High Court affirmed the IBBI's decision to suspend the Insolvency Professional's registration for appointing a related firm for excessive fees.
The Delhi High Single-Judge Bench of Justice Subramonium Prasad upheld the IBBI's decision to suspend the Petitioner’s registration for appointing a related firm for excessive fees, finding that the Insolvency Professional’s actions contravened regulatory provisions intended to ensure transparency and fairness in the liquidation process, but reduced the suspension period to reflect the time already served.
In a recent High Court judgment, the Petitioner challenged an order from the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI), dated September 28, 2022, which had suspended the Petitioner’s registration for two years. The suspension stemmed from several allegations related to the Petitioner’s role as Interim Resolution Professional and Liquidator for ABG Shipyard Limited.
The key issues involved were:
Non-refundable Participation Fees: The IBBI accused the Petitioner of improperly charging non-refundable fees for participating in asset auctions, contrary to the spirit of the Insolvency and Bankruptcy Code (IBC). However, the Court found that the relevant prohibition against such fees was introduced only in 2021, after the auction process in question. Therefore, the Petitioner could not be held liable for this charge.
Appointment of Unregistered Valuers: The IBBI claimed the Petitioner appointed unregistered valuers, as valuations were billed under a firm not registered at the time. The Court noted that the registered valuers conducted the valuations in their individual capacities and found no significant misconduct in this practice.
Excessive Fees Paid to BRAL: The most contentious issue was the payment of fees to BDO Restructuring Advisory LLP (BRAL), a firm where the Petitioner was a partner. The IBBI contended that BRAL was paid more than the Petitioner, thus violating regulations. The Court agreed with the IBBI’s view, noting that the Petitioner’s actions appeared designed to circumvent fee regulations and increase personal earnings. Despite the Petitioner’s arguments about the payments being pending and the firm's role being approved, the Court upheld the finding of misconduct.
Ultimately, the Court decided to reduce the suspension period from two years to the 20 months already served, reflecting a partial overturn of the original disciplinary action. The Petitioner’s challenge was partially successful but did not lead to a complete reversal of the suspension order.
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