Financial Creditor's RP Recommendation Does Not Invalidate Appointment Under IBC: NCLT Hyderabad

The Hyderabad Bench of the National Company Law Tribunal (NCLT) held on 7 September that a Financial Creditor's recommendation of an Insolvency Professional in a Section 95 application does not, by itself, invalidate the subsequent appointment of that person as Resolution Professional under Section 97 of the Insolvency and Bankruptcy Code, 2016 (IBC).

A Bench comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri held that the recommendation does not amount to an appointment, as the power to appoint the Resolution Professional remains with the Adjudicating Authority. It observed:

“…the fact that an Insolvency Professional is proposed by the Financial Creditor in a creditor-filed application under Section 95 does not, by itself, render the subsequent appointment contrary to Section 97. The recommendation is not the appointment. The proposed Insolvency Professional is required to furnish his particulars, declaration and consent for consideration, and the power to make the appointment remains with the Adjudicating Authority under Section 97(5).”

SREI Equipment Finance Limited filed a Section 95 application against M. Indrasena Chowdary, Personal Guarantor, in respect of the dues of Tapaswi Infra Projects India Pvt. Ltd. The Financial Creditor proposed Mr. Murali Mohan Chevuturi as the Resolution Professional in Form-C, following which the NCLT appointed him.

Chowdary challenged the appointment, contending that since the Section 95 application was filed by the Financial Creditor and not the Resolution Professional, the NCLT was required to direct the IBBI Board to nominate the Resolution Professional under Section 97(3). He argued that the procedure under Section 97(4) was mandatory.

The Tribunal considered IBBI Circular No. IBBI/II/62/2023 dated 21 December 2023, which clarified that in certain cases, a creditor may file the application itself while recommending the name of an Insolvency Professional for appointment as the Resolution Professional. In such cases, the proposed Insolvency Professional must provide the particulars, declaration and consent in Part IV of Form C under the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors Rules, 2019 to the creditor for consideration by the Adjudicating Authority.

Further, the Bench noted that the Madras High Court had upheld the validity of the Circular in Ashwani Kumar Bhatia v. Union of India and Ors., [(2025) ibclaw.in 620 HC], which had observed that the Circular operates as a practice direction and pragmatic tool for fulfilling the purposes of the IBC, thereby saving time and increasing efficiency.

It also relied on the NCLAT's ruling in Anita Goyal v. Vistra ITCL (India) Ltd. and Anr., [(2025) ibclaw.in 62 NCLAT], which rejected a similar challenge under Section 97 and Rule 8 of the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors Rules. The Appellate Tribunal had also rejected the apprehension that a Financial Creditor-recommended Resolution Professional would necessarily be biased.

Accordingly, the NCLT dismissed the application and held that the appointment could not be invalidated merely because the Financial Creditor had recommended the Resolution Professional.