Company Appeal (AT) (Insolvency) No. 76 of 2020
Re: State Bank of India v. M/s. Metenere Ltd.
The Appellant, State Bank of India (hereinafter referred to as “SBI”) is the ‘Financial Creditor’ who sought initiation of insolvency proceedings by filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “I&B Code”) before the Adjudicating Authority (National Company Law Tribunal), New Delhi, Principal Bench against the Corporate Debtor, M/s. Metenere Limited.
Before the NCLT, the Corporate Debtor raised objection to SBI proposal regarding the name of proposed ‘Interim Resolution Professional’- Mr. Shailesh Verma.
The Corporate Debtor stated that Mr. Shailesh Verma having worked with the SBI for 39 years before his retirement in 2016, there was an apprehension of bias and Mr. Shailesh Verma was unlikely to act fairly and could not be expected to act as an Independent Umpire.
In view of the submission, the NCLT passed an order directing SBI to substitute Mr. Shailesh Verma name. Aggrieved by the order of NCLT, SBI moved an appeal before NCLAT.
Contention of the Parties:
“SBI submitted that Mr. Shailesh Verma fulfils the requirement for appointment as ‘Interim Resolution Professional’/ ‘Resolution Professional’ under the ‘I&B Code’ and admittedly bears no disqualification.
It was contended on behalf of the Appellant that the ‘I&B Code’ and the Regulations framed thereunder do not attach any disqualification to an ex-employee of a ‘Financial Creditor’ from being appointed as an ‘Interim Resolution Professional’.
It is further submitted that the ‘Interim Resolution Professional’ is not required to act as an ‘Independent Umpire’ between the ‘Financial Creditor’ and the ex-management of the ‘Corporate Debtor’ or decide any conflicting issues between them.
It is further submitted that the ‘Financial Creditor’ also plays part only to the extent of its voting share as a member of ‘Committee of Creditors’ and not beyond that.
The Corporate Debtor argued that Mr. Shailesh Verma is drawing pension from the Appellant- ‘Financial Creditor’ which falls within the definition of ‘salary’ under the Income Tax Act, 1961. It is submitted that in view of the same, Mr. Shailesh Verma is an ‘interested person’ being an ex-employee and on the payroll of ‘Financial Creditor’, thus rendered ineligible under the ‘I&B Code’ to act as an ‘Interim Resolution Professional’.”
After recording the submissions of the parties, the NCLAT remarked, The sole question arising for determination in this appeal is whether an ex-employee of the ‘Financial Creditor’ having rendered services in the past, should not be permitted to act as ‘Interim Resolution Professional’ at the instance of such ‘Financial Creditor’, regard being had to the nature of duties to be performed by the ‘Interim Resolution Professional’ and the ‘Resolution Professional’.
The NCLAT opined the fact that Mr. Shailesh Verma is drawing pension from ‘Financial Creditor’s organisation does not clothe him with the status of an employee on the payroll of ‘Financial Creditor’.
While referring to Regulation 3 (1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the NCLAT observed that Mr. Shailesh Verma is a qualified Insolvency Professional and neither he nor any of his associates is alleged to be connected with the ‘Corporate Debtor’ in a manner rendering him ineligible to act as a ‘Resolution Professional’.
It was added that there were no disciplinary proceedings pending against Mr. Shailesh Verma and he was also not engaged as a retainer by the ‘Financial Creditor’.
In spite of the above, the NCLT noted that it could not be denied that SBI restricted its choice to propose Mr. Shailesh Verma as ‘Interim Resolution Professional’, “obviously having regard to past loyalty and the long services” rendered by him.
The National Company Law Appellate Tribunal (NCLAT) has upheld the substitution of a financial creditor’s ex-employee as the proposed interim resolution professional in a CIRP initiated by the financial creditor, on the ground of apprehension of bias.