Whether an ex-employee of a financial creditor is eligible to be appointed as Resolution Professional? Read what SC says

Supreme Court: The 3-Judge Bench of Arun Mishra, B.R. Gavai and Krishna Murari, JJ., set aside the NCLAT’s Order with regard to the appointment of Resolution Professional.

Question for Consideration

NCLT’s position

State Bank of India (Financial Creditor) had filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 with regard to initiation of Corporate Insolvency Resolution Process before the National Company Law Tribunal, Delhi.

NCLT on noting the objection regarding the proposed ‘Interim Resolution Professional’ — Shailesh Verma directed the Financial Creditor to perform it’s statutorily mandatory obligation by substituting the name of the ‘Resolution Professional’ to act as an ‘Interim Resolution Professional’ in place of Shailesh Verma as it was of the view that Shailesh Verma having worked with the State Bank of India for 39 years before his retirement in 2016, there was an apprehension of bias and was unlikely to act fairly and could not be expected to act as an Independent Umpire.

NCLAT’s position

Aggrieved with the above position, Financial Creditor preferred the appeal before NCLAT on the ground that the proposed ‘Interim Resolution Professional’ Shailesh Verma fulfils the requirement for appointment as ‘Interim Resolution Professional’/ ‘Resolution Professional’ under the ‘I&B Code’ and admittedly bears no disqualification.

NCLAT opined that the apprehension of bias expressed by the ‘Corporate Debtor’ qua the appointment of Shailesh Verma as proposed ‘Interim Resolution Professional’ at the instance of the Appellant — ‘Financial Creditor’ cannot be dismissed offhand and the Adjudicating Authority was perfectly justified in seeking his substitution.

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Supreme Court’s position

In the above background, Bench observed at the outset that, NCLAT’s approach was not correct that merely Resolution Professional who remained in the service of SBI and is getting pension was disentitled to be Resolution Professional.

Solicitor General, Tushar Mehta as well as Senior Counsel, Krishnan Venugopal agreed for the appointment of new Resolution Professional by NCLT.

Hence, the Bench held that new Resolution Professional be appointed by the NCLT in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.

While concluding the order, Court stated that the change of Resolution Professional shall not reflect adversely upon the integrity of Resolution Professional concerned, who has been replaced.