The National Company Law Appellate Tribunal (NCLAT), New Delhi bench comprising Justice Ashok Bhushan and Barun Mitra was hearing an appeal and held that Resolution Professional's role is not to decide jurisdictional issues but to facilitate the process.
The Appellate Tribunal upheld the order of appointing the RP, emphasizing that the RP's role is not to decide jurisdictional issues but to facilitate the process, with such issues being addressed at the subsequent Section 100 stage.
In these two appeals, the Personal Guarantors of a Corporate Debtor challenged an order passed by the National Company Law Tribunal (NCLT) in response to an Application filed by the Bank of Maharashtra under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 (IBC). The NCLT had appointed a Resolution Professional (RP) in CP (IB) No. 282/ND/2023 and CP (IB) No. 285/ND/2023. The Appeals raised common legal and factual questions.
The Respondent-Bank of Maharashtra had granted a loan to Modern Instruments Private Limited in 2013, with the appellants serving as Personal Guarantors. The debt was classified as a Non-Performing Asset (NPA) in 2016, and the bank issued a recall notice and invoked the guarantee in 2022. Subsequently, the bank filed applications under Section 95(1) in March 2023, leading to the appointment of an RP by the NCLT.
The Appellant contested the order, arguing that the applications were time-barred, as the debt had been declared an NPA in 2016, and the applications were filed in 2023. They further contended that the RP should not have been appointed due to the absence of an Authorization for Assignment (AFA). The RP's report under Section 99 should only focus on procedural requirements.
The NCLAT, after hearing arguments from both parties, rejected the Appellant(s)' contentions. It referred to the Supreme Court's judgment in Dilip B. Jiwrjka v. Union of India and Others, REED 2023 SC 11575, emphasizing that the adjudicatory function begins under Section 100 after the RP submits a report. The NCLAT clarified that issues of jurisdiction, including the limitation of applications, are to be considered at the Section 100 stage, not when appointing the RP under Section 97(5). The Appellant(s)' argument that the RP cannot comment on the limitation issue in the report was also dismissed, with the NCLAT asserting that the RP's role is facilitative, and they may recommend acceptance or rejection based on the application's merits.
The NCLAT concluded that the impugned order, appointing the RP was without error, dismissing the appeals with no costs.