NCLAT Dismisses Appeal: Personal Guarantor's Challenge To RP Appointment

NCLAT Dismisses Appeal: Personal Guarantor's Challenge To RP Appointment

Introduction

The National Company Law Appellate Tribunal (NCLAT) Chennai Bench has dismissed two appeals filed by Rajesh Bhatia, a Personal Guarantor, against an order passed by the Adjudicating Authority. The Adjudicating Authority had appointed a Resolution Professional in proceedings initiated under Section 95(1) of the Insolvency and Bankruptcy Code (IBC).

Factual Background

The Respondent had filed a petition before the NCLT, Chennai under Section 95(1) of the IBC, seeking initiation of insolvency proceedings against the Personal Guarantor. The NCLT passed an order appointing a Resolution Professional.

Procedural Background

The Appellant, Rajesh Bhatia, challenged the appointment of the Resolution Professional before the NCLAT, contending that the process followed by the Adjudicating Authority was in violation of Section 97 of the IBC.

Issues Involved

1. Appointment of Resolution Professional: Whether the Adjudicating Authority's process of appointing a Resolution Professional under Section 97 of the IBC was valid.

2. Maintainability of Appeal: Whether the Appellant can challenge the appointment of the Resolution Professional at this stage, before the order under Section 100 is passed.

Contentions of the Parties

Appellant's Contentions: The Appellant argued that the Adjudicating Authority's consultation with the Financial Creditor during the appointment of the Resolution Professional would be in violation of Section 97 of the IBC.

Respondent's Contentions: The Respondent argued that the Appellant had no locus standi to challenge the appointment of the Resolution Professional at this stage.

Reasoning and Analysis

A bench of Justice Sharad Kumar Sharma and Technical Member Jatindranath Swain analyzed the provisions of Section 97 of the IBC and held that:

• No Adjudicatory Effect: The proceedings from Section 95 to Section 100 do not have any adjudicatory effect, and the Appellant cannot be said to be an aggrieved person at this stage.
• Sole Prerogative of Adjudicating Authority: The appointment of the Resolution Professional is the sole prerogative of the Adjudicating Authority, and the Personal Guarantor has no role to play till the stage under Section 100 is achieved.

Final Decision

The Tribunal dismissed both appeals, holding that the Appellant's petitions were not sustainable at this stage. The Appellant's rights are safeguarded by filing an objection against the report to be submitted under Section 97(6) of the IBC.

Implications

This decision shows the importance of understanding the scope and limitations of the rights of a Personal Guarantor under the IBC, particularly with regard to the appointment of a Resolution Professional.

In this case the appellant was represented by Mr. Anandavenu, Advocate.