Approval Of Tribunal Not Required To Appoint Monitoring Committee Chair Under IBC: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has recently held that neither the Insolvency and Bankruptcy Code nor the CIRP Regulations require tribunal approval for appointing the chairperson of a monitoring committee, and that its role is limited to ensuring that such a committee is constituted for implementation of an approved resolution plan.

A monitoring committee is typically formed after approval of a resolution plan to oversee payments, asset handover, and other steps required to give effect to the plan.

A bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar observed, “It is noted that neither the Code nor the CIRP Regulation provides for approval of this Tribunal for engagement of a person to act as Monitoring Committee Chairman, and this Tribunal is only mandated to ensure that a Monitoring Committee is constituted for implementation of the approved Resolution Plan.”

The case arose from insolvency proceedings against SAY India Jewellers Pvt. Ltd., now renamed Avins Global Private Limited. The proceedings were originally initiated by operational creditor D. Chhaganlal & Co. as a winding-up petition under the Companies Act, 1956, before the Bombay High Court, which later transferred the matter to the NCLT to be treated as an insolvency petition under the IBC. The tribunal admitted the petition and commenced the corporate insolvency resolution process of the company.

After constitution of the committee of creditors, a resolution plan submitted by Rohit and Babulal Motawat was approved with 100 percent voting in 2018. Following approval of the plan, a monitoring committee was constituted in 2019 to oversee its implementation, including payment of dues and handover of the company's assets to the successful resolution applicant.

Akshay Rajendra Shah, who had acted as the resolution professional during the CIRP, also continued as the chairperson of the monitoring committee. The successful resolution applicant paid Rs 1 crore upfront and cleared the dues of operational creditors, and the settlement was recorded by the NCLT. The tribunal thereafter directed the monitoring committee to hand over control and assets in terms of the resolution plan.

Disputes arose when Shah demanded Rs 21 lakh as fees for acting as monitoring committee chair. The resolution applicant paid the demand under protest, stating that the payment was conditional upon handover of certain assets. However, before the handover could be completed, Shah passed away. The resolution applicant claimed that despite repeated follow-ups with Shah's team, the documents and assets were not handed over.

The resolution applicant then approached the NCLT under Section 60(5) of the IBC seeking directions for completion of the handover and for recognition of Rakesh Kumar Jindal as the monitoring committee chairperson in place of the deceased chairman. It was pointed out that Union Bank of India, a member of the erstwhile committee of creditors, had engaged Jindal to act as chairperson of the monitoring committee for implementation of the resolution plan.

The tribunal held that appointment of a monitoring committee chairperson was a matter between the erstwhile committee of creditors and the successful resolution applicant, and did not require approval of the NCLT. Since Union Bank of India had engaged Jindal to act as monitoring committee chair, the bench held that Jindal is entitled to act accordingly.

The tribunal further clarified that it had already directed the team of the deceased monitoring committee chairman to conclude and hand over all records and assets.

Disposing of the application, the NCLT directed Jindal to discharge his duties in accordance with the terms of his engagement and to complete the handover process.

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