Proposed IRP Must Be Appointed Under Section 16(2) IBC: NCLT Cannot Reject on Ground of Multiple Assignments Alone
- REEDLAW
- 13 minutes ago
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REEDLAW Legal News Network reports: In an important ruling clarifying the mandatory scheme of appointment under the Insolvency and Bankruptcy Code, 2016, the High Court held that once a Section 7 or Section 10 application is admitted and the proposed insolvency professional satisfies statutory eligibility requirements, the Adjudicating Authority is bound to appoint such professional as the Interim Resolution Professional under Section 16(2). The Court held that rejection or substitution merely on the ground of multiple ongoing assignments, in the absence of regulatory disqualification, is impermissible.
The Kerala High Court, Single-Judge Bench of Justice Viju Abraham, while adjudicating a writ petition, held that where a Section 7 or Section 10 application under the Insolvency and Bankruptcy Code had been admitted and the proposed insolvency professional was otherwise eligible, with no pending disciplinary proceedings and no breach of assignment limits under the IBBI Regulations, the National Company Law Tribunal was mandatorily required to appoint such professional as the Interim Resolution Professional. The Court clarified that the NCLT could not substitute another professional solely on the ground of “multiple ongoing assignments” when the statutory framework did not recognise such a ground as a disqualification.
The writ petition had been filed by the Financial Creditors, being home buyers and allottees of a residential project, challenging the order of the Adjudicating Authority to the limited extent it declined to appoint the Insolvency Professional proposed by them while admitting a Section 7 application under the Insolvency and Bankruptcy Code, 2016. Although the application for initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor had been admitted and moratorium declared, the Adjudicating Authority appointed an Interim Resolution Professional from the IBBI panel instead of the professional proposed by the Financial Creditors, citing that the proposed professional was handling multiple ongoing assignments and relying upon Regulation 22 of the IBBI (Insolvency Professionals) Regulations, 2016 and the IBBI Panel Guidelines, 2025.
The High Court examined the statutory scheme under Sections 7, 10 and 16 of the Code and noted that where an application for initiation of CIRP is filed by a Financial Creditor or Corporate Debtor, the Adjudicating Authority is mandatorily required to appoint the Resolution Professional proposed in the application as the Interim Resolution Professional, provided no disciplinary proceedings are pending against such a professional. It was found that in the present case, the written consent in Form-2 and declaration of non-pendency of disciplinary proceedings had been duly filed, and there was no statutory disqualification attached to the proposed professional.
On an examination of Regulation 22 of the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016 and the newly inserted Regulation 7B introduced by the IBBI (Insolvency Professionals) (Second Amendment) Regulations, 2025, the Court observed that the regulatory restriction only prohibited an insolvency professional from holding more than ten assignments in aggregate, subject to specified thresholds, and did not confer discretion upon the Adjudicating Authority to reject a proposed professional merely on the perception of “multiple assignments” when the statutory limits were not breached. It was specifically noted that the proposed Insolvency Professional had not exceeded the permissible number of assignments under the Regulations.
Reliance was placed on the decision of the Division Bench of the Madras High Court in WP No. 22949 of 2025 in K.J. Vinod (Insolvency Professional) v. Registrar of the National Company Law Tribunal and Others, REEDLAW 2025 Mad 08559, wherein it had been held that the Adjudicating Authority could not substitute the Insolvency Professional proposed by the applicant with one of its own choice in the absence of any statutory disqualification. Applying the said principle, the Court held that the Adjudicating Authority had acted contrary to the mandate of Sections 10 and 16 of the Code in refusing to appoint the proposed professional.
Accordingly, the impugned order was set aside to the extent it appointed another Insolvency Professional, and the Adjudicating Authority was directed to reconsider the matter in accordance with law, after affording an opportunity of hearing to all concerned parties, including the proposed Insolvency Professional. The writ petition was disposed of with the aforesaid directions.
Shri. Akhil Suresh, Shri. Amrith M.J., Shri. Rahul T., Smt. Kalliyani Krishna B. and Smt. Anita Elizebeth Babu, Advocates, represented the Petitioners.
Shri. Nidhi Sam Johns, Sri. Lijo Joseph (Thoppil), Sri. A. Kevin Thomas and Smt. Celia Santhosh, Advocates, appeared for the Respondent.
Ms. O.M. Shalina, Advocate, appeared for the DSGI.
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