NCLT dismisses Smaaash founder’s plea against RP
The National Company Law Tribunal (NCLT) has dismissed a plea by Smaaash Entertainment Pvt. Ltd’s founder and former promoter Shripal Morakhia alleging misconduct against the resolution professional (RP) of the company.
“This tribunal does not have any jurisdiction to deal with misconduct, if any, of the RP and initiate disciplinary proceedings against him. The Insolvency and Bankruptcy Board of India (IBBI) is the appropriate authority to initiate the disciplinary proceedings against the RP,” said a bench led by justices Laxmi Gurung and Charanjeet Singh.
The tribunal in its order on Saturday clarified that it does not have any ‘supervisory’ role on IBBI and so no directions could be issued to it. Therefore, the petition was rejected.
In May 2022, Smaaash was dragged into insolvency for non-payment of dues, following which Bhrugesh Amin was appointed as the company’s RP.
In his plea before the tribunal, Morakhia sought disciplinary proceedings against Amin to stop his undue influence over the corporate insolvency resolution process and stay his appointment as RP. Morakhia had proposed to conduct a transaction audit of Smaaash’s accounts in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.
The RP proposed to appoint Pipara & Co. Llp. Around the same time, Morakhia alleged that the RP demanded illegal gratification (essentially a bribe) to restrict the findings of the audit report.
In fact, it was alleged that the RP, while making the demand, threatened Morakhia by insinuating that he would operate and manage the gaming firm in such a way that it would be practically unable to resolve its financial issues.
On enquiring further with the RP, he was informed that Amin would proceed to launch challenges to transactions carried out by the erstwhile management of the corporate debtor should the applicant refuse to hand over the money demanded.
Amin argued that since the plea sought interim relief through a stay on his appointment, IBBI vested this power with the committee of creditors (CoC) not the tribunal.
Meanwhile, the court observed that the CoC, however, did not make any adverse comment against Amin's conduct and performance, thereby dismissing Morakhia’s plea.
The tribunal, in its order on Saturday, clarified that it does not have any ‘supervisory’ role on IBBI