NCLT Mumbai Bench affirms the Committee of Creditors' decision, dismissing claims of conflict of interest in the appointment of a single RP for KLT Automotive and its subsidiary.
In a significant decision, the Mumbai Bench of the National Company Law Tribunal (NCLT) has upheld the appointment of Mr. Ashutosh Agarwala as the Resolution Professional (RP) for both KLT Automotive and Tubular Products Limited and its subsidiary, Colour Roof (India) Limited (CRIL), dismissing allegations of conflict of interest. The judgment, delivered by Smt. Lakshmi Gurung and Shri Hariharan Neelakanta Iyer, emphasized the paramount commercial wisdom of the Committee of Creditors (CoC) in insolvency proceedings.
The case, initiated by Jubin Kishore Thakkar, an erstwhile promoter of KLT, sought the removal of Mr. Agarwala, alleging that his dual role as RP for both companies created a conflict of interest. Thakkar argued that Mr. Agarwala's decisions, particularly the partial rejection of KLT’s claims in the CRIL insolvency process, were biased and detrimental to KLT's interests.
The Tribunal, however, found no substantial evidence to support these allegations. It highlighted that the CoC, which includes significant creditors like Phoenix ARC Private Limited and Union Bank of India, had unanimously appointed Mr. Agarwala, reaffirming their confidence in his impartiality and capability. The Tribunal underscored that the RP had no prior business relationships with the debtor companies or their promoters, negating any potential bias.
Moreover, the Tribunal noted that the Insolvency and Bankruptcy Code, 2016, does not prohibit appointing a single RP for companies within the same group, provided there is no conflict of interest. The ruling emphasized that the CoC, with a 66% voting threshold, holds the authority to replace an RP if necessary, but in this case, they opted to retain Mr. Agarwala.
The decision also referenced regulatory frameworks and previous judicial interpretations, reinforcing the CoC's discretion in managing insolvency proceedings and the appointment of RPs. The Tribunal dismissed Thakkar's application, thereby maintaining the continuity of the insolvency resolution process under Mr. Agarwala's oversight.
This judgment reaffirms the legal principle that the CoC’s decisions, reflecting commercial wisdom, are paramount in insolvency cases unless procedural or substantive legal violations are evident.
Bottom Line:
Appointment of a common Resolution Professional for both parent and subsidiary company does not inherently constitute a conflict of interest under Insolvency and Bankruptcy Code, 2016. The Committee of Creditors (CoC) holds the authority to appoint or replace the Resolution Professional with a voting majority of 66%.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 22(4), 27; Insolvency and Bankruptcy Code, 2016 Regulations 3(1), 7(2)(h); National Company Law Tribunal Rules, 2016 Rule 11
Jubin Kishore Thakkar v. Ashutosh Agarwala, (NCLT)(Mumbai Bench) : Law Finder Doc Id # 2831815
