NCLAT sets aside liquidation of Febris Multispeciality Hospital; orders probe into RP's conduct

The NCLAT has set aside the liquidation of a Delhi-based hospital and directed the Insolvency and Bankruptcy Board of India (IBBI) to investigate the conduct of the resolution professional for "many infirmities and illegalities committed" by him.

The appellate tribunal has set aside an order passed by NCLT for liquidation of Febris Multispeciality Hospital and said, the "matter is remitted back to NCLT to reexamine the issue and consider to change the RP (resolution professional)".

A two-member National Company Law Appellate Tribunal (NCLAT) observed that meetings of Committee of Creditors (CoC) was held "in the premises of the financial creditor and also joint filing of the reply by RP and financial creditor...Reflects that something was going on in between the parties".

The NCLAT observed that RP had not taken any reasonable step to invite prospective resolution applicants for the hospital as a "going concern which is mandated as per Section 25(2)(h)" of the Insolvency and Bankruptcy Code and as "such there is no reason to allow the impugned order to further continue".

"We have noticed many infirmities and illegalities committed by the RP, it is desirable to direct IBBI to conduct an enquiry regarding the conduct of the RP and other circumstances which led to the filing of the petition under Section 33(2) of the IBC before NCLT," said the December 9 NCLAT order passed by a bench comprising Justice Rakesh Kumar and Ashok Kumar Mishra.

During the enquiry, IBBI is also required to examine as to whether in entire episode any cognisable offence had come to the fore or not, NCLAT said adding RP was proceeding as a public servant and as such it was expected that he will act independently.

"If during the enquiry by the IBBI any material comes showing prima facie commission of a cognisable offence, in that event, it would be appropriate for IBBI to lodge an FIR for its statutory invention to its logic end," it said directing its registry to communicate the order to IBBI through its Chairman for its compliance.

The NCLAT order came over a petition filed by an ex-director of Durha Vitrak, a company which was running the hospital, against the order passed by the Delhi-based bench of National Company Law Tribunal (NCLT).

Admitting the application moved by RP seeking liquidation of the hospital, NCLT had on May 31, 2021 said as the CoC was not inclined to consider any resolution plan considering them to be not feasible and viable, it was "a fit case for liquidation" and appointed the RP as the liquidator.

It was alleged that the hospital had generated a revenue of Rs 87 lakh in November 2019, when the RP took over and was having a strength of approximately 100 employees and doctors.

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Moreover, during the insolvency process, the RP instead of taking steps to continue the hospital as a going concern was taking all steps to create a situation for liquidation.

He had not taken any step to get certain dues of the hospitals recovered from government departments concerned.

The RP in connivance with the financial creditors, mainly LIC Housing Finance Ltd, which had about 93 per cent voting share in the CoC, filed an application under Section 33(2) of the IBC for initiating liquidation proceedings, ex-director of Durha Vitrak alleged.

Agreeing to it, the NCLAT said, "it is evident that the RP had not taken any reasonable step to get the CD (corporate debtor) as going concern which is mandated... And as such, there is no reason to allow the impugned order to further continue".

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