Resolution Professional cannot seek liquidation after Committee of Creditors resolves for his replacement.

The Committee of Creditors (CoC) of M/s. Infodrive Software Limited (Corporate Debtor) challenged an order dated 06.04.2022 passed by the NCLT, Chennai, which directed the liquidation of the Corporate Debtor.

Mr. Ashwani Kumar Gupta, the original Resolution Professional (RP), had expressed his unwillingness to continue in the role during the 5th CoC meeting on 03.10.2020 due to his advanced age.

the CoC resolved to appoint Mr. Sathiq Buhari as the new RP and filed an application for the change of RP on 03.11.2020.

while this application was pending, the erstwhile RP filed IA No. 128 (CHE) / 2021 seeking liquidation of the Corporate Debtor without the authorization or resolution of the CoC.

The Adjudicating Authority subsequently passed the liquidation order, leading to this appeal.

1. Whether a Resolution Professional is authorized to file an application for liquidation when the Committee of Creditors has already resolved to replace him and has not passed a resolution for liquidation.

2. Whether adverse observations made against the erstwhile Resolution Professional in the impugned order should be sustained given his voluntary expression of unwillingness to continue due to age.

While an RP must continue to function until a replacement is formally appointed by the Adjudicating Authority to ensure the continuity of the CIRP, this authority does not extend to filing for liquidation (a fundamental shift in the process) contrary to the CoC’s intent or in the absence of a CoC resolution to that effect.

The principle of "CoC Commercial Wisdom" is central, as the CoC holds the primary power to decide whether to resolve or liquidate the Corporate Debtor.

The Tribunal noted that although the RP remains in office until a formal replacement order is passed, the action of the erstwhile RP in filing for liquidation was "unsustainable" because the CoC had already resolved to replace him and had specifically not resolved for liquidation.

The Tribunal found that the application for liquidation was filed without CoC authority.

Regarding the conduct of the erstwhile RP, the court accepted his submission that he sought to be relieved due to his old age.

The Tribunal reasoned that while the liquidation application was improper, the adverse remarks against the RP personally were unwarranted and should be expunged to prevent professional prejudice.

The Tribunal further ordered that all adverse observations made against Mr. Ashwani Kumar Gupta (Respondent No. 1) be expunged from the record.

the Tribunal directed the CoC to convene a meeting to make fresh recommendations for a new RP and file a proper application before the Adjudicating Authority.

The appeal was disposed of accordingly.