Adjudicating Authority not bound by Resolution Professional's recommendations u/s 99 IBC: Karnataka High Court

The Karnataka High Court recently dismissed a writ petition challenging the constitutional validity of Sections 95, 99 and 100 of the Insolvency and Bankruptcy Code, 2016 [Shri Babu A Dhammanagi and Ors v. Union of India & Ors]..While doing so, the Bench of Justices Alok Aradhe and S Vishwajith Shetty held,"The Adjudicating Authority is not bound by the recommendations submitted by the Resolution Professional. There is no element of adjudication on the part of the resolution professional. Therefore the contentions raised by the petitioner that the impugned provisions are arbitrary as no person can be allowed to be a judge in his own cause is misconceived.".The Court was hearing a petition challenging the appointment of a Resolution Professional (RP) which was approved by the National Company Law Tribunal (NCLT), Bangalore on an application by the financial creditor, Piramal Capital and Housing Finance Limited. The company had sought the initiation of the insolvency resolution process against the personal guarantor, the writ petitioner before the High Court.The petitioner also prayed for the following:Declaration that Section 95(1) of the Code is unconstitutional to the extent that it permits the filing of applications through the resolution professional. Declaration that Section 99 and 100 of the Code is unconstitutional being violative of Article 14 of the Constitution..Section 95 provides that a creditor may apply either by himself or through an RP to the Adjudicating Authority for initiating the insolvency resolution process.Under Section 99, the RP is required to submit a report to the Adjudicating Authority recommending for approval or rejection of the application for the insolvency resolution process.The Adjudicating Authority shall, under Section 100, within fourteen days from the date of submission of the report under Section 99, pass an order either admitting or rejecting the application..The High Court noted that the Supreme Court in Gujarat Urja Vikas Nigam Ltd v. Amit Gupta had already upheld the validity of the provisions under challenge.It further rejected the contention of the petitioner that the appointment of the same RP through which the application was filed before the NCLT was arbitrary, noting that the RP in question had no personal interest in the application..Advocate Shashank Kumar appeared for the petitioner, while Central Government Counsel MN Kumar argued for the Union of India. Piramal Capital and Housing Finance Limited was represented by a team from Dua Associates comprising Angad Varma, Prashant Kumar, Toyesh Tewari, Nikhil Mehndiratta, and Mahima Singh. Advocate Malavika Prasad appeared for another party..[Read Judgment]