The High Court upheld the suspension of the Insolvency Professional by the IBBI due to regulatory violations.
The Delhi High Court Single-Judge Bench of Justice Subramonium Prasad recently reviewed a Writ Petition along with Miscellaneous Applications and observed that the Disciplinary Committee of the IBBI acted within its authority in suspending the Petitioner’s registration, as the proceedings were conducted in accordance with the Insolvency and Bankruptcy Code, and the role of the Resolution Professional necessitated strict adherence to regulatory standards.
The Petitioner challenged an Order from the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI), which suspended the Petitioner’s registration as an Insolvency Professional for two years. This situation stemmed from the Petitioner’s role as Interim Resolution Professional in the Corporate Insolvency Resolution Process for GTHS Retails Pvt. Limited, which eventually led to liquidation. An investigation revealed multiple compliance failures, including the inability to realize key assets and submit necessary forms in a timely manner. Following the issuance of a Show Cause Notice and consideration of the Petitioner’s responses, the Disciplinary Committee determined that the Petitioner violated several provisions of the Insolvency and Bankruptcy Code (IBC).
In response, the Respondents argued that judicial review in disciplinary matters is limited, focusing on the decision-making process rather than the case's merits. They maintained that the disciplinary proceedings adhered to proper procedures and lacked any evidence of arbitrary or erroneous actions. The Respondents countered the Petitioner’s claim regarding the committee's composition, asserting that the hearing was indeed conducted by Mr. Sudhaker Shukla, the same individual who issued the Order. They further noted that the statute did not necessitate multiple members in the Disciplinary Committee, which satisfied statutory requirements.
The High Court found the Petitioner's argument about the illegality of the Order due to its issuance by a single-member committee unpersuasive. Citing Section 220 of the IBC, the Court affirmed that the Board is authorized to establish a disciplinary committee, which could comprise a single member. Additionally, the Court dismissed the Petitioner’s assertion that the IBBI should have awaited the Adjudicating Authority's findings, clarifying that the IBBI's investigative functions were separate and allowed for examination of conduct regardless of ongoing proceedings elsewhere.
The Court emphasized the Resolution Professional's critical administrative role during the insolvency process, which necessitates integrity and diligence. Upon reviewing the evidence, it concluded that the Petitioner had made substantial adjustments against the security deposit without proper disclosure and had failed to protect the corporate debtor's assets. The Petitioner’s actions constituted multiple breaches of the IBC and its Regulations.
Ultimately, the Court reiterated its limited role under Article 226, asserting it would not intervene unless there was clear legal contravention or extreme error. It upheld the procedural integrity of the IBBI's actions and found no merit in the Petitioner’s claims. Consequently, the Court dismissed the Petition and any associated applications, affirming the legitimacy of the suspension Order.
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