The National Company Law Appellate Tribunal (“NCLAT”) on September 02, 2022 in the matter of Sumat Kumar Gupta v. Committee of Creditors of M/S Vallabh Textiles Company Ltd. held that when the Committee of Creditors (“CoC”) decides to replace the Resolution Professional under Section 27 of Insolvency and Bankruptcy Code, 2016 (“IBC”) and an application is filed before the Adjudicating Authority for approval, the erstwhile Resolution Professional would have no right to be heard before the Adjudicating Authority.

In the instant matter, an appeal was filed under against an order of National Company Law Tribunal, Chandigarh (“Adjudicating Authority”) allowing an Interlocutory application by the Financial Creditor for replacement of the Resolution Professional. In the present case M/S Vallabh Textiles Company Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) and the Appellant was appointed as the Resolution Professional. The CoC in its meeting decided with 100% vote to replace the Appellant with another Resolution Professional.

It was contented by the Appellant he was entitled for the opportunity to be heard in the application in consonance with the principles of natural justice when an order was being passed by the Adjudicating Authority replacing the Appellant. It was submitted that Section 27 of the IBC which provides for replacement of the Resolution Professional by CoC does not exclude applicability of natural justice and the Appellant was entitled for the opportunity to be heard.

The Bench observed that Section 27 of IBC by implication excludes principles of natural justice and that the aforementioned section clearly provides that when the CoC is of the opinion that a resolution professional appointed under Section 22 of IBC is required to be replaced, it may replace him with another Resolution Professional in the manner provided under the Section 27(2) of IBC. A resolution has to be passed at the CoC meeting by 66% voting share to replace the Resolution Professional, subject to a written consent from the proposed Resolution Professional. It was further observed that:

“The decision taken by the CoC is a decision by vote of 66% and when the decision is by votes of a collective body, the decision is not easily assailable. Replacement is complete as per scheme of Section 27 when the resolution is passed with requisite 66% voting share.”

Thus, the Bench held that there was no error in the order of the Adjudicating Authority allowing replacement of Resolution Professional and the appeal was dismissed.