01.12.2020.
(b) No. IBBI/DC/61/2020 Dated 17th Dec 2020.
(c) Following is excepts from the Hon’ble High Court order dated 26.02.2021 in WP No. 4458 & 4463 of 2021 and WMP 5086 & 5088 of 2021
“ Writ petitions under article 226 of the Constitutions of India praying that in these circumstances stated therein and in the respective affidavits filed their with the High Court will pleased to Issue writ of certiorari
(1) WP NO. 4458 of 2021
Calling for the in these records of the decisions of the 1st Respondent in the impugned order No. IBBI/DC/61/2020 Dated 17th Dec 2020 and in the consequential Impugned order of the 2nd Respondent in DCNo. IIIPI/DC/29/2020-21 dated 01.12.2020 and quash the same as being arbitrary, illegal and violative of Art 14, 19, 20(2) and (21) and pass.
(2) WP. NO. 4463 of 2021
Issue a writ of mandamus or any other writ or direction Directing the 2nd and 3rd Respondents to pay compensation of Rupees One Crore towards legal costs and Financial loss on account of wrongful rejection and abuse of process of law exposing the petitioner to heavy litigation, financial loss, mental agony, and ridicule suffered among the professional fraternity and fifty percent of it be deposited for the befit of free legal aid or other noble public causes and pass.
(3) WMP. NO. 5086 of 2021
To dispense with the Impugned order of 1st Respondent Insolvency and Bankruptcy Board of India in No. BBI/DC/61/2020 Dated 17th Dec 2020 and in the consequential Impugned order of the 2nd Respondent IIIPA/ ICAI in DCNo. IIIPI/ DC/ 29/ 2020-21 dated 01.12.2020
(4) WMP No. 5088 of 2021
To issue an order of ad interim injunction restraining all the Respondents, their servants and agents or any other person from taking any coercive action on account of the impugned orders passed in DCNo. IIIPI/DC/29/2020-21 dated 01.12.2020 and No. IBBI/DC/61/2020 Dated 17th Dec 2020 pending disposal of this writ petition.
Order : These petitions coming on for orders upon perusing the petitions and the respective affidavits filed in support thereof and upon hearing the arguments of CA.V. VENKATA SIVA KUMAR Party in person for the petitioner the court made the following order :–
The petitioner is aggrieved by the impugned order dated 01.12.2020, directing him to pay a penalty of Rs. 10,000/- by the first respondent on account of the alleged violation of Regulation 7A in the IP Regulations committed by him, which requires an Insolvency Professional to procure a valid AFA before undertaking any assignment after 31.12.2019….
3. This Court after due consideration to the averments contained in the affidavit and after perusing the documents filed in support of the Writ Petition as well as after hearing the submissions of the Party-in-Person, is of the considered view that a prima facie case has been made out for the grant of interim injunction as prayed for in W.M.P No. 5088 of 2021 in W.P. No. 4458 of 2021. Accordingly, there shall be an order of interim injunction as prayed for in W.M.P. No. 5088 of 2021 in W.P. No. 4458 of 2021.”
[emphasis supplied]
On face of it, above Interim injunction order passed by the Hon’ble Madras High Court confines only to the order with regard to action arising out of proceedings of the Disciplinary Committee and is silent on the issue of requirement of ‘AFA’ by the ‘Appellant’, compulsory requirement of AFA as per Regulation 7A of IBBI (Insolvency Professional) Regulation 2016 and any stay on removed of the ’Appellant’ from ‘Liquidator’ of the ‘Corporate Debtor’.
This ‘Appellate Tribunal’ also notes that the ‘Appellant’ had challenged the validity of Section 7A of IBBI (Insolvency Professional) Regulation 2016 as well as Regulation 12A of ‘Insolvency and Bankruptcy Board of India (Model Bye -Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI/2016-17/GN/REG001, dated 21st November, 2016 in Writ Petition No. 13229 of 2020 before the Hon’ble Madras High Court which was dismissed. It is noted that in this writ, the ‘Appellant’ himself admitted that application for ‘AFA’ was filed on 31.12.2019 and the same was rejected on 14.01.2020 hence, the arguments of the ‘Appellant’ that the ‘AFA’ was deemed to have been received the ‘Appellant’ or renewed within 15 days is not correct.
The Hon’ble Madras High Court while dismissing the Writ Petition No. 13229 of 2020 has clearly mentioned which as hereunder :-
“13….. In every case, such AFA is required to be obtained from the appropriate IPA in which such IP in enrolled as a professional member…..
….Accordingly, as er Regulation 12A of the Model Bye – Laws IPA Regulations, he is required to apply for and obtain the AFA from the IIIPI.”
