Common Resolution Professional For Group Companies Not Barred Under IBC: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai recently held that the Insolvency and Bankruptcy Code, 2016 does not prohibit the appointment of a single resolution professional for companies belonging to the same corporate group. According to the tribunal, such an appointment does not by itself create a conflict of interest.

A coram of Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer, while dismissing a plea seeking removal of a common resolution professional, refused to remove Ashutosh Agarwala as the resolution professional of KLT Automotive and Tubular Products Limited.

It observed “The Code does not explicitly prohibit appointment of a single RP for companies which belong to the same group. Therefore, we note that based on the facts in the present case that there is no evident conflict of interest in the appointment of the RP in the CIRP of KLT.”

The application was filed by Jubin Kishore Thakkar, the erstwhile promoter of KLT Automotive and Tubular Products Limited, seeking the removal of Ashutosh Agarwala as the resolution professional of KLT. Agarwala had earlier been appointed as the resolution professional of Colour Roof (India) Limited, a subsidiary of KLT that was also admitted into insolvency in February 2023.

During CRIL's CIRP, KLT apparently submitted a claim of Rs. 12.69 crore. Despite repeated requests for supporting documents, the RP admitted only a token claim of Re.1, rejected claims of over Rs. 12.12 crore for lack of proof, and treated Rs. 56.53 crore as a contingent liability.

Shortly after this, KLT itself entered CIRP in September 2024. Here as well, Agarwala was appointed as its interim resolution professional and later confirmed as RP after committee of creditors unanimously voted for him.

The promoter argued that Agarwala's role as RP for both the parent company and its subsidiary resulted in a conflict of interest. This was particularly since KLT's claim against CRIL had been rejected. He alleged that the RP failed to safeguard KLT's interests as it did not take any steps to recover its dues, The RP thereby violated the code of conduct governing insolvency professionals.

He also relied on reports relating to group insolvency to argue that a common RP should not be appointed where inter-company claims were involved.

The tribunal, however, observed that the grievance essentially flowed from the rejection of KLT's claim in CRIL's insolvency proceedings, which were pending before another bench of the NCLT and could not be examined in the present case.

It noted that the RP had disclosed to the committee of creditors that he was not a related party and had no prior association with either company or the promoter group.

The tribunal also noted that despite the promoter's objections, the committee of creditors had unanimously voted to appoint Agarwala as RP. It recorded that there was “nothing placed on record to show that Respondent No.1 is found wanting in discharging his duties as RP of KLT.”

Reiterating that “the commercial wisdom of the CoC is paramount in the insolvency process,” the tribunal held that an erstwhile promoter has no locus to seek replacement of a resolution professional and dismissed the plea. 

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