High Court upheld the disqualification of the liquidator, confirming both the invalidity of his authorization and the findings of professional misconduct.
The Madras High Court Single-Judge Bench of Justice G.K. Ilanthiraiyan held that the petitioner, lacking the mandatory Authorization for Assignment at the time of his appointment as Liquidator, did not meet the necessary qualifications under the Insolvency and Bankruptcy Code, 2016, thereby justifying the imposition of a fine and dismissal of both writ petitions challenging the orders and seeking compensation.
In W.P. No. 4458 of 2021, the petitioner sought to challenge the order dated 17.12.2020 issued by the first respondent, which upheld the decision of the second respondent from 01.12.2020. The second respondent had imposed a fine of Rs. 10,000 on the petitioner for professional misconduct. The petitioner, appointed as the Liquidator for Jeypore Sugar Company Limited on 29.05.2020, had submitted a written consent in Form AA, indicating his qualification under the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 (IBBI Regulations). However, he lacked the mandatory Authorization for Assignment required under Regulation 7A of the IBBI Regulations. His application for this authorization, submitted on 31.12.2019, had been rejected by the IBBI on 14.01.2020.
Further scrutiny by the third respondent revealed that the petitioner’s registration status with the Indian Institute of Insolvency Professionals was nil on the date of his appointment. This discovery led to the imposition of the fine by the disciplinary committee of the Indian Institute of Insolvency Professionals, which was later confirmed by the first respondent. The petitioner’s writ petition in W.P. No. 4463 of 2021 sought a direction for the payment of Rs. 1 crore as compensation.
The High Court reviewed the records, including the Tribunal's order dated 01.07.2022, which removed the petitioner from his position as Liquidator due to his incomplete qualifications. This decision was later upheld by the Appellate Tribunal on 20.12.2022. Sections 199 to 205 of the Insolvency and Bankruptcy Code, 2016, outline the requirements for insolvency professionals, mandating enrollment with insolvency professional agencies and registration under the IBBI, which the petitioner failed to meet.
In a related matter, the petitioner had previously filed W.P. No. 13229 of 2020 concerning the issuance of authorization for assignment. The court, in its order dated 03.11.2020, affirmed the legitimacy of the two-tiered regulatory system governing insolvency professionals, emphasizing that both the IBBI and the Insolvency Professional Agencies play distinct roles in the regulatory framework.
Given the findings, the court concluded that the orders by the respondents were legally sound and found no merit in the petitioner’s claims. Consequently, both writ petitions—W.P. No. 4458 of 2021 and W.P. No. 4463 of 2021—were dismissed. The court also closed the connected miscellaneous petitions without awarding costs.
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