2024 (10) TMI 834 - HC - IBC

Legality of the suspension of the petitioner's registration as a Resolution Professional (RP) - contravention of the provisions of Section 30 (2) (b) and (e), 208 (2) (a) and (e) of IBC - lack of due diligence by the petitioner in verifying the Resolution Plan - non-intimation of the claim of KCIL by failing to reply to the specific queries made by it to the RP - HELD THAT - There was sufficient basis for the IBBI to issue the show cause notice to the petitioner. Its adjudication thereafter by the Disciplinary Committee is principally based on the findings recorded by NCLAT. While adjudicating the show cause notice, the Disciplinary Committee found that there were various lapses on the part of the petitioner as RP by failing to object to the proposal submitted by the SRA on the ground that it included comments as well as legal analysis of the arbitration process wherein an award was passed in favour of KCIL. It found that it was not open for the SRA to term the award as void ab initio or unlawful. In spite of receiving the legal opinion dated 13th July 2020 wherein it was stated that such comments by the SRA ought not to have been made, the petitioner as RP failed to take cognizance of the same. This conduct of the RP has thus been found to be in contravention of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. As regards inaction on the part of the petitioner as RP to indicate the precise amount of claim admitted by him, the observations of the NCLAT in paragraph 20 form the basis for holding that the petitioner failed to act in accordance with Regulation 13 (2) (a) and (d) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - the Disciplinary Committee has proceeded to take necessary action based on the observations of the NCLAT, which the petitioner did not challenge. The finding recorded by the NCLAT was that the petitioner had failed in his duty as RP and hence there was substantial material to proceed against the petitioner. The Disciplinary Committee had failed to indicate the reasons for suspending the petitioner s registration for a period of one year. The material on the basis of which the Disciplinary Committee proceeded to suspend the petitioner being unquestionable, the period for which such suspension should operate is a matter within the realm of the Disciplinary Committee. The Disciplinary Committee in the light of the jurisdiction conferred upon it by Section 220 of the Code is empowered to take into consideration all relevant aspects including the conduct of RP. The petitioner s suspension for a period of one year cannot be said to be highly disproportionate that would shock the conscience of the Court for it to interfere in exercise of writ jurisdiction. No case made out to interfere in exercise of writ jurisdiction. The Writ Petition stands dismissed.

Summary

Issues Involved:

1. Legality of the suspension of the petitioner's registration as a Resolution Professional (RP).
2. Alleged lack of due diligence by the petitioner in verifying the Resolution Plan.
3. Non-intimation of the claim of Kanoria Chemicals & Industries Limited (KCIL).
4. Proportionality of the suspension period imposed by the Disciplinary Committee.

Issue-wise Detailed Analysis:

1. Legality of the Suspension of the Petitioner's Registration as RP:

The petitioner challenged the order of suspension issued by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI), arguing that there was no basis for the suspension of his registration as an Insolvency Professional (IP) for one year. The petitioner contended that the reprimand by the National Company Law Appellate Tribunal (NCLAT) was not sufficient grounds for suspension. However, the IBBI's counsel argued that the suspension was justified based on the petitioner's shortcomings noted by the NCLAT, which the petitioner did not challenge. The court found that the Disciplinary Committee acted within its jurisdiction and powers under Section 218 of the Insolvency and Bankruptcy Code, 2016. The decision was based on judicial findings that had attained finality, justifying the suspension.

2. Alleged Lack of Due Diligence by the Petitioner in Verifying the Resolution Plan:

The petitioner was accused of failing to perform due diligence in verifying the Resolution Plan, particularly regarding the claim of the Operational Creditor, KCIL. The NCLAT had observed that the petitioner did not object to the zero provisioning for KCIL and failed to communicate the admitted claim amount during the Corporate Insolvency Resolution Process (CIRP). The Disciplinary Committee found that the petitioner did not fulfill his duties as required under the Code and the relevant Regulations. The court noted that the findings of the NCLAT, which were not challenged by the petitioner, provided a sufficient basis for the IBBI's actions.

3. Non-Intimation of the Claim of KCIL:

The petitioner was also accused of failing to inform KCIL about the status of its claim, despite receiving multiple emails from KCIL. The NCLAT had reprimanded the petitioner for not being alert in responding to KCIL's inquiries and for failing to bring objectionable comments made by the Successful Resolution Applicant (SRA) to the notice of the Committee of Creditors and the Adjudicating Authority. The Disciplinary Committee concluded that the petitioner had contravened the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, by not adequately addressing KCIL's claim. The court upheld the Disciplinary Committee's findings, noting that the petitioner failed to challenge the NCLAT's observations.

4. Proportionality of the Suspension Period Imposed by the Disciplinary Committee:

The petitioner argued that the one-year suspension was excessive and disproportionate. However, the court found that the Disciplinary Committee, empowered by Section 220 of the Code, had considered all relevant aspects, including the conduct of the RP. The court determined that the suspension period was not so disproportionate as to shock the conscience of the court, and it declined to interfere with the Disciplinary Committee's decision. The court also referenced previous decisions, noting that the principle of proportionality did not apply to the case at hand.

In conclusion, the court dismissed the writ petition, finding no grounds to interfere with the Disciplinary Committee's decision to suspend the petitioner's registration as RP for one year. The court also rejected the petitioner's request to extend interim protection.