Is Adjudicating Authority bound by recommendations of resolution professional?

Is Adjudicating Authority bound by the recommendations of Resolution Professional (RP) made under section 99 of IBC, 2016? Khushboo Sai Khurana, a CS professional and a trainee associate at RRR Insolvency Services Experts LLP, looks at the issue through the prism of a Karnataka High Court order.

The High Court of Karnataka, Bengaluru in SRI. BABU A. DHAMMANAGI V. UNION OF INDIA W. P. No. 21626 of 2021, held that the Adjudicating Authority is not bound by the recommendation submitted by the Resolution Professional under section 99 of the Code.

It further clarified that the Adjudicating Authority is the body which takes the final decision on the recommendation submitted by the Resolution Professional and is in no manner bound by the recommendations of the RP.

Moreover, Adjudicating Authority, in order to indicate the broad contours of controversy of Adjudicatory Role of Resolution Professional, clarified that the role of Resolution Professional is limited to making the appropriate recommendation to the Adjudicating Authority and the final decision of the admission or rejection of the application solely lies with the Adjudicating Authority. Therefore, there lies no element of adjudication on the part of the Resolution Professional.

Therefore, the contention raised by the petitioner that “Nemo judex in causa sua – No person can be a judge in his own case” is not valid as the Resolution Professional in no manner is being the judge of his own cause. He does not have any adjudicatory powers and he is only conducting a preliminary check that whether the application filed in order to initiate the proceedings against the personal guarantor complies with the requirements laid down in section 94 or 95 and information connected therewith. The final say is that of the Adjudicating Authority in regards to acceptance or rejection of the application.

Thus, in view of the above, the procedure prescribed under the provisions is fair, rational and reasonable and same cannot be termed to be violative of Article 14.

Also see: ‘It is time NCLT imposes heavy costs on petitioners filing frivolous cases to delay resolution process’