03/06/2020

It is not necessary to replace an IRP in first meeting of CoC, CoC has the requisite powers to propose change of the IRP even in meeting/s subsequent to the first meeting – Bank of India Vs. M/s. Nithin Nutritions Pvt. Ltd. – NCLAT

NCLAT set aside the order of the NCLT and held that having gone through the Impugned Order, what appears is that the Adjudicating Authority has proceeded on the basis that if in the first meeting of COC, the COC does not replace the IRP with another RP, the COC cannot do so subsequently. Like statement of question of law is stated by the Adjudicating Authority that “The COC having not resolved to replace IRP in its first meeting could not be allowed to replace him by a resolution in any of its subsequent meetings”. It appears to us that this is clearly a wrong legal proposition considering the provisions of IBC. There is not merely Section 22 Sub-Section (2) which is relevant but also Section 27. In both the above provisions (Sec. 22 & 27), the law nowhere says that the COC is required to give reasons. This appears to be also right. The reason is that relationship between the IRP/RP and the COC is that of confidence. If there is loss of confidence and combination is continued, the Corporate Debtor would be put to loss because of the bad relationship between IRP/RP with COC. The Counsel is submitting that these provisions make it clear that even if in the first meeting, it remains for COC to change the IRP, there is no bar as such that in subsequent meeting, the IRP who has continued, cannot be changed. Considering these provisions, we have no doubt that the COC has the requisite powers to propose change of the Interim Resolution Professional even in meeting/s subsequent to the first meeting mentioned in Section 22(2) of IBC. There is no requirement that they should give particular reasons for the change.

It is not necessary to replace an IRP in first meeting of CoC, CoC has the requisite powers to propose change of the IRP even in meeting/s subsequent to the first meeting – Bank of India Vs. M/s. Nithin Nutritions Pvt. Ltd. – NCLAT Read Post »

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