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TMI Blog2024 (1) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Shantilal Shah another Vs Care Office Lt., [ 2022 (4) TMI 522 - NATIONAL COMPANY LAW TRIBUNAL , AHMEDABAD BENCH ]. Whether the show cause notice which the IBBI has served on the petitioner is legally sustainable? Whether this petition is entertainable when only a show cause notice of a statutory body is in challenge? HELD THAT:- Inasmuch as the petitioner has admitted that he had shared the valuation report of the CD, this Court considers that a prima facie ground is available for the IBBI to issue the show cause notice. The prima facie view of this Court is that when the petitioner ceases to be a Resolution Professional, and starts wearing the cap of a liquidator, the role of IIIP of ICAI vis-a-vis its member ceases. Hence, this Court considers, that at the best the decision of the IIIP of ICAI can be a piece of evidence in the proposed disciplinary proceedings but may not be adequate to affect the jurisdiction of the IBBI to initiate a disciplinary action against the petitioner. Turning to suspension of the petitioner is concerned, this is an automatic process on commencement of a disciplinary proceedings under Regulation 23A of the IBBI (Model Bye-laws a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the corporate-debtor, and the petitioner was appointed as the liquidator. c) Subsequently, IDBI bank, one of the financial creditors of the corporate debtor, had moved IA 815/IB/2020 in CP 1307/IB/2018 before the Adjudicating Authority, seeking the replacement of the petitioner as the liquidator on the ground that the petitioner has acted against the interest of the corporate debtor (CD) by sharing the valuation report with the prospective scheme proponents. While contesting the said application, the petitioner did admit that he had shared the valuation report of the corporate debtor with the prospective scheme proponents. On 01.07.2022, the Adjudicating Authority condemned the said act of the petitioner and proceeded to pass an Order and removed the petitioner as the liquidator. d) Subsequently, on 01.09.2022, one Mr. Anil Kumar, a Technical Member of the NCLT (3rd respondent herein), had filed two complaints, one with the Indian Institute of Insolvency professionals of the Institute of Chartered Accountants of India(IIIP/ICAI), and the other with the IBBI. In his complaint, the 3rd respondent had alleged that the petitioner, after he was removed as the liquidator of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce a liquidator is expected to share vital information with the stake holders, more so, when he is discharging his responsibility under Sec.230 of the Companies Act, 2013. 3. This plea was resisted by by the first respondent through its counter, where it alleged: a) The IBBI is empowered under Section 218 of the IBC to initiate an action based on any information it may receive from other sources. b) The stay granted by the NCLAT in CA(AT)(Ins) 302/201relates to the stay of the impugned order 17.11.2021 in IA No. 641/2021 . The order passed on 17.11.2021 relates to the inclusion of Rayagada assets in the valuation of the assets of the CD and to file a fresh asset memo. However, SCN dated 03.07.2023 refers to the remarks made by NCLT, Chennai in IA/815/IB/2020 order dated 01.07.2022 wherein the Petitioner was replaced as the liquidator on the ground of failure to exercise due care and diligence in discharging his functions as the liquidator. Hence, there is no disregard of orders of the Tribunal. c) Merely because the ICAI, being an independent body, found no merit in the complaint it does not ipso facto take away the authority of the Board under Section 217 and 218 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the learned Additional Solicitor General essentially contended that the this petition should not be entertained as it is premature. He would submit: a) The IBBI is empowered under Sec. 218 to initiate an action based on any information it may receive from other sources. b) The defence raised by the petitioner are only those which may be raised before the Board. This is to say that the Petitioner is contesting the merits of the matter dealt under the SCN without challenging the jurisdiction of the IBBI to issue the said SCN. 5.2 Developing his argument further, the learned Additional Solicitor General submitted: (a) What is under challenge in this case is the show cause notice, and unless it is established that there is no jurisdiction vested in the IBBI to issue the show cause notice, the petition cannot be maintained. Here the petitioner has relied on Sec. 217 of the IBC, and he makes a statement that inasmuch as the complaint was preferred by a certain Anil Kumar, the technical member of NCLT, he cannot be considered as a person aggrieved within the meaning of Section 217. However, under Sec. 218, the IBBI can initiate action based on any information that it may rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not deny that he shared the valuation report, but defends it on the ground that he was under an order of the NCLT to try for a compromise under Sec.230 of the Companies Act and backs it up with the ratio of the Hon'ble Supreme Court in Vijay Kumar Vs Standard Chartered Bank [Order dated 31.01.2019 in W.P.(C) No.1266 of 2018] and that of the NCLT (Allahabad Bench) in Hemant Shantilal Shah another Vs Care Office Lt., [I.A. 434 of 2020 in CP(IB) 602 of 2018]. He then offered a second line of defence with his reliance on the decision of the IIIP/ICAI to drop the same complaint. 9.1 The stated position of the petitioner can be divided into two parts: Whether, the allegation viz-a-viz the sharing of the valuation of the CD should invite a disciplinary action. This is a matter for the IBBI to decide, if at all it is required to be decided, and this precisely is the second part should the IBBI decide the issue? To state it differently, whether the show cause notice which the IBBI has served on the petitioner is legally sustainable. What follows is the question, whether this petition is entertainable when only a show cause notice of a statutory body is in challenge. 9.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as the present case is concerned, it chose to appoint the Resolution Professional himself as the liquidator. It is how, the petitioner appears to have become the liquidator. Therefore, the process and the procedure for liquidation of a CD is not exclusive to the domain of Companies Act, but it is also contemplated within the IBC. d) A liquidator so appointed by the Adjudicating Authority in a corporate insolvency proceedings is governed by IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Regulation 34(5) requires the liquidator to prepare an asset memorandum which includes valuing the asset of the corporate debtors and enables sharing this information only with the Board and the Stakeholder's Consultation Committee (a body of corporate creditors constituted udder Regulation 31A). It however, does not appear to authorise the liquidator to share the asset memorandum the potential purchasers of the corporate assets of the CD. e) This therefore, prima facie, indicates that the IBC and the Regulations made thereunder are anxious to protect the information leak on the valuation of the corporate assets both by the Resolution Professional or by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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