This also establishes that the ‘Appellant’ was required to have valid ‘AFA’ before taking any assignment.
Thus this ‘Appellate Tribunal’ do not find prima-facie any restrain on the ‘Adjudicating Authority’ to adjudicate in this case and no conflict is found.
# 48. Issue No. (III) Whether the ‘Adjudicating Authority’ can remove the ‘Liquidator’ ?
To be able to understand Whether the adjudicating authority can remove a Liquidator, we need to understand where resides the power to remove the a Liquidator.
I & B Code, 2016 does not explicitly state the grounds for removing the liquidator. In the absence of specific provisions, we may resort to Section 33 & 34 of the I & B Code, 2016 and Section 276 of the Companies Act, 2013, which provides for the removal and replacement of liquidators on various grounds.
Reference can be made to Section 16 of the General Clauses Act, 1897, which states as follows:
“16. Power to appoint to include power to suspend or dismiss. Where, by any Central Act or Regulation, a power to make any appointment is conferred, then, unless a different intention appears, the authority having for the time being power to make the appointment shall also have power to suspend or dismiss any person appointed whether by itself or any other authority in exercise of that power.”
[emphasis supplied]
Section 33 & 34 of the I & B Code, 2016
CHAPTER III
LIQUIDATION PROCESS
“33. Initiation of liquidation.—(1) Where the Adjudicating Authority,—
(a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or
(b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall—
(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter;
(ii) issue a public announcement stating that the corporate debtor is in liquidation; and
(iii) require such order to be sent to the authority with which the corporate debtor is registered.
(2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
(3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
(4) On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor:
Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority.
(6) The provisions of sub-section (5) shall not apply to legal proceedings in relation to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
(7) The order for liquidation under this section shall be deemed to be a notice of discharge to the officers, employees and workmen of the corporate debtor, except when the business of the corporate debtor is continued during the liquidation process by the liquidator.
34. Appointment of liquidator and fee to be paid.—
(1) Where the Adjudicating Authority passes an order for liquidation of the corporate debtor under section 33, the resolution professional appointed for the corporate insolvency resolution process under 2[Chapter II shall, subject to submission of a written consent by the resolution professional to the Adjudicatory Authority in specified form,] act as the liquidator for the purposes of liquidation unless replaced by the Adjudicating Authority under sub-section (4).
(2) On the appointment of a liquidator under this section, all powers of the board of directors, key managerial personnel and the partners of the corporate debtor, as the case may be, shall cease to have effect and shall be vested in the liquidator.
(3) The personnel of the corporate debtor shall extend all assistance and cooperation to the liquidator as may be required by him in managing the affairs of the corporate debtor and provisions of section 19 shall apply in relation to voluntary liquidation process as they apply in relation to liquidation process with the substitution of references to the liquidator for references to the interim resolution professional.
(4) The Adjudicating Authority shall by order replace the resolution professional, if—
(a) the resolution plan submitted by the resolution professional under section 30 was rejected for failure to meet the requirements mentioned in sub-section (2) of section 30; or
(b) the Board recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded 1[in writing; or]
2[(c) the resolution professional fails to submit written consent under sub-section (1).]
(5) For the purposes of 3[clauses (a) and (c)] of sub-section (4), the Adjudicating Authority may direct the Board to propose the name of another insolvency professional to be appointed as a liquidator.
(6) The Board shall propose the name of another insolvency professional 2[along with written consent from the insolvency professional in the specified form,] within ten days of the direction issued by the Adjudicating Authority under sub-section (5).
(7) The Adjudicating Authority shall, on receipt of the proposal of the Board for the appointment of an insolvency professional as liquidator, by an order appoint such insolvency professional as the liquidator.
(8) An insolvency professional proposed to be appointed as a liquidator shall charge such fee for the conduct of the liquidation proceedings and in such proportion to the value of the liquidation estate assets, as may be specified by the Board.
(9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall be paid to the liquidator from the proceeds of the liquidation estate under section 53.”
Section 276 of the Companies Act, 2013:
“276. Removal and replacement of liquidator.— (1) The Tribunal may, on a reasonable cause being shown and for reasons to be recorded in writing, remove the provisional liquidator or the Company Liquidator, as the case may be, as liquidator of the company on any of the following grounds, namely:—
(a) misconduct;
(b) fraud or misfeasance;
(c) professional incompetence or failure to exercise due care and diligence in performance of the powers and functions;
(d) inability to act as provisional liquidator or as the case may be, Company Liquidator;
(e) conflict of interest or lack of independence during the term of his appointment that would justify removal.
