I. Case Reference
| Case Citation | : | (2022) ibclaw.in 628 NCLT |
| Case Name | : | IDBI Bank Ltd. Vs. Shri. V.Venkata Sivakumar Liquidator of M/s. The Jeypore Sugar Company Ltd. |
| Corporate Debtor | : | M/s. The Jeypore Sugar Company Ltd. |
| Application/Appeal No. | : | IA/815/IB/2020 in CP/1307/IB/2018 |
| Judgment Date | : | 01-Jul-22 |
| Court/Bench | : | NCLT Chennai Bench |
| Member (Judicial) | : | Justice (Retd.) S. Ramathilagam |
| Member (Technical) | : | Shri B Anil Kumar |
| Case Status | : | Upheld by NCLAT, reported at (2022) ibclaw.in 1067 NCLAT |
II. Brief about the decision
Grounds of the application
In this case, the applicant contends that the Liquidator(respondent) did not possess a valid Authorisation for Assignment as required by the IBBI Regulation as on the date of appointment as the Liquidator, and therefore seeks the removal of the respondent as the Liquidator and to declare all the duties and functions performed as the Liquidator as null and void.
Decision of the Adjudicating Authority
The present Application has been filed by the Applicant seeking thereof to replace the Liquidator. In this regard, the Learned Liquidator has submitted that there is no provision under the IBC, 2016 to change the Liquidator and also the Liquidator cannot be changed at the behest of the stakeholders unless or otherwise a serious allegation has been made. In this regard, we may refer to Section 16 of the General Clauses Act, 1897 which states as follows;
“16. Power to appoint to include power to suspend or dismiss.— Where, by any Central Act or Regulation, a power to make any appointment is conferred, then, unless a different intention appears, the authority having for the time being power to make the appointment shall also have power to suspend or dismiss any person appointed whether by itself or any other authority in exercise of that power.”(p12-13)
Thus, it could be seen a conjoint reading of Section 33 of IBC, 2016 with Section 16 of the General Clauses Act, 1897 would show that the Authority which has the power to appoint a person, equally has the power to suspend or dismiss that person, in the absence of any specific powers conferred thereto. Thus, by virtue of Section 16 of the General Clauses Act, 1897 it clear that this Adjudicating Authority has the power to dismiss the Liquidator since this Authority is vested with the powers under Section 33 and 34 of IBC, 2016 to appoint a Liquidator.(p14)
Next coming to the issue of the grounds on which the Liquidator can be changed, the provisions of IBC, 2016 does not explicitly state the grounds on which the Liquidator can be removed. In the absence of the specific provisions under the IBC, 2016 we may resort to Section 276 of the Companies Act, 2013. The Section 276 of the Companies Act, 2013 would manifest the fact that the Liquidator can be removed under the following circumstances;
(a) misconduct;
(b) fraud or misfeasance;
(c) professional incompetence or failure to exercise due care and diligence in performance of the powers and functions;
(d) inability to act as provisional liquidator or as the case may be, Company Liquidator;
(e) conflict of interest or lack of independence during the term of his appointment that would justify removal.(p15-16)
In the present case, the Liquidator has stated in his reply that no stakeholder has the right to seek for replacement of Liquidator and that once the Liquidator is appointed, he cannot be removed unless there is a serious allegation of corruption. If we go by the contention as made by the Learned Liquidator then it should be construed that the Liquidator is infallible and this Adjudicating Authority has to simply close its eyes and let the Liquidator do whatever he wants. As to the present case of M/s. Jeypore Sugar Company Limited, it is to be seen that in the previous hearings serious allegations have been made against the Liquidator by the stakeholders that he has shared the valuation report with the prospective Scheme proponents and the Liquidator has also not denied the same. In reply to such a contention, the Liquidator stated that only during CIRP the RP should not share the valuation report, however during the Liquidation period there is no bar. Such a statement made by the Liquidator shook the conscious of this Court.(p17)
It is an admitted fact that the Liquidator has shared the valuation Report of the Corporate Debtor with the prospective Scheme proponents which lead to the proponents quoting value on par with the valuation report. Such an act committed by the Liquidator is viewed seriously by this Tribunal. The said act of the Liquidator would amount to failure to exercise due care and diligence in performance of the powers and functions and as such, it is one of the grounds on which the Liquidator can be changed.(p18)
Further, one of the grounds canvassed by the Learned Counsel for the Applicant is that the Liquidator at the time of accepting the assignment was not holding a valid AFA as per Regulation 7A of the IBBI (Resolution Professionals) Regulations, 2016 and as such he is disqualified to act as the Liquidator. In this regard, when the matter was agitated before the Hon’ble NCLAT in the matter of Committee of Creditors Represented by IDBI Bank Ltd. -Vs- V Venkata Sivakumar & Anr. [2020] ibclaw.in 75 NCLAT.(p19)
Thus, in so far as the appointment of Liquidator is concerned, it is an undisputed fact that the Respondent/Liquidator herein has accepted the assignment in respect of the Corporate Debtor without holding a valid AFA. Further, the Appellant viz. IDBI Bank was given the liberty to bring to the notice of the Adjudicating Authority to have a re-look at the appointment of the Liquidator so far as the Authorization is concerned.(p20)
It is to be noted here that IIIPI and also the IBBI have issued show cause notice to the Respondent and has stated that the Respondent has accepted the assignment without holding a valid AFA and hence IIIPI imposed a penalty of Rs.10,000/- upon the Respondent. The same is also reflecting the order passed by IBBI. Hence, it is crystal clear that the Respondent has accepted the assignment without holding a valid AFA, however as observed by the Hon’ble NCLAT, the non-holding of a valid AFA will not render the order of liquidation passed by the Adjudicating Authority illegal or invalid and moreover the Hon’ble NCLAT it has stated that if any irregularity is brought by the Appellant, then this Tribunal may have a re-look at the appointment of the Liquidator, in the present case.(p21)
Hence, for the aforestated reasons, we are of the view that the Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited has failed to exercise due care and diligence in performance of the powers and functions while discharging his functions as Liquidator in respect of the Corporate Debtor viz. M/s. Jeypore Sugar Company Limited and hence he is required to be replaced. Thus, under the provisions of Section 33 and 34 of IBC, 2016 read with Section 16 of the General Clauses Act, 1897 read with Section 276 of the Companies Act, 2013, from the latest list provided from IBBI, for the period from July 2022 to December 2022, we hereby appoint Mr. S Hari Karthik as the Liquidator in respect of the Corporate Debtor viz. Jeypore Sugar Company Limited. The outgoing Liquidator / Respondent is directed to handover the charges to the newly appointed Liquidator within a period of 7 days from the date of this order. Accordingly, IA/815/IB/2020 stands The Registry is directed to send a copy of this order to IBBI for its information and records.(p22-23)
III. Full text of the judgment
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