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TMI Blog2024 (10) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... the violations go to the root of the matter - Merely because in the opinion of the Court another alternate punishment would be more appropriate, cannot be a ground to interfere with the discretion of Disciplinary Authorities. There should be no reappraisal of the facts of the matter as if sitting in appeal. Respondent no.2 was accordingly cautioned and warned to be more careful in future while handling process under the Code and that in case such repetitive instances are noticed in future, the matter would be treated as willful negligence and action would be taken accordingly. It is succinctly explained in the reply filed on behalf of the Board, that in order to plan effective implementation of provisions of IBC, Ministry of Corporate Affairs constituted four working groups in July 2016. First working group was entrusted with the task to 'Recommend the design of the IBBI'. As per its recommendation in respect to constitution of the 'Committee', it is duly observed that once IBC neither explicitly permits nor prohibits the possibility of one member Disciplinary Committee, the word 'Committee' used in Section 220(1) IBC can be interpreted to be inclusive of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for alleged fraudulent transactions, filed by the respondent No. 2 and pending before the Respondent No. 1 for 2.9.22, to avoid fraud/ Income Leakage of Rs.7.94 crore to public money/ secured lenders/ public sector banks. 3. Both writ petitions have been filed by the suspended Director of M/s. KSM Yarns Limited, a Company which was admittedly in the midst of Corporate Insolvency Resolution Process (for short - 'CIRP') under provisions of the Insolvency and Bankruptcy Code, 2016 (for short - 'IBC'). It is pleaded that abovesaid Company which was under financial distress was admitted to CIRP in terms of order dated 17.12.2019 passed by learned National Company Law Tribunal, Chandigarh (for short - 'NCLT'). Respondent No. 2 namely Nipan Bansal took over as Interim Resolution Professional/Resolution Professional (for short - 'IRP/RP') on 20.12.2019. Various averments/allegations of malafides, misrepresentations and fraud are raised in the writ petition in respect to conduct of RP. It is stated that respondent No. 2 was never validly appointed as RP because he could not secure the requisite 66% votes. Various applications, as are detailed in the forego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judice had been caused to any of the stakeholders. It is further observed in order dated 22.08.2022 that in case any such repetitive instance is noticed in future, the matter would be treated as wilful negligence and action would be taken accordingly. 5. Present petitioners filed IA-892-2022 before learned NCLT, Chandigarh with contentions that IBBI vide order dated 22.08.2022 had found RP guilty of misconduct, therefore, he should be removed and they sought revival of IA Nos. 265, 266, 462 and 466 of 2020 which had earlier been disposed of vide order dated 27.07.2021. Learned NCLT revived all the said applications. CWP-19562 of 2022 was filed by petitioners seeking a direction to learned NCLT to decide all the above said applications prior to adjudication IA No. 914 of 2020, which is the application filed for approval of the Resolution Plan. 6. Notice of motion was issued in this writ petition on 01.09.2022 by Co-ordinate Bench and it was directed that proceedings in IA-914-2020 would remain stayed till the next date of hearing. The interim order continued to remain in currency. 7. During pendency of the said writ petition, learned NCLT vide order dated 25.04.2023 dismissed all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot deem it appropriate to delve into the issues as raised again with order dated 22.08.2022 passed by IBBI being a detailed and comprehensive one dealing with the relevant allegations. 10. Petitioner thereafter filed CWP-8750-2023 on 20.04.2023 challenging order dated 22.08.2022 passed by IBBI. Petitioner in CWP-8750- 2023 also sought stay of proceedings before the learned NCLT. Notice of motion was issued in CWP-8750-2023 by Co-ordinate Bench with the following observations on 29.04.2023:- Counsel for the petitioners has pointed out that the appointment of respondent No.2 was not as per the statutory provisions in as much as he only secured 65.89% of votes while referring to E-voting result dated 18.01.2020 (Annexure P-5) and he wrongly submitted that item No.13 was carried whereas the requisite condition was 66% of the votes as per the provisions of Section 22 of the Insolvency Bankruptcy Code, 2016 (for short, the 'Code'). It is submitted that at a subsequent point of time, he had approached the creditors i.e. Punjab National Bank and got a post-facto approval. IA No.111 112 (Annexure P-12) had been filed under Section 60(5) read with Section 22(2) of the Code which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplications was decided by learned NCLT. Be that as it may, it is to be noted that petitioners also filed an appeal before learned NCLAT challenging order dated 25.04.2023 which is pending adjudication. 