The court upheld the validity of Clause 23A of the Insolvency ...

Regulatory Suspension of Insolvency Agents During Disciplinary Proceedings Upheld.

Case Laws     Insolvency and Bankruptcy

August 27, 2024

The court upheld the validity of Clause 23A of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, and the corresponding clause in the bye-laws of the ICSI Institute of Insolvency Professionals. Clause 23A provides for suspension of an Authorized Facilitation Agent (AFA) upon initiation of disciplinary proceedings by the agency or IBBI. The issuance of a show cause notice amounts to initiation of disciplinary proceedings. The regulations were framed under the statutory powers conferred by the Insolvency and Bankruptcy Code, and the show cause notices issued were preceded by authorized investigations. The suspension of the petitioner's AFA was legal as a consequence of initiating disciplinary proceedings against them, as provided by Clause 23A. The court found no jurisdictional infirmity in the show cause notices.

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