NCLAT Holds the Decision to Replace a Resolution Professional Falls Within the Committee's Commercial Wisdom

Kaustav Chowdhury

2 days ago

5 min read

Background and Facts

A resolution professional holds office at the pleasure of the committee of creditors, within the limits the statute sets. The National Company Law Appellate Tribunal has upheld an order allowing a committee of creditors to replace a resolution professional, holding that the decision to seek replacement falls within the committee's commercial wisdom provided the statutory route is followed. The judgment in S. Viswanathan v. Canara Bank [Company Appeal (AT) (CH) (Ins) Nos. 191 of 2022 and 231 of 2022] was delivered by a Bench of Justice N. Seshasayee, Judicial Member, and Jatindranath Swain, Technical Member, and was reported on September 26, 2026.

Maylari Agro Products Limited was admitted into the corporate insolvency resolution process and the appellant was appointed interim resolution professional. Canara Bank, which held 84.6 per cent of the voting share in the committee of creditors, subsequently pressed for his replacement. The committee voted accordingly and the adjudicating authority allowed the replacement. The appellant challenged that order, and also sought the expunging of adverse observations made against him and the determination of his outstanding fees.

Key Legal Issue

Whether a decision of the committee of creditors to replace the resolution professional under Section 27 of the Insolvency and Bankruptcy Code, 2016 is open to review on its merits, and whether the incumbent professional has a right to continue in office that the tribunal will protect.

The Appellate Tribunal's Ruling

The replacement was upheld. The Bench put the governing proposition in a single sentence that carries both halves of the answer:

"While RP must function independently and not as per the whims and fancies of the dominant creditor, the commercial wisdom of the CoC (as represented by the majority view) has to be respected unless asked to perform tasks contrary to the Code and Regulations". The appellant was held to have no vested right to continue in the post.

What Section 27 Requires, and What It Leaves Alone

The provision is procedural in design. Section 27 permits the committee of creditors, at any time during the corporate insolvency resolution process, to replace the resolution professional where it decides to do so. The decision must be taken at a meeting by a vote of sixty six per cent of the voting shares, and the professional proposed in substitution must have given written consent in the specified form. The committee then forwards the name to the adjudicating authority, which forwards it to the Board for confirmation, and the appointment follows the procedure in Section 16.

What the section conspicuously does not require is a reason. It prescribes a threshold, a consent and a confirmation, and it is silent on cause. The Appellate Tribunal's reading follows the drafting: where the legislature has set a numerical threshold and stopped, a tribunal asked to test the merits of the decision is being asked to add a condition the section does not contain.

One protection does survive in the section itself. Where disciplinary proceedings are pending against the proposed replacement, the existing resolution professional continues until another is appointed, so the office does not fall vacant.

Independence Is a Duty, Not a Tenure

The sentence quoted above is carefully balanced and both halves matter. The professional must act independently and not at the direction of the dominant creditor. That is a duty owed in the conduct of the process, and it is not diluted by the fact that the same creditor can vote him out.

What independence does not give him is security of tenure. The two ideas are often run together in argument, and the Appellate Tribunal has separated them: a professional who refuses an instruction that would be contrary to the Code is right to refuse it, and may still be replaced by a committee that has the votes. The remedy for improper conduct by a creditor lies elsewhere in the Code and in the Board's disciplinary jurisdiction, not in a claim to remain in post.

Reputation and Fees Are Separate Questions

The appellant obtained something. The adverse observations against him were expunged, which matters to a professional whose livelihood depends on his standing before the tribunals and with the Board. The claim for his outstanding fees was left to the adjudicating authority to determine on its merits.

That division is the practical lesson of the judgment. An appeal against a replacement is very unlikely to restore the appointment, but it can clear the record and preserve the money claim. Those are the reliefs worth pleading.

Practice Notes

In practice, the judgment shapes how both sides should approach a replacement:

For the committee, follow the section exactly: The vote must reach sixty six per cent of the voting shares, the incoming professional's written consent in the prescribed form must be on record before the name goes up, and the route runs through the adjudicating authority to the Board. Compliance is where a replacement is vulnerable, not motive.
For the outgoing professional, plead the right reliefs: Frame the appeal around the expunging of adverse findings and the determination of fees rather than around restoration to office. A prayer for reinstatement invites the answer that there is no vested right to the post.
Keep independence and tenure apart in argument: Refusing an improper instruction is a duty and should be recorded contemporaneously in the minutes. It is not, and should not be advanced as, a defence to replacement.
Record the reason anyway: Section 27 does not require the committee to give one, but minutes that show a considered commercial decision are far easier to defend than a bare resolution, and they reduce the risk of adverse findings against anyone.
Deal with fees before handing over: Quantify the claim, place it on the record and seek a direction while the file is still before the adjudicating authority. A fee claim pursued after the process has moved on is harder to press.

Key Provisions Discussed

Section 27 of the Insolvency and Bankruptcy Code, 2016: Replacement of the resolution professional by the committee of creditors, which may resolve to replace him at any time during the corporate insolvency resolution process by a vote of sixty six per cent of the voting shares, with the written consent of the proposed replacement, the name being forwarded through the adjudicating authority to the Board for confirmation and the appointment following the procedure in Section 16, and with the incumbent continuing in office where disciplinary proceedings are pending against the proposed replacement.

Case Details

Case: S. Viswanathan v. Canara Bank
Case Nos: Company Appeal (AT) (CH) (Ins) Nos. 191 of 2022 and 231 of 2022
Tribunal: National Company Law Appellate Tribunal, Chennai Bench
Bench: Justice N. Seshasayee, Judicial Member, and Jatindranath Swain, Technical Member
Reported: September 26, 2026
Corporate Debtor: Maylari Agro Products Limited
Voting Share of the Creditor Seeking Replacement: 84.6 per cent
Outcome: Replacement upheld. Adverse observations against the appellant expunged, and his claim for fees left to the adjudicating authority to determine.

Sources and References

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.