2022 (9) TMI 140 - AT - Insolvency and Bankruptcy

Validity of order of NCLT issuing Direction to IBBI not to initiate any enquiry till further orders, if any enquiry is initiated, the same be halted till further direction from the court - HELD THAT - Hon ble Supreme Court in the case of K. Sashidhar Vs. Indian Overseas Bank Ors. 2019 (2) TMI 1043 - SUPREME COURT has held that the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I B Code and not to act as a court of equity or exercise plenary powers. This Appellate Tribunal in the case of M/S. MOHAN GEMS JEWELS PRIVATE LIMITED THROUGH ITS LIQUIDATOR DEBASHISH NANDA VERSUS VIJAY VERMA, INSOLVENCY AND BANKRUPTCY BOARD OF INDIA 2021 (8) TMI 1000 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI and INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (IBBI) VERSUS SHRI RISHI PRAKASH VATS AND ORS. 2019 (8) TMI 629 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , has held similar view. The impugned orders passed by the Adjudicating Authority cannot be sustained in the eye of law - Appeal allowed.

Issues Involved:
1. Jurisdiction of the Adjudicating Authority (NCLT) to direct the Insolvency and Bankruptcy Board of India (IBBI) to initiate or halt disciplinary proceedings.
2. Powers of the IBBI regarding the regulation and oversight of Insolvency Professionals.
3. Compliance with the principles of natural justice and statutory limitations.

Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority (NCLT):
The primary issue revolves around whether the Adjudicating Authority (NCLT) has the jurisdiction to direct the IBBI to initiate or halt disciplinary proceedings against an Insolvency Professional (IRP). The Appellant Board contended that the NCLT exceeded its jurisdiction by issuing such directions, which are beyond the powers vested in it by the Insolvency and Bankruptcy Code (IBC). The Tribunal emphasized that the NCLT cannot act as a superior authority over the IBBI or as a writ court, thereby taking over the functions exclusively vested with the IBBI. The Tribunal referred to the Supreme Court's judgment in 'K. Sashidhar Vs. Indian Overseas Bank & Ors.' which clarified that the NCLT has limited jurisdiction and cannot exercise plenary powers.

2. Powers of the IBBI:
The IBBI, as a statutory body established under Section 188 of the Code, has the exclusive authority to regulate and oversee the functioning of Insolvency Professionals. The Appellant Board argued that under Sections 196 and 218 of the Code, the IBBI has plenary powers to carry out inspections, investigations, and pass necessary orders for compliance with the Code and its regulations. The Tribunal noted that the legislative intent behind the establishment of the IBBI was to grant it exclusive powers to oversee the working of the Code and the functioning of Insolvency Professionals. The Tribunal reiterated that the NCLT does not have the power to interfere with the inspection and investigation processes initiated by the IBBI.

3. Compliance with Principles of Natural Justice and Statutory Limitations:
The Appellant Board argued that the impugned orders of the NCLT were against the principles of natural justice, equity, and good conscience. The Tribunal observed that the NCLT's directions to halt the enquiry initiated by the IBBI were beyond its statutory powers and transgressed the jurisdiction given under the Code. The Tribunal emphasized that the inspection and investigation into the actions of an Insolvency Professional are fact-finding processes, and the NCLT does not have the authority to interfere with these processes. The Tribunal also highlighted that the IBBI has established regulations, including the 'IBBI (Insolvency and Investigation) Regulations, 2017', which provide a detailed procedure for conducting inspections and investigations, ensuring that the Insolvency Professional is given adequate opportunity to present his case.

Conclusion:
The Tribunal concluded that the impugned orders dated 06.07.2021 and 29.07.2021 passed by the NCLT, New Delhi Court-IV, directing the IBBI to initiate or halt disciplinary proceedings against the IRP, were not sustainable in law. The Tribunal set aside these orders, thereby allowing the appeal. The judgment underscores the exclusive jurisdiction of the IBBI in regulating Insolvency Professionals and the limited powers of the NCLT under the IBC. The Tribunal directed the Registry to upload the judgment on its website and send a copy to the NCLT, New Delhi Court-IV.

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