India Entry & Business Startup Consultings

NCLAT: Order passed by NCLT on appointment of RP for Metenere Ltd. upheld-

NCLAT: Order passed by NCLT on appointment of RP for Metenere Ltd. upheld-

As per the reports, the Appellate Tribunal has upheld order passed by Honourable NCLT which prohibits appointment of an ex-bank official as Resolution Professional of a bankrupt company due to the possibility of bias. The NCLAT has upheld an order passed by NCLT, Delhi bench over the appointment of a former official of State Bank of India as a Resolution Professional in CIRP of Metenere Ltd. This judgement could have an impact on the Corporate Insolvency Resolutions of many companies including Rs. 40,000 crore Videocon Industries case where former bank employees are working as RPs.

The Financial creditor of SBI had been associated for 39 years, retired as a chief general manager in 2016, the corporate debtor felt he was not acting fairly while discharging his duties. While, on 4th January, 2020, the Delhi bench of NCLT passed a judgement ordering State Bank of India to substitute RP on the basis of an appeal of bias filed by Metenere Ltd. against him. SBI appealed against this order before appellate tribunal. It was argued by Metenere Ltd. that RP was an ‘interested party’as he was receiving pension from SBI, which was considered as salary under the Income Tax Act, apart from being an ex-employee of the bank. SBI held that these are no grounds under the IBC for disqualification of the RP and that he only acts as a facilitator without any adjudicatory (decision making) powers in the CIRP.

The three-judge bench dismissed Metenere’s interested party argument but said that, “it cannot be denied that the Appellant (SBI) restricted its choice to propose him as ‘Interim Resolution Professional’ obviously taking account his loyalty in the past and the long services rendered by him.” SBI filed an appeal before the NCLT as it aggrieved with the order passed by the NCLT. The process should be fair and not biased because principles of natural justice should be followed. The NCLAT has passed a judgement setting aside the appointment of ex-employees of banks as RPs, which was a usual practice of banks. The order could be used as a tactic by promoters which causes delay in proceedings or removal of RPs.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

 

SUBSCRIBE OUR NEWS LETTER