SUPREME COURT OF INDIA State Bank of India vs. Metenere Ltd. [2020] 17 SC
Decided on 19th  August, 2020
Ruling Analysed By:  Adv. Partho Sarkar


A Resolution Professional (RP), just because  he was in the employment of a financial creditor can’t summarily be disentitled  to act as RP/IRP, wherein the said financial creditor constitutes  CoC of the corporate debtor. [It is a matter of intrigue, that Shailesh Verma (Ex-CGM of SBI) ‘the IRP proposed by SBI’ didn’t  contest the order of NCLT seeking his replacement, all along it was SBI who was insisting the appointment of Shailesh Verma as IRP’ – a fundamental question arises that, would SBI have spared it’s resources in contesting at multiple appellate levels, had the proposed IRP been other than its Ex-Senior Executive – the author  is of the opinion that  it is a callous wastage  of public funds nay abuse  of authority  by public servants  for some inexplicable reasons.]


NCLAT upheld((State Bank of India Vs. M/s. Metenere  Ltd.  [2020] 114 NCLAT)) the  NCLT ruling directing State Bank of India to substitute its nominee,  an Ex-CGM of theirs, to act as the Interim Resolution Professional  (IRP) in the insolvency proceedings of Metenere  Limited. A three-member bench of NCLAT said that  apprehension of bias expressed by ex-management of Metenere  Ltd./Corporate  Debtor – cannot  be dismissed  and the NCLT was right in asking for substitution of the IRP. NCLAT expressed that  though  I & B Code does not prohibit an ex-employee of the financial creditor to be appointed as an IRP, in this particular case, the person, whose name was proposed as IRP (Shailesh Verma) had worked with SBI for 39 years and had retired as Chief General Manager (Ex-CGM). It was submitted on behalf  of SBI that  the  IRP is not required  to act as an ‘Independent Umpire’ between the ‘Financial Creditor’ and the ex-management of the

‘Corporate Debtor’ or decide any conflicting  issues between them. It was further submitted that  the RP has no adjudicatory  powers and only acts as a facilitator  in the ‘Corporate Insolvency Resolution  Process’ as all major decisions are taken by the CoC. It was further argued that the ‘Financial Creditor’ plays its part only to the extent  of its voting share therefore, merely because  the proposed  IRP happens  to be an ex-employee of SBI can’t be a ground  to allege  bias against  him. The question arising for determination is whether  an ex- employee  of the ‘Financial Creditor’ having rendered services in the past should or should not be permitted to act as IRP at the  instance  of such ‘Financial Creditor’ regard  being  had to the  nature  of duties  to be performed  by the IRP/RP. The fact that Shailesh Verma/Ex-CGM is drawing pension from SBI does not clothe him with the status of an employee on the payroll of ‘SBI. Pension is paid for the past services under the relevant Service Rules. Regulation  3 (1) of the  CIRP Regulations,  provides  that  an Insolvency Professional  shall be eligible for appointment as an RP if he or his partners  and directors  of the Insolvency Professional  Entity are independent of the  ‘Corporate Debtor’. Admittedly Ex-CGM/Shailesh Verma nor any of his associates is alleged  to be connected with the  ‘Corporate Debtor’ in any manner  rendering  him ineligible  to act as a

‘Resolution Professional’. Provision engrafted in Section 17(1) of the Income Tax Act, 1961 bringing pension within the ambit of ‘salary’ cannot be interpreted to render a pensioner ineligible holding him as an ‘interested person’ being in employment of the ‘Financial Creditor’; as the definition of ‘salary’ under the Income Tax Act, is designed only for the purposes of computing of income to determine tax liability. With regard to IRP to act as an Independent Umpire must  be understood in the  context  of the  IRP acting  fairly in the  context  of his statutory duties, to admit or reject a claim under Regulation  13 of CIRP Regulations,  read with Regulation 17 of CIRP regulations as to constitution of CoC. NCLT had expressed apprehension of bias as was argued  by the ex-members of Corporate Debtor/Metenere Ltd. regarding  appointment of the Ex-CGM as proposed  IRP at the instance  of SBI. NCLAT too had upheld the  order  of NCLT. Further  NCLAT had  observed  it goes  without  saying that  SBI shouldn’t  have  been aggrieved  of the  NCLT order  as it doesn’t prejudice  it. NCLAT had observed in pertinence, it cannot be denied that SBI restricted its choice to propose Shailesh Verma as IRP obviously having regard to past loyalty and the long services rendered by him, this conclusion is further reinforced by filing of instant appeal by the financial creditor (SBI) who is upset with the impugned order directing SBI to substitute the name of IRP in place of the Ex-CGM.

