Writ Appellate Court Cannot Reappreciate Facts or Entertain New Grounds Absent Procedural Violation in Disciplinary Actions by IBBI
- REEDLAW
- 5 days ago
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The High Court held that a writ appellate court cannot reappreciate factual findings or entertain new grounds at the appellate stage in disciplinary matters initiated by the IBBI, unless there is a demonstrated violation of statutory procedure or principles of natural justice.
The Delhi High Court Division Bench, comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela, while adjudicating a Letters Patent Appeal and connected applications, held that judicial interference with disciplinary decisions of a statutory regulator like the IBBI is unwarranted unless there is a demonstrable violation of procedure or statutory mandate. The Court further clarified that writ appellate courts cannot reappreciate factual findings or entertain new grounds that were not raised before the writ court.
The Letters Patent Appeal was filed by the appellant assailing the judgment dated 27.08.2024 passed by the learned Single Judge in W.P.(C) 15588/2023, whereby the writ petition challenging the suspension of his registration as an Insolvency Professional by the Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India (IBBI) was dismissed. The appellant, who had been registered with IBBI since 02.06.2017, was appointed as Interim Resolution Professional (IRP) and later as Resolution Professional (RP) in the CIRP of GTHS Retails Pvt. Ltd., which ended in liquidation. Subsequently, upon directions of the NCLT, IBBI initiated an investigation under the Inspection Regulations based on issues related to the appellant’s conduct during CIRP, particularly concerning realisation of assets, handling of security deposits, and reporting requirements.
Following the investigation, the DC found the appellant guilty of violating provisions of the IBC and IP Regulations, including Sections 25 and 208 of the IBC and Regulation 7(2)(h) of the IP Regulations. A show cause notice was issued and, after considering the appellant’s reply and an Auditor’s Report dated 14.09.2023, the DC imposed a two-year suspension of his registration by order dated 01.11.2023. The appellant challenged the same by way of a writ petition, which was dismissed by the learned Single Judge on the ground that due process had been followed and no procedural irregularity or violation of natural justice was established.
Before the Division Bench, the appellant reiterated that the Disciplinary Committee had failed to consider crucial documentary evidence, such as the Auditor’s Report that supported the realisation of work-in-progress and justified the adjustments against security deposits. He also asserted that he had acted with the approval of the Committee of Creditors (CoC), including in the appointment of a CEO and handling of operational matters. It was argued that the charges in the show cause notice were inconsistent with the findings of the investigation report, and the suspension order suffered from non-application of mind and disproportionate punishment.
In response, learned counsel for the DC, Ms. Amrita Singh, strongly opposed the appeal, contending that the appellant could not raise new factual arguments at the appellate stage which had not been urged before the learned Single Judge. She maintained that the scope of writ jurisdiction was confined to examining the decision-making process and not the merits of the decision. Relying on binding precedents, she argued that no violation of law or procedure had been demonstrated. It was submitted that the appellant had permitted unauthorized financial adjustments, failed to preserve and disclose asset information to the Adjudicating Authority and valuers, and breached statutory duties under Section 25 of the IBC. The findings of the DC, according to her, were based on evidence and fell within the regulatory domain of the IBBI, which must not be interfered with unless tainted by procedural infirmities or legal error.
On the issue of proportionality, it was contended that the same was not pleaded before the writ court and could not be urged at the appellate stage. She emphasized that the appellant’s omissions had materially impacted the insolvency process and that the penalty imposed was in proportion to the gravity of misconduct. Referring to relevant Supreme Court decisions, it was argued that courts should refrain from substituting regulatory discretion with their own unless there was a demonstrable violation, which was absent in the present case.
The Division Bench, therefore, had to consider whether the appellant had successfully demonstrated a flaw in the procedure adopted by the Disciplinary Committee or any violation of natural justice so as to warrant judicial interference. In the absence of such findings by the learned Single Judge and considering the appellant’s failure to raise certain pleas at the appropriate stage, the appeal failed to establish any legal infirmity in the impugned order.
Mr. Mohit Nandwani, Advocate with Kamal Deep Tyagi, CMA, represented the Appellant.
Ms. Amrita Singh and Mr. Ankit Gupta, Advocates, appeared for Respondent No. 1.
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