Insolvency & BankruptcyNational Company Law Tribunal & NCLATIndependence of Resolution Professional: Test of Biasness

September 8, 20200
State Bank of India Versus  M/s. Metenere Ltd.
[Company Appeal (AT) (Insolvency) No. 76 of 2020] | Date: 22.05.2020
The appointed Resolution Professional (“RP”), Shailesh Verma (“SV”)  was an ex-employee of the Appellant Financial Creditor and was also drawing pension from it.
Thus, on objection raised by the Respondent, the Adjudicating Authority directed substitution of the RP, on the ground that he was previously employed with the Appellant and thus will render the process unfair and biased.
Aggrieved by this, the Appellant appealed before the Appellant Authority on the ground that SV fulfils the requirement for appointment as Resolution Professional and bears no disqualification.
Whether an ex-employee of the financial creditor having rendered services in the past should not be permitted to act an Interim Resolution Professional at the instance of such financial creditor?
The Appellant Tribunal held that merely because the RP drew pension does not clothe him with the status of an interested person. Pension is paid for the services rendered to the employer in the past and it is a benefit earned for such past services under the relevant services rules.
Further, it was held that the argument that inclusion of pension within the definition of “salary” under the Income Tax Act was not relevant and did not make the RP an interested person and ineligible to be appointed as the RP.
The Tribunal relied on the Regulation 3(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 wherein complete independence of the RP from the Corporate Debtor is mandatory. The Regulation was not violated in the instant case.
Further, relying on the decision of State Bank of India vs. Ram Dev International Limited, Company Appeal (AT) (Insolvency) No. 302 of 2018” decided on 16th July, 2018, the Tribunal held that there was no ground to disqualify him from being appointed as the RP.
Nonetheless, regardless of the abovementioned findings, the Tribunal rendered the test for determination of apprehension of bias. To answer this, the Tribunal placed reliance on the decision of the Supreme Court in Ranjit Thakur v. Union of India and Ors., (1987) 4 SCC 611, wherein it was held that the to test likelihood of bias it is relevant to see whether there is a reasonable apprehension in the mind of the party.”
Thus, the Tribunal held that the determination of apprehension of bias about the RP necessarily rests on the perception of the Corporate Debtor.
In light of the past association of the RP with the Financial Creditor, the Tribunal held that the apprehension of the Corporate Debtor cannot be ruled out.
It was held that the RP acting as an “independent umpire” had to be viewed in the context of the RP being required to discharge his statutory duties in a fair manner, including collating claims.
Although it was acknowledge that per se the RP was not disqualified to act in his personal capacity as an RP as there exists no statutory requirement forbidding an ex-employee from becoming RP.



The decision of the NCLAT is a positive attempt at highlighting the importance of an independent RP under the Code. The decision is in consonance of the objective of the Code that is to balance the interests of all stakeholders.
Whilst it is a pertinent adjudication for the determination of independence of the RP, the Tribunal through the test has lowered the threshold by not considering specific instances of biased conduct by the RP. It will also invoke further challenges for the appointment of RP on the ground that it is biased from the perspective of the Corporate Debtor. This will further elongate the timeline for completion of the CIRP, as against the objective of the Code.  
Nonetheless, the functioning of the RP independent from the Committee of Creditor is imperative and thus calls for a legislative intervention in furtherance of Regulation 3 (1).
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