12. In the given factual matrix, it is apparent that after passing of order dated 25.04.2023 by learned NCLT, CWP-19562-2022 was rendered infructuous inasmuch as IA Nos. 266, 462, 466 of 2020, IA No. 892, 890 of 2022 stood decided. IA No. 366 of 2020 had been filed not by petitioners but by respondent No. 2 seeking appropriate directions against petitioners for indulging in preferential transactions and fraudulent trading and reference of the matter to IBBI/Central Government under Section 236 IBC. MA No. 4 of 2022 in IA-914- 2020 necessarily could not have been decided as proceedings therein were stayed by this High Court on 01.09.2022. Moreover, appeal challenging order dated 25.04.2023 also stood filed by petitioners before learned NCLAT. 13. While not seriously denying in principle that CWP-19562-2022 was indeed rendered infructuous, learned counsel for petitioners vehemently argued that impugned order dated 22.08.2022 passed by IBBI (DC) is absolutely illegal, arbitrary, hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and cheating by RP. Units of the CD were closed down illegally for more than 4 years and RP in connivance with creditors is trying to get the same sold to a person of his choice for mutual gains. Therefore, it is incorrectly held in the impugned order that no harm has been done to any of the stakeholders. Learned counsel for petitioners also urged that RP was guilty of non-disclosure and declaration of relationship of three years prior in case of appointment of legal Professional. Disciplinary Committee failed to refer to its own site (IBBI site) wherein till May, 2023 counsel was shown to be a Director of common IPE with the co-Director who is the IRP. It was, however, reiterated that no action was sought against the counsel. It is to be noted that CM-18752- CWP-2023 in CWP-19562-2022 seeking action under Section 340 Cr.P.C. was withdrawn on 19.12.2023. 15. It was further contended that Disciplinary Committee cannot be comprised of one sole member and that Disciplinary Committee cannot be equated with one whole time member. The functions and area/sphere of working of both are completely different. Reference was made to Clause 12 of Insolvency and Bankruptcy Board of India (Dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion utilities. It is the duty of IBBI to ensure that CIRP and liquidation proceedings are conducted in a fair and just manner by IRP/RP/Liquidator (IP). By virtue of powers conferred upon IBBI under the Code, Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (for short - 'IP Regulations') have been promulgated. The Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 (for short - 'Complaint Regulations') promulgated in terms of Section 196(q) of IBC lay down a comprehensive mechanism in consonance with the mandate of IBC for consideration and disposal of grievances against insolvency professionals. A complaint once filed passes through several stages in terms of Regulation 7 of Complaint Regulations. It was submitted that Section 218 of IBC and Complaint Regulations do not require a decision by IBBI as a quasi judicial authority. It is not necessary to join the complainant with proceedings wherein the service provider against whom proceedings may be initiated upon forming a prima facie view is entitled to a right of personal hearing. The complaint handling mechanism under the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed of on 27.07.2021 on the ground that IBBI vide order dated 22.08.2022 had found respondent No.2 guilty while at the same time they are challenging this very order in CWP-8750-2023. After dismissal of their applications on 25.04.2023, appeal with similar grounds as in the present writ petition has been filed and is pending before learned NCLAT. Present writ petition, it was submitted, has been filed in a malafide manner in April, 2023 challenging order dated 22.08.2022 passed by learned IBBI (DC). Present writ petition, it was further submitted is not maintainable or entertainable. Even on merits there is no ground whatsoever to interfere in the matter. It was thus prayed that both writ petitions be dismissed. 20. We heard learned counsel for the parties at length and have carefully scrutinized the file. 21. Initiation of proceedings under Section 7 of IBC against the firm - M/s. KSM Spinning Mills, vide order dated 17.12.2019, passed by learned NCLT is a matter of record. The firm was admitted to CIRP and respondent no.2 took over as IRP on 20.12.2019. Petitioner(s) are admittedly the suspended Directors of M/s. KSM Spinning Mills. Ltd. Various applications, as have been detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged contravention of various provisions of Insolvency and Bankruptcy Board of India and Insolvency Professionals Regulations, 2016. Reply was filed by RP. On receipt of report of Investigating Authority, Disciplinary Committee was constituted in terms of Section 220(1) IBC to consider the report of inspecting Authority. Impugned order dated 22.08.2022 was passed by the Disciplinary Committee. Petitioners filed IA No.892 of 2022 before NCLT, Chandigarh with the prayer as reproduced hereunder:- Application under Section 60(5) read with Section 22(2) and Section 219 of the Insolvency and Bankruptcy Code, 2016 for staying all further proceedings in CP(IB)250/CHD/PB/2018 as Shri Nipan Bansal the alleged RP was not validly appointed having failed to secure 66% votes as provide in Section 22 and that the said RP. Shri Nipan Bansal, has knowingly made misleading and incorrect