NCLT replaces Resolution Professional in insolvency proceedings against Subhash Chandra

The National Company Law Tribunal (NCLT) at New Delhi has ordered the replacement of the Resolution Professional (RP) who was handling the insolvency proceedings against Chairman of the Essel Group, Subhash Chandra [Indiabulls Housing Finance Ltd. v. Subhash Chandra]..Judicial member Ashok Kumar Bhardwaj and technical member Subrata Kumar Dash passed the order on an application moved by Chandra, who was the personal guarantor in respect of certain unpaid debts. .Chandra told the tribunal that Resolution Professional Raj Kumar Saraogi had met him on April 24 at an expensive hotel in Delhi with a lawyer. During the meeting, Saraogi is alleged to have claimed that the present proceedings would lead to Chandra's bankruptcy by saying "matter toh bankruptcy mein jayega." Chandra also alleged in his application before the NCLT that the RP made the visit without prior permission to conduct negotiations. It also seemed to Chandra that Saraogi had no desire to streamline the process. Chandra expressed concern that the RP was acting in a hostile manner and appeared to be unaware of his responsibility in the insolvency process. .The NCLT took a serious view of these allegations. "We are unable to appreciate why and how the RP felt the need to conduct the meeting in an expensive hotel when the responsibility given to him was to conduct the process for Insolvency Resolution of Personal Guarantor," the tribunal's May 27 order reads. The NCLT added that it could not understand how a resolution professional, a consultant himself in the proceedings, could have hired the services of another lawyer. .Since Sarogi denied having remarked that the matter would end in bankruptcy, the NCLT did not delve into this allegation. However, the NCLT proceeded to appoint Shiv Nandan Sharma as the Resolution Professional instead of Saraogi. "We are unable to appreciate that how before preparation of plan under Section 105 of IBC, 2016, he (earlier RP) could feel need to meet Personal Guarantor along with lawyer in Lodhi Hotel," the NCLT explained. .The tribunal added that its order should not be held against Sarogi for any other purpose."We have ordered the replacement of Mr. Raj Kamal Saraogi only because the procedure given in chapter 3 of the Code is beneficial procedure and the role of RP is only that of facilitator between PG and Creditors. The present order would not be relied against them for any purpose and in manner, the only ramification of the order is replacement of RP," the order stated.The tribunal also clarified that Sarogi would be entitled to claim professional fees for services rendered so far..The NCLT had admitted a plea for the initiation of insolvency proceedings against Chandra on April 24. The petition was filed by Indiabulls Housing Finance (IBHF).IBHF had moved the tribunal under Section 95 of the Insolvency and Bankruptcy Code (IBC) over outstanding loan amounts to be furnished by Chandra as he was a personal guarantor in an agreement executed between IBHF and Vivek Infracon..Advocates Sumesh Dhawan, Shaurya Shyam, Chirag Sharma and Shikhar Misra from the Chambers of Jaitley and Bakshi appeared for IBHF.Advocates Vaibhav Gaggar along with a team from Trust Legal led by Partner Ritwika Nanda and advocates Petal Chandhok, and Shruti Gupta appeared for Chandra..[Read order]