The captioned Civil Appeal arose out of the NCLAT order.


Prima-facie satisfied  that the approach  adopted by NCLAT is not correct that merely Resolution Professional who remained  in the Service of SBI and is getting pension,  was dis-entitled to be RP. However, since SBI have  agreed  for appointment of new RP, let  the  new RP be appointed by the  NCLT within  a week in accordance with the provisions of the I & B Code. Supreme  Court Observed that  the change  of RP shall not reflect adversely upon the integrity of concerned  RP, who has been replaced.  Since the impugned order does not reflect the correct approach, the same shall not be treated as a precedent.


  1. The controversy can be viewed in the context of Judicial pronouncement(s) that held the office of the RP as a quasi-judicial authority/officer of the court, thus the question arises should the Ex-CGM ought to have recused himself as RP once an objection, that too prima-facie not unreasonable been raised as regards his appointment !!! Supreme Court in P.K. Ghosh V/s J.G. Rajput (1995) 3 SCC 744,  had ruled that  a basic postulate of the rule of law being, that  justice should not only be done but must also seem to have been done. If there  is a basis which can’t be treated as unreasonable for a litigant  to expect  that a particular  judge should not adjudicate a particular  matter  and there  is no compelling  necessity,  such as absence  of any alternative, probity demands  the  judge  to recuse  himself.  This is required  not because  the judge is likely to be influenced  in any manner  but his conducting the proceedings is likely to give rise to a reasonable apprehension in the mind of the litigant,  that the mind of the judge may be subconsciously influenced  of some extraneous factors; justice should not only be done, but should also seem to have been done. In the NCLAT order, the ruling of Ranjit Thakur V/s UoI & Ors. (1987) 4 SCC 611 was cited, wherein the Supreme Court held: As to the tests of the likelihood of bias what is relevant is the reasonableness of the apprehension in that regard in the mind of the party. The proper approach for the judge is not to look at his own mind and ask himself, however, honestly, “Am I Biased?”; but to look at the mind of the party before him”. In the  captioned matter,  the  Supreme  Court had rightly held  there  is no inherent disqualification inhibiting  the  Ex-CGM of SBI to have acted  as Resolution  Professional  – but despite  NCLT/NCLAT ruling in opposition  to the  appointment of their Ex-CGM as the  IRP, and it is not that  there  are no alternatives other than the Ex-CGM to be appointed as RP, yet SBI pursuing for appointment of him at multiple  levels in itself is sufficient to give reasonable apprehension in the mind of a litigant  of a sub- conscious  influence  working in the mind of the Ex-CGM which might prejudice  the litigant,  which in the present matter  is the Corporate Debtor/Metenere Ltd.; on grounds of self-honour,  Ex-CGM/ Shailesh Verma ought to have recused himself.

  2. Prima-facie it might be censorious  of an Ex-Official of the  lender  being  appointed as RP/IRP; the independence of such person  will always be in the  realm  of speculation. Some of the  corporate debtors  which have been  admitted for proceedings under I & B Code, wherein  either  through  board membership or some other direct or circuitous engagement the erstwhile  top officials of the financial creditor  are a part  of the  defaulting corporate debtor,  it had also been the case, there was rampant siphoning of funds; and year on year the corporate debtor was suffering losses on one hand yet the exposure of the banks/financial creditor(s) were increasing concurrently – it would be naïve to believe that  such top officials who been  co-opted  in the  board  of the  defaulting corporate debtor  weren’t aware of the fraud happening, where not loose change but significant sum of public money were being siphoned. It is in this backdrop in case an Ex-employee  of the very same bank/financial creditor gets appointed as RP/IRP, will he or can he remain immune to pulls and pressures of his former employer is anybody’s guess; thus as a matter of probity ‘even if not the mandate of law’, an ex-employee of a creditor should not be appointed as RP/IRP, lest the nagging needle of suspicion of bias persists.

For the  benefit  of  Judicial Officers/Resolution  Professionals/  Advocates/  Contestants/  Students/ Academicians, Adv. Partho Sarkar is nearing completion of his book, analysing more than 75 Judgments on IBC Laws  – sample shared.