NCLAT's resolution professional ruling: Several bankruptcy cases face delay

Fate of several insolvency cases, including EPC Constructions (earlier knows as Essar Projects), Videocon Industries and Metenere hang in balance. This is because the National Company Law Appellate Tribunal (NCLAT) had ordered that a former bank official cannot be appointed as a resolution professional (RP) in a company facing bankruptcy.
 

State Bank of India (SBI), which had proposed the names of its former officials as RPs in several cases, has the option to move Supreme Court to appeal against the NCLAT order, say lawyers.
 

Lawyers said the bankruptcy process will be impacted as the RPs of these companies were earlier bank officials who took over these positions after their retirement. This was a conflict of interest, felt several companies, moving courts.

The bankruptcy process of Videocon is going on since mid-2018 after the company defaulted on loans worth Rs 40,000 crore. Similarly, EPC Constructions (earlier known as Essar Projects) is facing bankruptcy proceedings since the last two years. These companies have former bank officials as RPs.
 

Videocon Industries has already seen appointment of four debt RPs, including from Price Waterhouse, KPMG and now Deloitte which is managing the asset sale. The debt resolution of the company is going on since January 2018 when the Reserve Bank of India recommended the name of Videocon in its second list of 29 companies for debt resolution.

In an order dated May 22, the NCLAT said the apprehension of bias expressed by Metenere about the appointment of former banker Shailesh Verma as the proposed ‘interim resolution professional’ at the instance of the SBI cannot be dismissed offhand.

The appellate tribunal added that it was perfectly justified in seeking substitution of Verma to ensure that the resolution process was conducted in a fair and unbiased manner.
 

Metenere said Verma was in the SBI for over 39 years and retired as chief general manager in 2016. He was drawing pension from the SBI, which falls within the definition of ‘salary’ under the Income Tax Act, 1961. The company said Verma is an ‘interested person’, being an ex-employee and on the payroll of the ‘financial creditor’. This makes him ineligible under the insolvency code to act as an interim resolution professional, the company added.