Subsequent Ratification Of Power of Attorney By IMC And Fresh Board Validates SEFL's CIRP Plea Against Roadwings: NCLAT

The National Company Law Appellate Tribunal has recently held that the power of attorney issued to an officer of Srei Equipment Finance Limited to initiate and defend legal proceedings, including proceedings under the Insolvency and Bankruptcy Code, remained valid despite the discharge of its administrator.

The tribunal said the authorisation survived the discharge of the administrator because it was ratified by the Implementation and Monitoring Committee and later by the newly reconstituted Board of Directors.

The Kolkata bench of the NCLT had dismissed SEFL's Section 7 CIRP application against Roadwings International Pvt. Ltd. on the ground that it had been filed without a subsisting valid authorisation.

The Adjudicating Authority had found that debt and default were established. It had also held that the petition was not barred by limitation. Those findings were not challenged.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra said, “In the present case, it therefore follows that the Administrator having issued POA to Sohan Jha and the POA having been ratified both by the IMC and the fresh Board of Directors, actions taken by the POA holder cannot be said be suffer from irregularities on grounds of lack of valid authorisation.”

The Reserve Bank of India superseded SEFL's Board in October 2021 and initiated insolvency proceedings. An administrator was appointed. On March 28, 2023, he issued a power of attorney to Sohan Kumar Jha.

The POA authorised him to commence, initiate, file, and defend legal proceedings, including under the IBC. It authorised him to sign and verify petitions and appear before the NCLT and NCLAT. The POA was valid until March 31, 2024. It was neither revoked nor terminated.

On August 11, 2023, the resolution plan was approved. The administrator stood discharged. An Implementation and Monitoring Committee was constituted under the plan. On August 17, 2023, the IMC ratified and confirmed the power of attorney. Jha filed the Section 7 application on November 4, 2023.

On February 26, 2024, upon reconstitution of the Board, the IMC stood dissolved. A new Board of Directors was constituted. The Board ratified and accepted all acts of the IMC, including the power of attorney issued to Jha. A fresh power of attorney was subsequently issued.

The tribunal held that ratification relates back and retrospectively validates the act. It rejected the contention that the IMC lacked authority. Referring to the approved resolution plan, it noted that the IMC was deemed to have all the powers of a resolution professional.

It also rejected the argument that such powers could not be delegated. The tribunal observed, “Keeping in view the complexity and multifarious nature of tasks which are to be undertaken by the RP so as to successfully conclude the insolvency resolution within tight time-lines set out under IBC, the exigencies of the situation requires the RP to delegate tasks if the situation so requires and the statutory framework of IBC not only recognises this eventuality but also provides for meeting such eventualities.”

It held that the ground for rejection of the Section 7 application was erroneous. The impugned order was set aside. The NCLT has been directed to pass an order of admission within one month.