A public sector bank, acting as a financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal seeking initiation of the Corporate Insolven

The issue in the present problem relates to the independence and eligibility of an Interim Resolution Professional (IRP) when the proposed professional had previously been employed by the financial creditor. A similar issue arose in the case of State Bank of India v. Metenere Limited , where the courts examined whether past employment with a creditor creates bias or conflict of interest for an Insolvency Professional. (i) Decision of NCLT When the application for initiation of CIRP was filed before the National Company Law Tribunal, the corporate debtor objected to the appointment of the proposed IRP on the ground that he had earlier served as a senior employee of the same bank for many years. The tribunal considered that the IRP plays a crucial and neutral role in the insolvency process. The IRP is required to take control of the corporate debtor's management, verify claims, and conduct the process in a fair and impartial manner. Therefore, the authority emphasized that the professional must not only be independent but must also appear to be independent. Since the proposed IRP had a long association with the financial creditor and continued to receive pensionary benefits, the tribunal held that there could be a reasonable apprehension of bias. To maintain confidence in the insolvency process, the tribunal directed the financial creditor to propose another independent Insolvency Professional. (ii) Decision of NCLAT The order of the tribunal was challenged before the National Company Law Appellate Tribunal. The appellate tribunal upheld the decision of the NCLT. It agreed that the IRP functions as an independent facilitator of the insolvency process, and therefore even the possibility of bias should be avoided. Accordingly, the appellate tribunal affirmed the direction to substitute the IRP to ensure fairness and transparency in the Corporate Insolvency Resolution Process. (iii) Decision of the Supreme Court The matter was further appealed before the Supreme Court of India. The Supreme Court observed that under the Insolvency and Bankruptcy Code, there is no statutory provision which automatically disqualifies a person from acting as IRP merely because he was previously employed by the financial creditor. Past employment by itself cannot be treated as a legal ground for disqualification. However, during the proceedings both parties agreed that another Insolvency Professional could be appointed so that the insolvency process could proceed without controversy. In view of this consensus, the Supreme Court allowed the substitution of the IRP, while clarifying that mere past employment with a creditor does not automatically establish bias or ineligibility. Thus, the present situation closely resembles with the above highlighting the importance of independence of Insolvency Professionals as well as established that Past employment by itself cannot be treated as a legal ground for disqualification.