The National Company Law Appellate Tribunal (NCLAT) has upheld the NCLT order directing State Bank of India to substitute its nominee, an ex-employee, to act as the Interim Resolution Professional (IRP) in the Metenere insolvency matter.
A three-member bench of the appellate tribunal said that apprehension of bias expressed by Metenere Ltd -- the corporate debtor against whom insolvency was filed -- cannot be dismissed offhand and the National Company Law Tribunal (NCLT) was right in asking for substitution for the IRP.
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The appellate tribunal also rejected the claims of SBI that the Insolvency and Bankruptcy Code does not prohibit an ex-employee of the financial creditor to be appointed as an IRP and said the NCLT was justified in seeking substitution so that process conducted in a "fair and unbiased" manner.
The NCLAT observed Shailesh Verma, whose name was proposed as IRP has worked with SBI for 39 years and had retired as chief general manager.
"In the given set of circumstances, we are of the considered opinion that the apprehension of bias expressed by the 'corporate debtor' qua the appointment of Verma as proposed IRP at the instance of the appellant - financial creditor cannot be dismissed offhand," it said.
The NCLT was perfectly justified in seeking substitution to ensure that the 'Corporate Insolvency Resolution Process' was conducted in a fair and unbiased manner, said the NCLAT.
It further said: We find no legal flaw in the impugned order which is free from any legal infirmity and has to be upheld. It goes without saying that the appellant - financial creditor should not have been aggrieved of the impugned order as the same did not cause any prejudice to it."
The NCLAT order came over a petition filed by SBI, challenging the order of the principal bench of NCLT, which had on January 4, 2020 directed the country's largest lenderto perform its statutorily mandatory obligation by substituting the name of the resolution professional to act as an IRP in place of Verma.
The NCLT said thatVerma having worked with the SBI for 39 years before his retirement in 2016, "there was an apprehension of bias" andhe was "unlikely to act fairly and could not be expected to act as an independent umpire".
Verma's nameopposed by corporate debtor Metenere, against whom insolvency has been filed, under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the Principal Bench of the NCLT.
Though the appellate tribunal said that Mehta is a pensioner of SBI and was not connected with the bank in any form post retirement, however, "it cannot be denied that SBI restricted its choice to propose Verma as IRP obviously having regard to past loyalty and the long services rendered by the later".
"This conclusion is further reinforced by filing of instant appeal by the financial creditor (SBI) who is upset with the impugned order directing the appellant - financial creditor to substitute the name of IRP in place of Verma.
"This has to be viewed in the context of apprehension of bias raised by the respondent - corporate debtor for the apprehension of bias necessarily rests on the perception of respondent - corporate debtor," said the NCLAT.
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