The National Company Law Appellate Tribunal, Chennai Bench, upheld the power of the Committee of Creditors to replace a Resolution Professional under Section 22 of the Insolvency and Bankruptcy Code, 2016, while expunging adverse findings against the former RP grounded on alleged delay. The Tribunal clarified that a voting sheet is not statutorily mandatory when unanimous consent is reflected in signed minutes, and that fee claims remain open for adjudication before the NCLT.
Background & Facts
The Dispute
The dispute arose from the Corporate Insolvency Resolution Process (CIRP) of Maylari Agro Products Ltd., where the Appellant, Mr. S. Viswanathan, served as Interim Resolution Professional (IRP) and later Resolution Professional (RP). Canara Bank, the predominant financial creditor with 84.6% voting share in the Committee of Creditors (CoC), sought his replacement, alleging delay and loss of confidence. The Appellant challenged the Adjudicating Authority's order dismissing his re-confirmation application and allowing the Bank’s replacement application.
Key Facts
- The Corporate Debtor, Maylari Agro Products Ltd., was admitted into CIRP on 08.03.2021 (C.P. (IB) No.02/BB/2020).
- The Appellant was appointed IRP and convened the first CoC meeting on 09.04.2021, wherein both financial creditors (Canara Bank and Karnataka Bank) unanimously resolved to retain him as RP at a fee of Rs. 3 lakh per month plus taxes.
- On 26.04.2021, Canara Bank withdrew its consent via letter, alleging deficiencies; the Appellant replied the next day (27.04.2021) denying the allegations.
- Canara Bank filed I.A. No. 276 of 2021 before the NCLT seeking replacement of the RP.
- The NCLT, on 17.09.2021, heard the application and directed the Appellant to convene a CoC meeting within one week to decide on his continuance.
- Due to Dussehra holidays and the absence of an oral order (the written order was uploaded only on 06.10.2021), the earliest date when all three parties could meet was 21.10.2021, on which the Appellant convened the second CoC meeting.
- At the 21.10.2021 meeting, Canara Bank voted against his continuation while Karnataka Bank voted in favour.
- The Appellant filed I.A. No. 349 of 2021 seeking re-confirmation; the NCLT, on 27.10.2021, directed the parties to amicably settle fee and expense disputes.
- On 30.11.2021, the Adjudicating Authority (NCLT Bengaluru Bench) passed the impugned order: dismissed the Appellant’s re-confirmation application and allowed Canara Bank’s replacement application, appointing Ms. Shirley Mathew as new RP.
- The Appellant claimed outstanding professional fees of Rs. 17.83 lakhs and reimbursement of CIRP expenses of Rs. 3.38 lakhs (total Rs. 21.21 lakhs).
- After replacement, the new RP concluded the CIRP, obtaining a resolution plan for Rs. 5.05 crores approved by the CoC with 100% voting share on 30.03.2022.
- Canara Bank lodged a complaint with the IBBI on 22.10.2021; the IBBI communicated its closure on 16.12.2021.
Procedural History
- 08.03.2021: CIRP commencement.
- 09.04.2021: First CoC meeting.
- 26.04.2021: Bank’s withdrawal of consent.
- 27.04.2021: Appellant’s reply.
- 17.09.2021: NCLT hearing on I.A. No. 276; direction to convene CoC meeting within one week.
- 06.10.2021: Written order uploaded.
- 21.10.2021: Second CoC meeting convened.
- 27.10.2021: NCLT direction on fee settlement.
- 30.11.2021: Impugned order passed.
- 22.10.2021: Complaint filed with IBBI.
- 16.12.2021: IBBI communication closing complaint.
- 30.03.2022: Resolution plan approved.
- 23.09.2026: Judgment of the NCLAT Chennai Bench.
Parties' Positions
For the Appellant (Mr. S. Viswanathan):
- Contended that the NCLT failed to examine his defence and addendum dated 18.11.2021, violating audi alteram partem.
- Argued that under IBBI Regulations 24 and 25, a voting sheet is not required when unanimous consent is evidenced by signed minutes; the first CoC meeting minutes were recorded, circulated, and confirmed by Karnataka Bank.
- Asserted that the alleged delay was not his fault, as no oral order was passed on 17.09.2021 and the written order came only after Dussehra holidays.
- Claimed that the NCLT erred in treating the absence of a voting sheet as “unacceptable and against the code.”
- Maintained that I.A. No. 276 was not maintainable due to non-joinder of Karnataka Bank (15.4% voting share) and lack of Power of Attorney.
- Alleged that Canara Bank’s refusal to meet despite multiple calls and emails constituted contempt of court.
