NCLT Orders Disciplinary Proceedings Against Resolution Professional Of BYJU's, Says He Acted With Prejudice To Mislead Tribunal

The National Company Law Tribunal, Bengaluru bench comprising Justice K. Biswal (Judicial Member) and Ravichandran Ramasamy (Technical Member) have held that that as per the Insolvency and Bankruptcy Code, 2016 (“Code/IBC”), there is no provision to 'provisionally' constitute the Committee of Creditors (“CoC”); the CoC once constituted is final and cannot be revised or reconstituted by the Interim Resolution Professional (“IRP”)/Resolution Professional (“RP”) without the interference of the Adjudication Authority. It said:"The IRP has a duty to assist the Tribunal with integrity in an honest and fair manner and the conduct of the IRP in the present case has been filed with the intent to mislead the tribunal. The actions and decisions taken by the IRP are prejudicial to the interests of the CIRP process outlined by the IBC, 2016 and to the stakeholders. Further, the conduct of IRP is not fit and proper as expected from an officer of the Tribunal. The above conduct on part of IRP needs to be dealt by way of disciplinary proceeding by the IBBI. Hence, the IBBI may conduct the necessary investigation in this matter."The Tribunal noted that Regulation 14 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is 'quantifying' in nature i.e. the IRP/RP is only entitled to revise the claims, which is again to be at the leave of the Tribunal and cannot act in his own accord. The Tribunal held that after the categorization of a claim, the IRP/RP cannot change the status of a Creditor. The Tribunal held that the re-classification of Aditya Birla Finance Limited, who was initially classified as a 'Financial Creditor', as an 'Operational Creditor' by IRP was beyond the powers provided by the Code and was not valid. The Tribunal observed that the conduct of the IRP was prejudicial to the interests of the Corporate Insolvency Resolution Process (“CIRP”) outlined by the IBC and to the stakeholders. It directed IBBI to conduct disciplinary proceedings against the IRP. Brief Facts The Tribunal vide order dated 16.07.2024 admitted Think and Learn Private Limited (BYJUS) (“Corporate Debtor”) into the Corporate Insolvency Resolution Process (“CIRP”) under Section 9 of the IBC and appointed Mr. Pankaj Srivatsava (“Respondent No.1”) as the Interim Resolution Professional of the Corporate Debtor. The NCLAT vide its order dated 02.08.2024 passed to set aside the initiation of CIRP against the Corporate Debtor due to a settlement between Suspended Directors of the Corporate Debtor and Respondent No.2. Aggrieved by this order, Glass Trust Company LLC had filed an appeal before the Supreme Court. The Supreme Court vide order dated 14.08.2024 stayed the operation and effect of the Order dated 02.08.2024 passed by the NCLAT and thus reinstated the CIRP proceedings of the Corporate Debtor. Respondent No.1 vide mail dated 21.08.2024 informed Aditya Birla Finance Limited (“Applicant No.1”) and GLAS Trust Company LLC (“Applicant No.2”), the Financial Creditors of the Corporate Debtor, that he constituted the CoC of the Corporate Debtor. The Respondent reclassified Applicant No. 1, i.e. Aditya Birla Finance Limited as an 'Operational Creditor' in the revised Notice and Agenda of the CoC meeting dated 01.09.2024. The Respondent determined that the relationship between the Applicant and the Corporate Debtor stemmed from their Business Agreement which is a service agreement and therefore the Respondent reclassified the Applicant's claim as an 'operational debt'. Applicant No.1 wrote to Respondent No.1 inter alia objecting to its reclassification and the manner in which the first CoC meeting was conducted. Applicant No. 1 filed the I.A. under section 60 (5) of the Code inter alia praying to: a) set aside the decision made by the Respondent in respect of the Applicant's classification as an Operational Creditor; b) direct Respondent to exclude the Applicant from List of Operational Creditors and to consider the Applicant's claim as a 'financial debt' within the meaning of Section 5(8) of the Code; c) direct the Respondent to appropriately reconstitute the CoC with the Applicant classified as a Financial Creditor with the proportionate voting accruing in light of the financial debt owed to it by the Corporate Debtor. Issues before the NCLT Whether the IRP has the power to reconstitute the CoC, without the leave of the Adjudicating Authority? Whether the Respondent No. 1 has exceeded his authority conferred under law? Observations With regard to the duties of the IRP, the Tribunal observed that the foremost duty of the IRP first is to take the control of the Corporate Debtor and initiate the process of inviting the claims by the Creditors. Once the above said two processes have been completed, in terms of Section...

NCLT Orders Disciplinary Proceedings Against Resolution Professional Of BYJU's, Says He Acted With Prejudice To Mislead Tribunal

Tazeen Ahmed

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