Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees (Recommendation) (Second) Guidelines, 2022
- The Insolvency and Bankruptcy Board of India (IBBI) vide notification dated December 12,2022 issued certain guidelines pertaining to the appointment of Insolvency Professionals as Interim Resolution Professionals (IRP), Resolution Professionals (RP) and Liquidators by the Adjudicating Authority in cases where the Operational Creditor has not proposed an IRP while filing an Application under Section 9 of IBC or where an Application under Section 94 or 95 is filed by the Debtor or the Creditor and not through RP or when the RP needs to be replaced.
- The said guidelines, which will be effective from January 01, 2023, have been issued in supersession of the earlier guidelines (Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustee (Recommendation) Guidelines, 2022) issued on June 8, 2022. Salient aspects of these guidelines are:
- In order to minimize the time period involved in appointment of
the Insolvency Professionals, the IBBI by way of these guidelines
has suggested that a rotational panel of Insolvency Professionals
(IP/IPs) be made and be shared with the Adjudicating Authority. The
panel shall be made on the following basis:
- The Panel will have Zone-wise list of IPs based on the registered office (address as registered with the Board) of the IP.
- The Panel will have validity of six months and a new Panel will replace the earlier Panel every six months. For example, the first Panel under these Guidelines will be valid for appointments during January-June 2023, and the next Panel will be valid for appointments during July-December 2023, and so on.
- An IP will be eligible to be in the Panel of IPs if:
- There is no disciplinary proceeding, whether initiated by the Board or the IPA of which he is a member, pending against him.
- He has not been convicted at any time in the last three years by a court of competent jurisdiction.
- He expresses his interest to be included in the Panel for the relevant period.
- He undertakes to discharge the responsibility as IRP, Liquidator, RP or BT, as he may be appointed by the Adjudicating Authority.
- He holds an Authorization for Assignment (AFA), which is valid till the validity of Panel. For example, the IP included in the Panel for appointments during January-June 30, 2023 should have AFA valid up to June 30, 2023.
- An IP will be included in the Panel against the Zone where his registered office (his address as registered with the Board) is located.
- The Board shall invite expression of interest from IPs in Form A by sending an e-mail to them at their email addresses registered with the Board. The expression of interest must be received by the Board in Form A by the specified date.
- The IPs after being determined to be eligible are scored on the
basis of the volume of the assignments handled by such an IP and
accordingly such IP is included in the panel. Where two or more IPs
get the same score, they will be placed in the Panel in the order
of date of their registration with the Board. The IP registered
earlier will be placed above the IP registered later ? Upon being
included in the Panel, such IP will have the following obligations:
- To not withdraw his interest to act as IRP, Liquidator, RP or BT, as the case may be.
- To not decline to act as IRPs, Liquidator, RP or BT, as the case may be, if appointed by the AA.
- To not surrender his registration to the Board or membership or AFA to his IPA during the validity of the Panel.
- Lastly, it must be explicitly understood that:
- The Adjudicating Authority may require the IBBI to recommend an IP from or outside the Panel and in such cases, the IBBI shall accordingly recommend an IP.
- An IP in the Panel can be appointed as IRP, Liquidator, RP at the sole discretion of the Adjudicating Authority.
- The submission of expression of interest is an unconditional consent by the IP to act as an IRP, Liquidator, RP of any process relating to a corporate or individual Debtor, as the case may be.
- An IP who declines to act as IRP, Liquidator, RP or BT, as the case may be, on being appointed by the Adjudicating Authority, shall not be included in the Panel for the next five years, without prejudice to any other action that may be taken by the Board.
Krishna Hi-Tech Infrastructure Pvt Ltd v. Bengal Shelter Housing Development Ltd
- An Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by Krishna Hi-Tech Infrastructure Pvt Ltd (Operational Creditor) against Bengal Shelter Housing Development Ltd (Corporate Debtor), was rejected by the NCLT, Kolkata Bench vide order dated September 12, 2022 (Impugned Order) observing that there is a pre-existing dispute between the parties.
- The Operational Creditor/Appellant was awarded work on contract by the Corporate Debtor/Respondent and payments were also made from time to time. As per the terms of contract, all payments were to be made within 15 days of raising of bills. However, when the Corporate Debtor started delaying in making payments as per the contract, the Operational Creditor sent a notice under Section 8 of IBC on July 13, 2019 claiming a debt of INR 1.39 crore.
- As a result of failure on the part of the Corporate Debtor to make payment even after receiving the demand notice, the Operational Creditor filed an Application under Section 9 of IBC seeking initiation of CIRP of the Corporate Debtor. NCLT while deciding the Application observed that there are email communications between the parties wherein the Corporate Debtor has raised disputes such as deficiency in the work, slow progress in the work, defective materials, that too prior to issuance of demand notice. NCLT rejected the Application under Section 9 on the ground of existence of pre-existing disputes between the parties.
- Aggrieved by the Impugned Order, the Operational Creditor challenged the same before the National Company Law Appellate Tribunal (NCLAT) on the ground that the Corporate Debtor have not made payment on the due dates since it was provided in the contract that within 15 days all bills shall be paid. Further, the Corporate Debtor is responsible for slow progress of work and not the Operational Creditor who is the contractor. Hence, the emails which were sent by the Corporate Debtor cannot be said to be reason for rejecting the Application on the ground that there is pre-existing dispute.
Issue at hand?
- Whether Section 9 Application under IBC can be rejected when there is a pre-existing dispute?
Decision of the Tribunal
- The NCLAT dismissed the Appeal preferred by the Appellant and observed that the email communications raising disputes such as deficiency in the work, slow progress in the work, defective materials were sent much prior to issuance of demand notice under Section 8 of IBC. The dispute between the parties were not supposed to be decided, examined, and adjudicated in IBC proceeding.
- The NCLAT concluded by reiterating that the question to be looked in Section 9 Application is as to whether the objection raised by the Corporate Debtor opposing claim of the Operational Creditor is not a moonshine defence. In this present case, the disputes regarding quality of work were raised much prior to sending of demand notice which establishes that the issues raised in the emails are not moonshine defence.
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