(2) In the event of death, resignation or removal of the provisional liquidator or as the case may be, Company Liquidator, the Tribunal may transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing.
(3) Where the Tribunal is of the opinion that any liquidator is responsible for causing any loss or damage to the company due to fraud or misfeasance or failure to exercise due care and diligence in the performance of his or its powers and functions, the Tribunal may recover or cause to be recovered such loss or damage from the liquidator and pass such other orders as it may think fit.
(4) The Tribunal shall, before passing any order under this section, provide a reasonable opportunity of being heard to the provisional liquidator or, as the case may be, Company Liquidator.”
Further, the reference can also be made to the judgment in the case of State of Tamil Nadu and Ors. vs. M.N. Sundararajan (1980) 4 SCC 592 wherein it has been stated as under:
“9. The question is, whether the expression “appointments” used in this Government Order, dated June 13, 1973, will include ‘termination’ of service or ‘compulsory retirement’ from service, also. It is a fundamental principle of interpretation that unless a contrary intention appears from the context, a power to appoint should include a power to terminate the appointment. including termination of the person appointed by his compulsorily retirement in accordance with the terms and conditions of his service. This fundamental principle underlies Section 16 of the General Clauses Act, In other words, the power to terminate the appointment by compulsory retirement or otherwise is a necessary adjunct of the power of appointment and is exercised as an incident to or consequences of the power” In the case of Heckett Engineering Co. vs. Their Workmen (1977) 4 SCC 377 it has been stated
“14. We may also in this connection recall the provisions of Section 16 of the General Clauses Act, 1897, Whether or not the section in terms applies to the aforesaid Standing Orders of the Company which are certified under Section 5(3) of the Industrial Employment Standing Order Act, 1946 may be a moot point but the general doctrine underlying the section can well be made applicable to a case of the present nature for it is now firmly established that the power to terminate service is a necessary adjunct of the power of appointment and is exercised as an incident to or consequence of that power (See Lekhraj Satramdas Lalvani v Deputy Custodian-cum-Managing Officer and Ors. MANU/SC/0010/1965 [1966]1SCR120 and Kutoor Vengayil Rayarappan Nayanar v. Kutoor Vengayil Madhavi Amma and Ors. [1949] F.C.R. 66. In Kutoor Vengayil Rayarappan Nayanar v. Kutoor Vengayil Valia Madhavi Amma and Ors. (supra) Mahajan, J. (as he then was) speaking for the Federal Court approved the statement of Woodroffe On Receivers, Fourth Edition, that the power to terminate flows naturally and as a necessary sequence from the power to create. In other words, it is a necessary adjunct of the power of appointment and is exercised as an incident to, or consequence of that power; the authority to call suck officer into being necessarily implies the authority to terminate his functions. “
This ‘Appellate Tribunal’ also notes that in recent judgement passed by Principal Bench, NCLAT vide order dated 13.10.2022 in Company Appeal (AT) (Ins.) No. 1234 of 2022 as held :
“The Liquidator does not have any personal right to continue in the Liquidation Process and the reasons which have been noted in the order are sufficient to exercise even the inherent power by NCLT to replace the Liquidator. It is not a fit case to interfere in exercise of our Appellate Jurisdiction.”
[emphasis supplied]
This clearly establishes that, no Liquidator, has any `personal rights’, to continue in `Liquidation’ and the ‘Adjudicating Authority’, can order for `Replacement’ of the ‘Liquidator’, recording sufficient reasons, as per `Law’.
Further, since the ‘Adjudicating Authority’, is vested with the power, to `appoint a Liquidator’, under Section 33 and 34 of the I & B Code, 2016. It is by the virtue of the Section 16 of the General Clauses Act, 1897, that an ‘Adjudicating Authority’, who also, has the power, to remove the `Liquidator’.
Combined reading of above Case Laws and Provisions along with Section 33 and Section 34 of the I & B Code, 2016, would make it clear that the ‘Adjudicating Authority’, which had the `powers’, to appoint the ‘Liquidator’, will also have the powers, to remove the ‘Liquidator’ for reasons, the ‘Adjudicating Authority’, may find fit, just, valid and proper.
# 49. After above detailed qualitative and quantitative analysis of the facts, legal position of various Laws discussed above and `judgments’, this ‘Appellate Tribunal’, without any `ambiguity / simmering doubt’, finds that there was no error in the ‘impugned order’. The ‘Appeal’, is devoid of merits and stand dismissed. There shall be no order, as to costs. The connected pending I.A. No. 571 of 2022, I.A. No. 572 of 2022 and I.A. No. 623 of 2022 are closed.
------------------------------------------------
No comments:
Post a Comment