- Sought payment of outstanding professional fees (Rs. 17.83 lakhs) and reimbursement of CIRP expenses (Rs. 3.38 lakhs), and expunging of adverse remarks in paragraphs 4-10 of the impugned order.
For the Respondent (Canara Bank):
- Relied on Section 22 of the IBC, asserting the CoC’s commercial wisdom to replace the RP.
- Cited R.K. Vallal v. Sree Ramkrishna Sponge (P) Ltd. to support that the Appellant cannot question the creditor’s commercial decision.
- Emphasized the Adjudicating Authority’s observation that the Appellant failed to furnish any voting record for the 09.04.2021 meeting.
- Stated that the Appellant delayed convening the second CoC meeting until directed on 17.09.2021, holding it only on 21.10.2021.
- Noted that after replacement, the new RP concluded the CIRP successfully, obtaining a resolution plan for Rs. 5.05 crores approved by the CoC with 100% voting share on 30.03.2022.
- Contended that the Appellant’s conduct warranted replacement and that the IBBI complaint was examined and closed.
Relief Sought
The Appellant sought: (i) Direction to Canara Bank to pay outstanding professional fees of Rs. 17.83 lakhs and reimburse valid CIRP expenses of Rs. 3.38 lakhs (total Rs. 21.21 lakhs). (ii) Order expunging all derogatory and adverse remarks made against his professional reputation in paragraphs 4, 5, 6, 7, 9, and 10 of the impugned order.
The Legal Issue
The central question was whether the Adjudicating Authority, National Company Law Tribunal Bengaluru Bench, erred in dismissing the Appellant’s application for re-confirmation as Resolution Professional and allowing the Respondent’s application for replacement under Section 27(3) of the Insolvency and Bankruptcy Code, 2016, particularly concerning the alleged delay in convening a Committee of Creditors meeting, the necessity of maintaining a voting sheet, and the Appellant’s right to be heard.
Arguments Presented
For the Appellant
The Appellant, appearing in person, argued that the NCLT violated the principle of audi alteram partem by not considering his addendum dated 18.11.2021 or his oral submissions on 23.11.2021. He contended that under Regulations 24 and 25 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, there is no statutory requirement to maintain a voting sheet when all members are present and vote unanimously; signed, circulated minutes suffice, and the minutes of the first CoC meeting (09.04.2021) were recorded, circulated, and confirmed by Karnataka Bank, the other financial creditor. He asserted that the alleged delay was not attributable to him, as no oral order was passed on 17.09.2021, the written order was uploaded only on 06.10.2021, and the earliest feasible date for all parties to meet, considering Dussehra holidays, was 21.10.2021. He further argued that the NCLT’s reliance on the absence of a voting sheet was misplaced, that I.A. No. 276 suffered from non-joinder of Karnataka Bank (holding 15.4% voting share) and lack of a Power of Attorney, and that Canara Bank’s refusal to engage despite multiple calls and emails constituted contempt of court. He relied on authorities such as Re: Torque Automation Pvt. Ltd., Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, the 32nd Report of the Standing Committee on Finance, and Bhupendra Singh Rajput v. IBBI to assert that an RP must function independently and not be removed at the mere instance of a dominant creditor.
For the Respondent
Canara Bank, represented by Mr. M.L. Ganesh, Advocate, submitted that Section 22 of the IBC expressly empowers the Committee of Creditors to replace a Resolution Professional, and that the Appellant cannot question the commercial wisdom of a creditor holding 84.60% voting share. It relied on the Supreme Court’s ruling in R.K. Vallal v. Sree Ramkrishna Sponge (P) Ltd. to underscore that the CoC’s decision, based on its commercial assessment, is entitled to deference. The Bank emphasized the Adjudicating Authority’s observation that the Appellant failed to furnish any physical or electronic voting record for the 09.04.2021 meeting, and that, despite the direction dated 17.09.2021 to convene a meeting within one week, the Appellant held the second CoC meeting only on 21.10.2021. It noted that after the Appellant’s replacement, the newly appointed RP conducted the CIRP in accordance with the Code and Regulations, securing a resolution plan for Rs. 5.05 crores approved by the CoC with 100% voting share on 30.03.2022, demonstrating that the replacement was justified and did not hinder the process. The Bank also pointed out that it had lodged a complaint with the IBBI on 22.10.2021, which was examined and closed by the Board’s communication dated 16.12.2021, reserving only the right to take further lawful action.
