Deliberate Inaction by RP Justifies Replacement Under Section 60(5) IBC: NCLAT

Deliberate Inaction by RP Justifies Replacement Under Section 60(5) IBC: NCLAT

Introduction

The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Member-Judicial) and Jatindranath Swain (Member-Technical), has held that Section 60(5) of the Insolvency and Bankruptcy Code (IBC) can be invoked to replace a resolution professional (RP) if he deliberately avoids placing the agenda for his replacement before the Committee of Creditors (CoC).

Factual Background

The Corporate Insolvency Resolution Process (CIRP) of the corporate debtor was initiated, and the appellant was appointed as the resolution professional. However, the financial creditor sought replacement of the appellant, citing non-cooperation, obstructionist behavior, and failure to facilitate the CIRP effectively.

Procedural Background

The financial creditor requested the replacement of the RP via email communication dated 22.04.2025, but the same was not included by the RP in the agenda for the 2nd CoC meeting. Therefore, the financial creditor filed an application under Section 60(5) of the IBC, which was allowed by the adjudicating authority.

Contentions of Parties

Resolution Professional's Contention: The resolution professional contended that the petition under Section 60(5) IBC was not maintainable for the relief prayed. It argued that the application seeking his removal cannot be filed under the provision.

Respondent's Contention: The respondent contended that despite having knowledge regarding the resentment over the RP's manner of functioning, the RP deliberately avoided placing the agenda of his replacement in the 2nd CoC meeting.

Reasoning and Analysis

The NCLAT discussed that the replacement of the RP must be done in accordance with Section 27(2) of the IBC, which requires a CoC resolution with the consent of not less than 66% of the voting shares of the financial creditor. However, the application under Section 60(5) would be tenable in cases where the resolution professional deliberately avoids placing the agenda for CoC consideration.

Implications

The judgment highlights that any party aggrieved by any proceedings or inaction cannot be left remedy-less if the statute is silent with regard to prescribing a forum for redressal of grievances. The tribunal's decision emphasizes the importance of complying with the provisions of Section 27 IBC in the replacement of a resolution professional.

In this case the appellant was represented by Mr. Mathioli N, RP. Meanwhile the respondent was represented by Mr. R. Imayavaramban, Advocate.