statement before the AA in the application for confirmation of IRP as RP in the application dated February 17, 2020, as held by the IBBI in Notice No. IBBI/IP/2020/60/531/3551, dated 18.5.2022. AND Hence all acts and proceedings done by and in the name of the RP by Nipan Bansal subsequent to 17.01.2020 are non es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be disproportionate, outrageous, in defiance of logic or is irrational suggesting lack of good faith or shocks the conscience of the Court. Merely because in the opinion of the Court another alternate punishment would be more appropriate, cannot be a ground to interfere with the discretion of Disciplinary Authorities. There should be no reappraisal of the facts of the matter as if sitting in appeal. Gainful reference in this regard can be made to judgment of Hon'ble the Supreme Court of India in Union of India and others Vs. Ex-Constable Ram Karan, 2022 (1) SCC 373, which reiterates and elaborates the principle in question which is applicable to the given facts and circumstances as well. 25. In this background, it is to be seen that Disciplinary Committee in respect to failure in filing relationship disclosure observed as under:- 4.3.1 The circular no. IP/005/2018 dated 16.01.2018 provides as follows while explaining kinds of relationship: Where the Insolvency Professional or the Other Professional, as the case may be, is a partner or director of a company, firm or LLP, such as, an Insolvency Professional Entity or Registered Valuer, the relationship of kind A, B or C of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng again. 4.6.2 The DC further observes that as no objection was raised in 3rd CoC meeting by any members of CoC and till date also no objection has been raised on appointment of Mr. Bansal as RP when the resolution plan has also been approved by CoC and pending for approval before AA. In light of the above, the DC takes a lenient view as no objections has been raised, fee of Mr. Bansal has been approved and resolution plan was approved by CoC including Bank of Baroda who once had objected to the appointment of Mr. Bansal as RP, and no harm has been done to any stakeholders. 27. Respondent no.2 was accordingly cautioned and warned to be more careful in future while handling process under the Code and that in case such repetitive instances are noticed in future, the matter would be treated as willful negligence and action would be taken accordingly. Copy of the order was duly forwarded to the Indian Institute of Insolvency Professionals of ICAI where respondent no.2 is enrolled as a member. It is the categoric finding by IBBI that no prejudice or loss has been caused to any of the stakeholders of the CD by non-disclosure of the relationship and moreover CoC (whose decisions in any c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igating Authority submitted under sub-section (6) of section 218: Provided that the members of the disciplinary committee shall consist of whole-time members of the Board only. (2) On the examination of the report of the Investigating Authority, if the disciplinary committee is satisfied that sufficient cause exists, it may impose penalty as specified in sub-section (3) or suspend or cancel the registration of the insolvency professional or, suspend or cancel the registration of insolvency professional agency or information utility as the case may be. (3) Where any insolvency professional agency or insolvency professional or an information utility has contravened any provision of this Code or rules or regulations made thereunder, the disciplinary committee may impose penalty which shall be-- (i) three times the amount of the loss caused, or likely to have been caused, to persons concerned on account of such contravention; or (ii) three times the amount of the unlawful gain made on account of such contravention, whichever is higher: Provided that where such loss or unlawful gain is not quantifiable, the total amount of the penalty imposed shall not exceed more than one crore rupees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self-contained and comprehensive mechanism has been put in place for consideration and disposal of grievances against insolvency professionals. Delhi High Court in the case of Consumer Education and Research Centre and others versus Securities and Exchange Board of India and others(CWP-1195-1998) decided on 07.09.1999 and in DLF Limited versus SEBI and others (LPA-100-2012)decided on 20.11.2012, while dealing with the question of requirement of hearing being given to complainants under the said Act, held that in case a Body like SEBI is directed to give hearing to each and every complainant, then the very purpose for which SEBI has been established i.e. investors protection would be lost. Similar view was taken by the High Court of Bombay in JK Paper Limited versus SEBI(Writ petition No. 3341 of 2020) decided on 06.10.2020. We are in agreement with the ratio as culled out in abovesaid decisions which is squarely applicable to the instant matter presenting similar controversy. 32. Learned counsel for petitioners was unable to point out any illegality or irregularity in the procedure followed by respondent - Board in deciding the complaint filed by the petitioners while looking into ..... X X X X Extracts X X X X X X X X Extracts X X X X
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