The Court's Analysis
The Tribunal began by noting that Section 22 of the IBC grants the Committee of Creditors the power to replace a Resolution Professional, subject to compliance with the Code and Regulations made thereunder. It observed that the power must be exercised in accordance with the principle that an RP must function independently and not at the whims and fancies of a dominant creditor, but the commercial wisdom of the CoC (as represented by the majority view) must be respected unless the RP is asked to perform a task contrary to the Code and Regulations.
On the issue of the voting sheet, the Tribunal held that under Regulation 25(3) of the IBBI Regulations, when all members are present and vote unanimously, electronic voting is not required, and signed, circulated minutes are sufficient. It accepted the Appellant’s contention that the minutes of the first CoC meeting (09.04.2021) were recorded, circulated, and confirmed by Karnataka Bank, thereby satisfying the procedural requirement. Consequently, the Adjudicating Authority’s finding that the absence of a voting sheet rendered the meeting “unacceptable and against the code” was deemed incorrect.
Regarding the alleged delay in convening the second CoC meeting, the Tribunal found that no oral order was passed on 17.09.2021; the written direction was uploaded only on 06.10.2021. Due to the Dussehra holidays, the earliest date when all three parties (Appellant, Canara Bank, Karnataka Bank) could meet was 21.10.2021, on which the Appellant duly convened the meeting. The Tribunal noted that the NCLT did not flag any delay during subsequent hearings on 27.10.2021 and 10.11.2021, and that the term “Resolution” in the 17.09.2021 order referred to resolving the company’s insolvency, not replacing the RP. Hence, the delay was not attributable to the Appellant.
On the Appellant’s claim for professional fees and CIRP expenses, the Tribunal observed that the amount of fees payable depended on the quantum of work done, the willingness of the CoC regarding the fee scale, and objections of the parties - matters requiring evidentiary assessment. It therefore granted liberty to the Appellant to approach the NCLT, the appropriate forum, for adjudication of his claim, preferably within two months of filing the appropriate application.
Concerning the adverse observations in paragraphs 4-10 of the impugned order, the Tribunal held that, although made in the context of alleged delay, such remarks bore upon the Appellant’s professional reputation and, in the circumstances of the case, were not required to be retained and were accordingly expunged.
Finally, on the replacement itself, the Tribunal concluded that the CoC’s decision to seek the Appellant’s replacement fell within its commercial wisdom, subject to compliance with statutory and procedural requirements. Since the Appellant was not being asked to perform any act contrary to the Code or Regulations, the NCLT’s direction to replace him with a new RP could not be faulted.
The Verdict
Both appeals were disposed of as follows: (i) liberty granted to the Appellant to approach the National Company Law Tribunal for adjudication of his claim for outstanding professional fees of Rs. 17.83 lakhs and reimbursement of CIRP expenses of Rs. 3.38 lakhs (total Rs. 21.21 lakhs), preferably within two months of filing the appropriate application; (ii) the adverse remarks contained in paragraphs 4, 5, 6, 7, 9, and 10 of the impugned order were expunged; (iii) the decision of the Committee of Creditors to replace the Appellant as Resolution Professional was upheld as being within its commercial wisdom and compliant with the Code; and (iv) consequently, both Company Appeal (AT) (CH) (Ins) Nos. 191/2022 and 231/2022 stand dismissed.
What This Means For Similar Cases
Commercial Wisdom of CoC Subject to Statutory Compliance
The Tribunal affirmed that the Committee of Creditors may replace a Resolution Professional based on its commercial assessment, provided the replacement does not contravene any provision of the IBC or Regulations made thereunder. Practitioners must ensure that any challenge to such a replacement focuses on statutory non-compliance rather than mere disagreement with the creditor’s commercial judgment.
Voting Sheet Not Mandatory When Minutes Exist
- Under Regulation 25(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, a voting sheet is not required when all members are present and vote unanimously.
- Signed, circulated minutes that reflect unanimous consent constitute sufficient proof of the CoC’s decision.
- Parties should preserve and produce such minutes to defend procedural validity of CoC resolutions.
Adverse Findings Based on Delay May Be Expunged
- Remarks in an order that adversely affect a professional’s reputation, if grounded on alleged delay not attributable to the party, may be expunged.
- Tribunals will examine whether the delay was caused by external factors (e.g., holidays, lack of oral order) before sustaining adverse findings.
Fee Claims Remain Open for Adjudication
- Claims for professional fees and CIRP expenses are not decided summarily in appellate proceedings where quantum depends on factual disputes.
- The appropriate forum for such claims is the National Company Law Tribunal, which must afford an opportunity of hearing to all concerned parties.
- Appellants should file a separate application before the NCLT, preferably within the timeframe indicated (two months) to avoid limitation issues.
