Approved Resolution Plan Authorises CoC to Pursue Avoidance Applications: Suspended Director Has No Locus to Oppose RP Substitution
- REEDLAW
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REEDLAW Legal News Network reports:Â In a decisive ruling clarifying post-resolution plan governance under the Insolvency and Bankruptcy Code, 2016, the Appellate Tribunal held that once a resolution plan expressly authorises the Committee of Creditors or its representative to pursue avoidance applications, a suspended director lacks locus standi to object to substitution of the Resolution Professional, and no independent notice or opportunity of hearing is required for effecting such substitution.
The National Company Law Appellate Tribunal, Principal Bench, comprising Justice Ashok Bhushan (Chairperson)Â and Mr. Barun Mitra (Technical Member), while adjudicating a company appeal, held that following approval of a resolution plan which specifically empowered the Committee of Creditors or its nominee to pursue avoidance applications, a suspended director could not maintain any objection to the substitution of the Resolution Professional. The Tribunal further held that such substitution did not require issuance of a separate notice or grant of an opportunity of hearing to the suspended director, as no vested right subsisted post approval of the resolution plan.
The Appellate Tribunal considered an appeal filed against an order passed by the Adjudicating Authority allowing substitution of the Committee of Creditors’ representative in an avoidance application, whereby the National Asset Reconstruction Company Ltd. had been substituted in place of the Resolution Professional. The substitution was sought in continuation of an avoidance application earlier filed under Sections 43 to 51 of the Insolvency and Bankruptcy Code, 2016, pursuant to approval of the resolution plan.
The Appellant, being a suspended director of the Corporate Debtor, contended that the impugned order had been passed without granting an opportunity of hearing and without impleading the Appellant, and therefore suffered from a violation of principles of natural justice. It was urged that the Appellant ought to have been permitted to object to the substitution application.
The Tribunal noted that the approved resolution plan expressly authorised the Committee of Creditors or its representative to pursue avoidance applications under Sections 43 to 51 and Section 66 of the Code, and further provided that any recoveries pursuant to such applications would inure to the benefit of the Financial Creditors. Reliance was placed on Clause 4.7 of the resolution plan, which clearly vested the Committee of Creditors with the authority to continue and prosecute avoidance proceedings post-approval of the plan, with all associated costs to be borne by the Committee of Creditors.
The Tribunal held that once the resolution plan had attained finality and was binding on all stakeholders, including the suspended management of the Corporate Debtor, it was not open to the Appellant to object to procedural steps taken strictly in accordance with the plan. The substitution of the Committee of Creditors’ representative in place of the Resolution Professional was found to be fully in consonance with the terms of the approved resolution plan and did not require consent or objection from the suspended director.
Finding no infirmity in the impugned order and holding that the Appellant had no locus to challenge an action expressly authorised under the binding resolution plan, the Tribunal dismissed the appeal as devoid of merit.
Ms. Purti Gupta, Ms., Heena George, Ms. Sunidhi Sah and Ms. Khushi Sharma, Advocates, represented the Appellant.
Mr. Ankur Mittal, Ms. Sabhya Jain and Mr. Ankush Kumar, Advocates, appeared for the Respondent.
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