Allegation of Fraud in Appointment of IRP as RP – Ground for Rejection of Resolution Plan?

Facts of the Case:

An application filed by Amit Sangal, Proprietor of Nitin Plastic (Operational Creditor of Prince MFG Industries Private Limited) under section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of National Company Law Tribunal Rules, 2016 against Kairav Anil Trivedi, IRP/RP of the Corporate Debtor and Canara Bank Ltd., Member of Committee of Creditor (CoC), seeking following reliefs:

• Take cognizance against the Interim Resolution Professional (IRP for committing fraud, perjury, misconduct and omission of material facts
• Reject the Resolution Plan which is approved by the CoC
• Direct to Insolvency & Bankruptcy Board of India (IBBI) for taking disciplinary action against IRP

Application reveals that the IRP has not been appointed as Resolution Profession (RP) in the first meeting of CoC. The CoC has voted against the appointment of IRP as RP. The IRP has intentionally filed a false and fabricated document showing himself appointed as RP of the corporate debtor.

IRP/RP Claim:

• Submission made by the Applicant is based on documents which the Operational Creditor (OC) does not have any legal access, as the CIRP process under IBC is a closed-door confidential process.
• IRP submitted that after the CIRP order, the Applicant/OC has no role to play in the CIRP process and thus has no locus standi whatsoever to raise any objection on the same.
• CIRP process is confidential, and the OC has no legal access to the documents and therefore the OC cannot be considered as an aggrieved party under IBC in the CIRP process.

Decision:

• Operational Creditor (who has filed the application us 9 of IBC) has raised an objection related to matter much before issuance of FORM G (Invitation for expression of interest) Therefore, these grounds cannot be considered as a ground for rejection of the Resolution Plan u/s 30(2)(e).
• Legal implementation of the Resolution plan u/s 30(2)(e) is in no way impacted by the CIRP process followed in the first CoC meeting and therefore cannot be considered as an objection us 30(2)(e) as it does not impact the implementation of the Resolution plan.
• The application filed by the CoC for replacement of the RP has already been withdrawn by the CoC.
• In relation to misconduct of IRP/RP, the appropriate authority to deal with such matters is IBBI.

Conclusion

Once the CIRP process has commenced, Legal implementation of the Resolution plan u/s 30(2)(e) is in no way impacted. In this case, application filed for replacement of the RP was withdrawn, the question on fraud in the process of appointment of The RP does not survive.