The Guwahati National Company Law Tribunal (NCLT) on 24 July ruled that a bank’s internal policies cannot override the Insolvency and Bankruptcy Code, 2016 (IBC) or an NCLT order appointing a Resolution Professional (RP).
The decision was given by a Bench comprising Judicial Member Rammurti Kushwaha and Technical Member Yogendra Kumar Singh. The Tribunal dismissed an application filed by Indian Bank seeking the replacement of Resolution Professional Sudha Sarma in the personal insolvency resolution process of Rita Mandal.
Indian Bank Sought Removal of RP
Indian Bank had started personal insolvency resolution proceedings against Rita Mandal, in which Sudha Sarma was appointed as the Resolution Professional.
The Bank wanted Sarma to be replaced. It claimed that there was a conflict of interest, an adversarial relationship and a reasonable possibility of bias because of pending legal proceedings between the Bank and Sarma.
Bank Relied on Another Case
The Bank referred to proceedings involving Sarma in the liquidation of Nayak Infrastructure Private Limited. In that case, Sarma was working as the Liquidator.
Indian Bank argued that these proceedings had created an adversarial relationship between the Bank and Sarma. It also said that it had lost confidence in her ability to act independently and impartially.
The Bank also relied on its internal policies relating to professionals who may have a conflict of interest with the Bank.
Sarma Opposed the Removal
Sudha Sarma opposed the application and said that the Bank had previously filed a similar application seeking her removal but later withdrew it without permission to file another application on the same grounds.
She also argued that the Bank had not pointed to any specific act of bias, misconduct or partiality by her in the present insolvency proceedings.
According to Sarma, the proceedings relied upon by the Bank were related to a different case and should not be used as a reason to remove her from the present assignment.
NCLT Explains Section 98 of IBC
The Tribunal observed that Section 98 of the IBC deals with the replacement of a Resolution Professional in a personal insolvency resolution process.
The NCLT said that an RP cannot be removed simply because a creditor has lost confidence in the professional or is unhappy because of an unrelated legal proceeding.
The pending proceedings referred to by Indian Bank involved a different corporate debtor. In that case, Sarma was working as a Liquidator, while in Rita Mandal’s case she was appointed as the Resolution Professional.
Adverse Position in One Case Does Not Prove Bias
The Tribunal held that an Insolvency Professional taking an adverse position against a financial creditor in one matter does not automatically prove bias or disqualification in another unrelated case.
The Bench said that allowing such a ground could make it possible for dissatisfied creditors to seek the removal of an Insolvency Professional simply by referring to genuine legal disputes in other cases. This could affect the independence of Insolvency Professionals under the IBC.
No Misconduct Found in Present Case
The NCLT noted that Indian Bank had not identified any specific act of partiality, misconduct or irregularity by Sarma in the present insolvency proceedings.
The grounds raised by the Bank were mainly connected with a separate matter involving a different corporate debtor.
Bank’s Internal Policy Cannot Override IBC
The Tribunal also rejected the Bank’s reliance on its internal risk management policies.
It made it clear that the internal policy of a banking company does not have statutory force. Such policies cannot override the provisions of the IBC or an order passed by the Tribunal appointing a Resolution Professional.
The NCLT therefore dismissed Indian Bank’s application seeking the replacement of Sudha Sarma as the Resolution Professional in the personal insolvency resolution process of Rita Mandal.
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