NCLAT Chennai: Resolution Professional Can Be Replaced Under Section 60(5) IBC If He Fails To Place Replacement Agenda Before CoC
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member), has held that Section 60(5) of the Insolvency and Bankruptcy Code (IBC) can be invoked to replace a resolution professional (RP) where he deliberately avoids placing the agenda for his replacement before the Committee of Creditors (CoC).
Background
The CIRP of MQ Networks Pvt. Ltd. was initiated and the appellant, Mathioli N., was appointed as the RP. The sole financial creditor, Reliance Asset Reconstruction Company Ltd., sought his replacement citing non-cooperation, obstructionist behaviour, and failure to facilitate the CIRP effectively.
On 22 April 2025, the creditor sent an email requesting replacement of the RP, but the appellant did not include the matter in the agenda for the 2nd CoC meeting scheduled for 23 June 2025. Despite NCLT’s interim direction to place the replacement issue before the CoC, the RP failed to do so, leading the financial creditor to file an application under Section 60(5) of the IBC. The NCLT, Chennai Bench-II, allowed the application and appointed a new RP, Mr. Pathukasahasram Raghunathan Raman.
Appellant’s Contentions
The appellant challenged the maintainability of the application under Section 60(5), contending that replacement of an RP must strictly follow Section 27 of the IBC, which requires a CoC resolution supported by at least 66% voting share. He argued that the impugned order violated principles of natural justice as it had civil consequences but was passed without hearing him.
Respondent’s Submissions
The financial creditor argued that the RP, despite being aware of the request for his replacement, deliberately excluded it from the agenda of the CoC meeting. It was only due to this inaction that the application under Section 60(5) had to be filed, as the Code does not envisage a situation where an RP can frustrate the statutory rights of the CoC by refusing to table such an agenda.
Tribunal’s Findings
The NCLAT acknowledged that under Section 27(2), replacement of an RP requires a CoC resolution passed by 66% voting share with prior consent of the proposed RP. However, it observed that the statute cannot leave an aggrieved party remedy-less in situations where the RP himself obstructs the process by avoiding to place the agenda before the CoC.
The bench held that an application under Section 60(5) would be maintainable in such exceptional cases. It noted that: “Since the Resolution Professional was expected to act fairly and was required to place the agenda even if it concerned his replacement, having not done so, he cannot now argue that the removal was in violation of Section 27 of the IBC.”
At the same time, the NCLAT clarified that the correct course for the Adjudicating Authority would have been to frame the agenda itself and direct the CoC to consider it under Section 27. The impugned order thus suffered from a procedural flaw in bypassing CoC approval.
Quashing the NCLT’s replacement order dated 07.07.2025, the NCLAT directed the Adjudicating Authority to formulate the agenda for replacement of the RP and place it before the CoC within two weeks. The CoC was directed to consider the matter within a further two weeks in accordance with Section 27. The Bench emphasised that this decision was delivered in the peculiar facts of the case and “may not be treated as a precedent.”
Appearance
For Appellant: Mr. Mathioli N, RP/Party-in-person
For Respondent: Mr. R. Imayavaramban, Advocate
Cause Title: Mathioli N, RP of MQ Networks Pvt. Ltd. Vs. Reliance Asset Reconstruction Company Ltd.
Case No: Company Appeal (AT) (CH) (Ins) No. 412/2025 (IA No.1172/2025)
Coram: Justice Sharad Kumar Sharma (Member-Judicial), Jatindranath Swain (Member-Technical)
