NCLAT sets aside observations of NCLT’s order directing to refer matter to IBBI for actions against IRP

A Division Bench of the Hon’ble National Company Law Appellate Tribunal, New Delhi (NCLAT), Justice A.I.S. Cheema (the Officiating Chairperson) and Dr. Alok Srivastava (Technical Member) in the matter of Kumud Shekhar, Resolution Professional v. Mr. Akshay Kumar Soni, REED 2021 NCLAT Del 06583 set aside certain observations from the Impugned Order passed by National Company Law Tribunal (NCLT) that referred the matter to Insolvency and Bankruptcy Board of India (IBBI) for action against the Interim Resolution Professional (IRP). The NCLAT held so as the Registry of NCLT failed to communicate the order of admission under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC) to IRP.

The Financial Creditor/Respondent filed Application under section 7 of IBC which was admitted by NCLT on 30 January 2020 but initially Financial Creditor had no information of any such order being passed and uploaded on the website of the Adjudicating Authority. The Appellant submitted that on December 15 2020 it received an email from Mr. Anil Tayal mentioning that he has come to know about the Appellant being appointed as IRP of the M/s. Value Infraestate India Pvt. Ltd. (Corporate Debtor) and sought information regarding Public Announcement.

The Appellant pointed out he was surprised to find out about the Admission order and immediately sent an email to the Financial Creditor and informed that searching the website of NCLT he has come to know about said Order dated 30 January 2020. The Respondent informed that he also had no knowledge of said Order and subsequently, a public announcement was made on 16 December  2020.

Thereafter, IRP filed an I.A. to exclude 322 days from the Corporate Insolvency Resolution Period (CIRP) timeline. NCLT vide order dated 1 February 2021 (Impugned Order) dismissed the I.A. stating that if the Admission Order has been put on the website, it was the responsibility of the parties to check. Further, based on the conduct of IRP of not initiating CIRP till 16 December 2020, the NCLT through paragraphs 24-25 directed to refer the matter to the IBBI for needful action against IRP. Aggrieved thereof, the IRP preferred appeal before NCLAT praying that the observations made in Paragraphs 24-25 of the Impugned Order should be expunged and the reference to IBBI should be quashed.

The NCLAT noted that although in the Order dated 30 January 2020 NCLT had directed that a copy of Order shall be immediately communicated to the Financial Creditor, the Corporate Debtor and the IRP, the Registry of NCLT did not convey admission Order to any of the parties. Further, in the Impugned Order, NCLT relied more on the fact that the Order was uploaded on website, rather than finding if or not the Order was actually communicated to parties including IRP.

In view of the aforesaid, the NCLAT observed that although it is expected that Financial Creditor who files the Application under section 7 of IBC follows up on the matter, the same cannot be expected from IRP who only came into the picture vide the Impugned Order. The NCLAT further opined that only because the Resolution Professional has given consent to a party to file the application for initiating CIRP, it would be inappropriate to expect the IRP to chase parties as to what they have done about the consent.

In light of the foregoing, the NCLAT concluded that the Registry of NCLT in contravention of section 7(7) of IBC, failed to communicate the order within 7 days to the Financial Creditor, who could have then contacted the IRP. Accordingly, the NCLAT allowed the appeal and set aside Paragraphs 24 and 25 of the Impugned Order.