'Deeming' Fiction Lets Interim Resolution Professional Continue Until CoC Appointment: NCLAT New Delhi

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 16 March, held that the “deeming” fiction created by law empowers the Interim Resolution Professional (IRP) to continue as the Resolution Professional (RP) even if not formally confirmed by the Committee of Creditors (CoC) in the first meeting.

A Bench of Judicial Member Yogesh Khanna and Technical Member Indevar Pandey observed:

“The objective of IBC is a time bound resolution of a Corporate Debtor and hence, Section 16(5) of the IBC read with Regulation 17(3) of the CIRP Regulations, 2016 seeks to prevent a situation where a time bound CIRP gets stalled merely because the CoC fails to confirm the Interim Resolution Professional appointed by the Ld. NCLT as the Resolution Professional, or fails to appoint someone else as the RP.”

The matter arose from the order of the Mumbai Bench of the National Company Law Tribunal (NCLT), which had dismissed the application filed by IDBI Bank Ltd., the appellant. The application was filed in the CIRP of the Corporate Debtor, MEP Infrastructure Developers Private Ltd., which was admitted into CIRP on 28 March 2024. The respondent, Ravindra Kumar Goyal, was appointed as the IRP and constituted the CoC, where the appellant held 9.77% voting rights.

In the first meeting of the CoC, an agenda was proposed to continue the respondent as the RP, but it received only 36.03% votes in favour. The same circumstances prevailed in the second CoC meeting. After the third meeting, the IRP prepared a provisional list of Prospective Resolution Applicants (PRAs).

In the eighth CoC meeting, the appellant proposed replacing the respondent with a new RP. The respondent refused to place the proposal for voting, citing the minimum 33% votes required for any proposal, leading to an application before the NCLT, which was rejected. The appellant then preferred an appeal before the NCLAT.

The appellant contended that the IRP was appointed as RP despite being voted against in the first and second CoC meetings. It argued that once the CoC rejected the appointment, it could not later appoint him as RP. It was further argued that the IRP had no authority under Sections 18 and 25 of the IBC to invite a prospective Resolution Applicant or act in furtherance of the resolution plan.

The Bench noted that sub-section (2) of Section 22 gives discretion to the CoC to “may” in the first meeting do the needful, and if the IRP is not appointed as RP in the first meeting, he has to be replaced. Sub-section (5) of Section 16 provides that the term of the IRP continues till the appointment of the RP under Section 22.

Further, Regulation 17(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 states that when the appointment of the RP is delayed, the IRP performs the functions of the RP from the 40th day of the CIRP commencement date until the RP is appointed under Section 22.

The Bench observed:

“The 'deeming' fiction created by law empowers the Interim Resolution Professional appointed by the Ld. NCLT to act as the Resolution Professional and continue to handle the CIRP as if the said Interim Resolution Professional was in fact the Resolution Professional of the corporate debtor.”

The appellant argued that the respondent could not have acted as the 'deemed' RP before 17 February 2025 since he was not confirmed as the RP. The NCLAT observed:

“If this argument is accepted, then it would lead to 'turning back the clock' and erode the objective of the Code for time bound resolution, by a creditor having only 9.76% voting share.”

Accordingly, the Bench disposed of the appeal, upholding the IRP's authority to act as RP until formal confirmation by the CoC.

For Appellants: Advocates Prachi Johri, Rishi Thakur, Dhwani Gala

For Respondents: Senior Advocate Krishnendu Datta with Advocates Samkash Goyal and Harsh Gurbani