NCLT must adhere to applicant's IRP recommendations unless disciplinary issues exist, as dictated by the Insolvency and Bankruptcy Code.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 10(3)(b), 16(2) - Appointment of Interim Resolution Professional - The NCLT deviated from the applicant's recommendation for IRP, raising concerns regarding statutory compliance and jurisdictional overreach. Appointment must adhere to recommendations unless disciplinary proceedings are pending. (Paras 1, 16, 19)

(B) Natural Justice - The NCLT must ensure transparent appointment of IRPs to maintain stakeholder interests, following the statutory scheme stipulated in the Code. (Paras 12, 18)

Facts of the case:
The petitioner was appointed as an IRP recommendation by the financial creditor, but NCLT appointed another IRP, prompting the petitioner to challenge this order.

Findings of Court:
The NCLT erred in substituting the applicant's recommendation, which must be upheld unless grounds exist for dismissal under disciplinary action.

Issues: Whether the NCLT may override the recommendation for IRP by the applicant as laid out in the Code.

Ratio Decidendi: The NCLT’s requirement to accept proposals made under Sections 7 and 10 of the Code is clear, as the tribunal's discretion is limited to specific scenarios.

Result: The order of the NCLT is set aside, and the matter is remitted for reconsideration.

ORDER

(Made by Dr. ANITA SUMANTH.,J)

The petitioner is an Insolvency Professional and is aggrieved by an order passed by the National Company Law Tribunal (‘NCLT’ / ‘Tribunal’) / R1 on 04.06.2025 as under that order, the NCLT has proceeded to appoint one Mr.Thangamuthu Viswanathan as the Interim Resolution Professional (IRP) of R2 instead of the petitioner.

2. Mr.Varun Srinivasan, who appears for the petitioner states that the petitioner was enrolled as a member of the Insolvency Professional Agency of Institute of Cost Accountants of India (‘Agency’). He is also registered as a Resolution Professional (RP) with the Insolvency and Bankruptcy Board of India (‘IBBI’ / ‘Board’) / R3 and has a valid Authorization for Assignment (AFA) issued by the Agency valid till 30.06.2026.

3. An application under Section 10 of the Insolvency and Bankruptcy Code, 2016 (‘IB Code’) had been referred by R2 seeking initiation of Corporate Insolvency Resolution Process (CIRP). In that application, R2 had recommended that the petitioner acts as IRP. The recommendation was as per (3)(b) of the IB Code.

4. When the matter had come up for admission, the NCLT had gone ahead to appoint another RP in preference to the petitioner with which appointment the petitioner is aggrieved as being in contravention of the statutory provisions, particularly Section 16 (2) of the IB Code.

5. According to the petitioner, it is mandatory for the NCLT to appoint the IRP as recommended by the Financial Creditor (FC) under Section 7 of the IB Code or the Corporate Debtor (CD) as per Section 10 of the IB Code. It is only when an Operational Creditor (OC) prefers an application under Section 9 of the Code that the NCLT may has some leeway to deviate from the proposal of the OC qua the proposed RP.

6. Emphasis is laid on the fact that a RP has to undergo rigorous training in order to obtain the necessary professional qualifications. The IBBI is the governing statutory body, which regulates the appointments of IRPs, stipulate the requisite eligibility criteria and issues certificates recognizing them as Insolvency Professionals.

7. Thus, the competence and eligibility of the professional is beyond question, and where the recommendation of an IRP has been made by the applicant under Sections 7 and 10 of the Code, there is no provision that enables the NCLT to deviate from such recommendation. The legal issue that arises is thus whether the NCLT is vested with the requisite discretion to override the recommendation of the applicant under Section 7 and 9 in appointing an RP of its choice.

8. We had requested Ms.Indumathi Ravi, who accepted notice for the NCLT, to obtain instructions in regard to the legal issue as framed above.

9. After hearing the parties, an order had come to be passed on 07.07.2025 expressing our prima facie view in the following terms:-

“The petitioner relies on Sections 10 (3)(b) and 16(2) of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') reading thus:

Section 10 . Initiation of corporate insolvency resolution process by corporate applicant.

............

(3) The corporate applicant shall, along with the application furnish the information relating to-- (a) .............

(b) the resolution professional proposed to be appointed as an interim resolution professional.

...............

Section 16 Appointment and tenure of interim resolution professional.

...............

(2) Where the application for corporate insolvency resolution process is made by a financial creditor or the corporate debtor, as the case may be, the resolution professional, as proposed respectively in the application under section 7 or section 10, shall be appointed as the interim resolution professional, if no disciplinary proceedings are pending against him.

(3) Where the application for corporate insolvency resolution process is made by an operational creditor and--

(a) no proposal for an interim resolution professional is made, the Adjudicating Authority shall make a reference to the Bo

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