Suspended Board of Directors cannot replace Resolution Professional: NCLT [Read Order]

The National Company Law Tribunal (NCLT), Chennai bench has held that the suspended Board of Directors has no power under the IBC to appoint a Resolution Professional. The bench comprising Justice M. Venugopal, Judicial Member and KanthiNarahari, Technical Member, while considering the case of Anil Kumar Ojha v. ChandramouliRamasubramaniam Resolution Professional of SLO Industrial Ltd. &Anr, held that the power to do so has only been vested in the Committee of Creditors (CoC) and then the Adjudicating Authority (AA).

The NCLAT, while dismissing the appeal filed by the Appellant filed under section 60(5) of the IBC, challenging the order of the Adjudicating Authority which refused to admit the Application of the Appellant under section 60(5) and held that the suspended Board of Directors has no right to change the RP and imposed a cost of Rs. 1 Lakh on the Appellant.

The Bench observed that Section 22 of the Code allows the 'Financial Creditors' to be involved in the appointment of the 'Resolution Professional'. The RP is to be appointed on the first meeting of the CoC. The Interim Resolution Professional can continue, or be replaced by a majority of 66% votes of the CoC. An application to replace the IRP is to be addressed to the Adjudicating Authority, which sends it to the IBBI for confirmation. After the confirmation is received, the RP shall be appointed.

“Displacement Of RP As per the terms of Section 27, the RP may be replaced during CIRP by the CoC with a 66% majority of voting share. Thus, the power to displace the RP is vested with the CoC. In case no name is proposed by the CoC, an Adjudicating Authority is called upon to propose a person's name from the IBBI,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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