Sri. Babu A. Dhammanagi Vs. Union of India - Second application has been made through the resolution professional. It is pertinent to note here that he does not have any personal interest in the application. Therefore, the contention of the petitioner that subsequent appointment of the same resolution professional is arbitrary cannot be accepted.

High Court of Karnataka (21.02.2022) in Sri. Babu A. Dhammanagi Vs. Union of India [W.P. No.21626 of 2021 (Gm-Res)] held that;

• The Adjudicating Authority is not bound by the recommendation made by the resolution professional. There is no element of adjudication on the part of the resolution professional. 

• Therefore, the contention raised by the petitioner that the impugned provisions are arbitrary as no person can be allowed to be a judge in his own case is misconceived.

• It has further been held by the Supreme Court that Section 95, 97, 99 and 100 of the Code do not suffer from any illegality or any unconstitutionality. 

• As per the procedure prescribed under Section 95 to 100 of the Code, the role of resolution professional is limited to make the appropriate recommendation to the Adjudicating Authority and the final decision of the admission or rejection of the application referred to under Section 95 solely lies with the Adjudicating Authority.

• Second application has been made through the resolution professional. It is pertinent to note here that he does not have any personal interest in the application. Therefore, the contention of the petitioner that subsequent appointment of the same resolution professional is arbitrary cannot be accepted. 

Excerpts of the order;

In this writ petition, the petitioner inter alia has assailed the validity of Section 95(1), 99 and 100 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘the Code’ for short) as unconstitutional being violative of Article 14 of the Constitution of India.

 

# 2. Facts giving rise to filing of this petition briefly stated are that an inter corporate deposit agreement was executed between the Corporate debtor and the Perimal Enterprise viz., respondent No.2 on 27.05.2016. The aforesaid intra corporate deposit agreement was assigned to respondent No.2 on 22.09.2016. The respondent No.2 filed two separate applications under Section 95(1) of the Code read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 with a prayer to initiate corporate insolvency resolution process. The National Company Law Tribunal, Bangalore passed an interim moratorium order dated 11.11.2021 against the petitioners and also appointed respondent No.3 as a resolution professional under Section 97 of the Code. The respondent No.3 issued notices to the petitioners on 18.11.2021 and the petitioners responded to the aforesaid notice by an email dated 25.11.2021. The petitioners also requested for an early hearing. Thereafter a virtual meeting of respondent No.3 and the petitioner’s counsel was held on 29.11.2021. The respondent No.3 submitted its report to National Company Law Tribunal, Bangalore on 01.12.2021 under Section 99(1) of the Code recommending the acceptance of the application filed by respondent No.2. The petitioners in the aforesaid factual background have challenged the validity of the aforesaid provisions.

 

# 3. Learned counsel for the petitioner submitted that the impugned provisions are in violation of principles of natural justice as no opportunity of hearing is envisaged in the proceedings. It is further submitted that the resolution professional is appointed by the creditor and no person can be a judge in on own case. In support of aforesaid submissions, reliance has been placed on ‘UMA NATH PANDEY AND OTHERS VS. STATE OF UP AND ANOTHER,AIR 2009 SC 2375, ‘JUSTICE P.D.DINAKARAN VS. HON’B LE JUDGES INQUIRY COMMITTEE AND OTHERS,AIR 2011 SC 3711.

 

# 4. We have considered the submission made by learned counsel for the petitioner. From perusal of the report of resolution professional, it is evident that the insolvency proceedings initiated against the personal guarantor under the Code is a time bound process. The aforesaid procedure contains filing of application under Section 95 of the Code for appointment of resolution professional by the Adjudicating Authority under Section 99 of the Code, submission of the report by the resolution professional under Section 99 of the Code recording reasons for recommending the request for acceptance or rejection of the application and finally the admission or rejection of the application by the Adjudicating Authority. The resolution professional is required to give reasons in support of its recommendation. The Adjudicating Authority is the body, which takes the final decision on the recommendation submitted by the resolution professional. The Adjudicating Authority is not bound by the recommendation made by the resolution professional. There is no element of adjudication on the part of the resolution professional. Therefore, the contention raised by the petitioner that the impugned provisions are arbitrary as no person can be allowed to be a judge in his own case is misconceived. The Supreme Court in GUJURAT URJA VIKAS NIGAM LTD. VS AMIT GUPTA (2021) 7 SCC 209 has negative the contention of the petitioner and has held that the role of Adjudicating Authority is that of a rubber stamp in the context of Section 95, 97, 99 and 100 of the Code. It has further been held by the Supreme Court that Section 95, 97, 99 and 100 of the Code do not suffer from any illegality or any unconstitutionality. As per the procedure prescribed under Section 95 to 100 of the Code, the role of resolution professional is limited to make the appropriate recommendation to the Adjudicating Authority and the final decision of the admission or rejection of the application referred to under Section 95 solely lies with the Adjudicating Authority. It is also pertinent to note that Section 5(27) of the Code read with the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 defines the expression `resolution professional’. The aforesaid rule lays down the guidelines for appointment of insolvency professionals including their eligibility criteria and a code of  conduct to be followed by insolvency professional. Second application has been made through the resolution professional. It is pertinent to note here that he does not have any personal interest in the application. Therefore, the contention of the petitioner that subsequent appointment of the same resolution professional is arbitrary cannot be accepted. The procedure prescribed under the provisions is fair, rational and reasonable and same cannot be termed to be violative of Article 14.

 

For the aforementioned reasons, the challenge made to the validity of the provisions as contained in Section 95 to 100 of the Code is hereby repelled. For the aforementioned reasons, we do not any merit in this writ petition. The same fails and is here by dismissed.

 

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