2023 (1) TMI 747 - HC - Insolvency and Bankruptcy

Maintainability of petition - availability of appellate remedy - whether the standard applied is reasonable and proportionate in evaluation of administrative or executive action in judicial review? - HELD THAT - A hearing is not to be an empty formality. It must be an effective hearing and must result in a reasoned order that reflects a proper application of mind. This speaks to the decision-making process, not the resultant decision itself. Where these elements are found even prima facie to be lacking, a writ Court is not denuded of its powers, nor can it be told that its extraordinary jurisdiction is completely fettered - Where the petitioner is able to prima facie dispute the existence of an effective alternate appellate remedy, that is to say, where the petitioner points out that if the alternate appellate remedy invoked by the respondent is likely to result in a serious question of jurisdiction or maintainability of the appeal, a writ court can certainly exercise its discretionary and equitable powers under Article 226 of the Constitution of India. Anyone may set the criminal process in motion against anyone. There may be an FIR. There may even be a charge-sheet. But, except in certain specific statutes, the presumption in criminal jurisdiction in this country is still that a person is innocent until he is proved guilty. Today, even charges have not been framed. It is entirely possible that the court in question, when it takes up the charge-sheet, may not in fact frame charges against the Petitioner at all. Even that is not known. The Petitioner may apply for or may obtain a discharge or a quashing order at some appropriate stage. Even that is unknown. The impugned order seems to us to have completely overlooked the inherent absurdity that it creates. It proceeds on the basis that the mere pendency of a criminal proceeding robs a person such as the Petitioner of his fit and proper person status because it supposedly affects his integrity, reputation and character . We note that there is no case about the absence of a conviction, restraint orders, competence, or financial solvency. But if any of the eventualities that we have noted above occurs, i.e., no charges are framed, there is a discharge, quashing or an acquittal, we are asked to believe that the fit and proper person requirement, and the integrity, reputation and character of the Petitioner will suddenly get restored to some position anterior in time. Shortly stated, the submissions of Mr Parmar for the Petitioners is that an appeal is provided to the chairperson from the matters that have delegated to the Whole Time Member (Administrative Law or AL). This includes the disposal of a show cause notice under Rule 17 of the RV Rules. But suspension and cancellation of a registered valuer is within the jurisdictional remit of a Whole Time Member or WTM as per the table at Part C. There is no specific provision that provides for an appeal against an order or a WTM (as opposed to a WTM (AL)). The impugned order must be stayed.

Summary

Issues Involved:
1. Existence of an alternate appellate remedy.
2. Reasonableness and proportionality of administrative action.
3. Evaluation of "fit and proper person" criteria under the RV Rules.
4. Impact of pending criminal proceedings on professional registration.
5. Jurisdiction and maintainability of the writ petition.

Detailed Analysis:

Existence of an Alternate Appellate Remedy:
The primary issue raised by the Respondent (IBBI) was the existence of an appellate remedy available to the Petitioner. However, the court noted that the existence of an appellate remedy is not an absolute bar to the exercise of writ jurisdiction under Article 226 of the Constitution of India. Citing the Supreme Court decision in *Radhakrishna Industries vs State of Himachal Pradesh & Ors.* [(2021) 6 SCC 771], the court emphasized that there are well-known exceptions to the rule of exhausting alternate remedies, and the existence of an alternate remedy does not per se divest a High Court of its powers under Article 226.

Reasonableness and Proportionality of Administrative Action:
The court underscored that one of the principles in evaluating administrative or executive action in judicial review is whether the standard applied is reasonable and proportionate. The court emphasized that natural justice requires an opportunity to be heard and a reasoned order. The decision-making process must involve a proper application of mind, and where these elements are lacking, a writ court is not denuded of its powers.

Evaluation of "Fit and Proper Person" Criteria under the RV Rules:
The Petitioner, a Chartered Accountant and registered valuer, faced a show cause notice from IBBI based on a charge-sheet filed by the Economic Offences Wing (EOW) related to his association with PMC Bank. The IBBI's order suspended the Petitioner's registration, citing that the pending criminal proceedings impacted his integrity and reputation, thus making him ineligible under Rule 3(1)(k) of the Companies (Registered Valuers and Valuation) Rules, 2017. The court found it difficult to comprehend the rationale behind the order, noting that mere allegations or accusations should not impeach a person's integrity, reputation, and character. The court highlighted that the presumption in criminal jurisdiction is that a person is innocent until proven guilty.

Impact of Pending Criminal Proceedings on Professional Registration:
The court criticized the IBBI's order for assuming that the mere pendency of criminal proceedings was sufficient to tarnish the Petitioner's professional integrity and character. The court noted that charges had not even been framed, and the Petitioner could potentially be discharged or acquitted. The court found the IBBI's logic inherently absurd, as it suggested that the Petitioner was already guilty based on mere accusations.

Jurisdiction and Maintainability of the Writ Petition:
The court addressed the issue of jurisdiction and maintainability by noting that the Petitioner disputed the existence of an effective alternate appellate remedy. The court observed that if the matter of an alternate remedy is controversial and not undisputed, the intervention of the writ court is justified. The court also noted the general order of delegation of powers and functions, which complicated the Respondent's claim about the existence of an appellate remedy.

Conclusion:
The court issued a stay on the impugned order, granting interim relief to the Petitioner. The court directed the Respondent to file an Affidavit in Reply on merits and listed the petition for final disposal on 16th March 2023. The court's decision highlights the importance of reasoned administrative action and the protection of professional integrity against mere allegations.