Aadya Chandra

191301114

State Bank of India v. Ram Dev International Ltd.

Citation: (2018) ibclaw.in 144 NCLAT

Bench and Coram: Justice S.J. Mukhopadhaya, Chairperson; Justice Bansi Lal
Bhat, Member (Judicial)

Procedural History:
“The State Bank of India (SBI) filed an application under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (IBC) for initiation of corporate insolvency
resolution process (CIRP) against Ram Dev International Ltd. (RDI). The
Adjudicating Authority (National Company Law Tribunal), Principal Bench, New
Delhi appointed Mr. K.G. Somani as the Interim Resolution Professional (IRP).
The SBI objected to the appointment of Mr. Somani, on the ground that he was in
the panel of erstwhile State Bank of Hyderabad, which is now merged with SBI,
which is one of the members of the Committee of Creditors (CoC). The
Adjudicating Authority rejected the objection of SBI and confirmed the
appointment of Mr. Somani as the IRP. The SBI challenged the order of the
Adjudicating Authority before the National Company Law Appellate Tribunal
(NCLAT).”

Facts of the Case:

The SBI is a financial creditor of RDI. RDI defaulted on its loan repayments to the
SBI. The SBI filed an application under Section 7 of the IBC for initiation of CIRP
against RDI. The Adjudicating Authority appointed Mr. K.G. Somani as the IRP.
The SBI objected to the appointment of Mr. Somani, on the ground that he was in
the panel of erstwhile State Bank of Hyderabad, which is now merged with SBI,
which is one of the members of the CoC.

Issues:
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191301114

Whether the appointment of Mr. Somani as the IRP is valid, despite the fact that he
is in the panel of SBI, which is a member of the CoC.

“Arguments:
 The SBI argued that the appointment of Mr. Somani as the IRP is invalid,
as he is in the panel of SBI, which is a member of the CoC. The SBI argued
that this would create a conflict of interest, as Mr. Somani would be
beholden to the SBI, which is one of his creditors.
 The RDI argued that the appointment of Mr. Somani as the IRP is valid.
The RDI argued that the fact that Mr. Somani is in the panel of SBI does
not create a conflict of interest. The RDI argued that Mr. Somani is a
professional insolvency professional and he would be able to discharge his
duties impartially.”

Laws Applied:
 Section 7 of the Insolvency and Bankruptcy Code, 2016
 Section 22(2) of the Insolvency and Bankruptcy Code, 2016

Judgment:
The NCLAT allowed the appeal of the SBI and set aside the order of the
Adjudicating Authority. The NCLAT held that the appointment of Mr. Somani as
the IRP is invalid, as he is in the panel of SBI, which is a member of the CoC. The
NCLAT held that this would create a conflict of interest, as Mr. Somani would be
beholden to the SBI, which is one of his creditors.

“Rationale:
The NCLAT reasoned that the appointment of Mr. Somani as the IRP would create
a conflict of interest, as he would be beholden to the SBI, which is one of his
creditors. The NCLAT noted that the IRP is required to act impartially and in the
best interests of all the creditors. The NCLAT held that it would be difficult for Mr.
Somani to act impartially, given his relationship with the SBI.”
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191301114

Concurring and Dissent:

There was no dissenting opinion.

“Critical Analysis:
The decision of the NCLAT is a welcome development, as it clarifies the law on
the appointment of IRPs. The NCLAT has rightly held that the appointment of an
IRP who is in the panel of a creditor would create a conflict of interest. This is
because the IRP would be beholden to the creditor, which would make it difficult
for him to act impartially in the best interests of all the creditors. The decision of
the NCLAT will help to ensure that the appointment of IRPs is fair and impartial.”