Suspension of Resolution Professional’s Registration Upheld Due to Finality of NCLAT Findings and Procedural Compliance

The High Court upheld the suspension of the Resolution Professional’s registration, emphasizing the finality of NCLAT findings and compliance with procedural requirements.

The Bombay High Court Division Bench of Justice A.S. Chandurkar and Justice Rajesh S. Patil considered a writ petition challenging the suspension of a Resolution Professional’s (RP) registration by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI). The Division Bench held that the suspension of the petitioner’s registration as a Resolution Professional for one year by the Disciplinary Committee of the IBBI was justified, as it was based on findings of deficient conduct and lapses recorded by the NCLAT, which were not challenged by the petitioner and had attained finality, with no procedural infirmity warranting interference by the Court.

The High Court considered a writ petition challenging the suspension of a Resolution Professional’s (RP) registration by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI). The petitioner, appointed as RP in the Corporate Insolvency Resolution Process (CIRP) of M/s. Transparent Energy System Private Limited faced allegations of lack of due diligence in verifying the Resolution Plan and failing to adequately address the claim of Kanoria Chemicals & Industries Limited (KCIL). These allegations were rooted in findings by the National Company Law Appellate Tribunal (NCLAT), which had earlier reprimanded the petitioner for failing to communicate the admitted claim amount and for not addressing certain objectionable remarks by the Successful Resolution Applicant (SRA) regarding an arbitration award in favour of KCIL.

The Disciplinary Committee, acting under Section 218 of the Insolvency and Bankruptcy Code, 2016 (IBC), suspended the petitioner’s registration for one year, citing contraventions of Sections 30(2)(b) and (e), 208(2)(a) and (e) of the IBC, and related regulations. The petitioner contended that the suspension was disproportionate, arguing that the NCLAT's observations did not warrant such severe action, particularly since they had already reprimanded him. It was also highlighted that the petitioner had responded to the allegations and attributed delays to the Covid-19 outbreak. In support, precedents like Ranjit Thakur v. Union of India and Ors., (1987) 4 SCC 611; Partha Sarathy Sarkar v. Insolvency & Bankruptcy Board of India (IBBI) & Ors., REEDLAW 2023 Bom 10597 and Vishal Ghisulal Jain v. Union of India and Ors., REEDLAW 2023 Bom 08641 rulings were cited to argue against the proportionality of the suspension.

The IBBI countered by asserting that the NCLAT’s findings were binding and unchallenged, forming a sufficient basis for disciplinary action. The Disciplinary Committee emphasized that the petitioner had failed in his duties by not objecting to the SRA’s comments and by failing to adequately respond to KCIL’s repeated communications. It further argued that judicial review under Article 226 should not re-evaluate the merits of the disciplinary action when procedural fairness was observed.

The Division Bench observed, "we do not find that there is any case for reducing the period of suspension of the petitioner’s registration. The ratio of the decision in Ranjit Thakur, (1987) 4 SCC 611 on the aspect of proportionality is not attracted to the facts of the present case. The orders passed in Vishal Ghisulal Jain v. Union of India and Ors., REEDLAW 2023 Bom 08641 and Partha Sarathy Sarkar v. Insolvency & Bankruptcy Board of India (IBBI) & Ors., REEDLAW 2023 Bom 10597 are interim in nature and do not assist the case of the petitioner."

The Court upheld the suspension, noting that the NCLAT’s findings had attained finality and provided substantial grounds for the Disciplinary Committee’s decision. It observed that the petitioner’s conduct during the CIRP exhibited lapses, including his failure to act on legal advice regarding the SRA’s comments and to communicate KCIL's admitted claim. While acknowledging that the COVID-19 pandemic posed challenges, the Court found the petitioner’s overall performance as RP deficient. It held that the suspension was within the IBBI’s jurisdiction and proportionate to the petitioner’s conduct, thereby declining to interfere with the Disciplinary Committee's order.

Mr. Gaurav Joshi, Senior Advocate with Mr. Chaitanya Nikte, Ms. Esha Malik and Mr. Swapnil Sangle, Advocates represented the Petitioner.

Mr. Pankaj Vijayan with Ms. Sushmita Chauhan, Advocates appeared for Respondent No. 1.

Mr. Vinit Jain with Mr. Ashutosh Mishra, Advocates appeared for Respondent No. 2/UoI.

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REEDLAW 2024 Bom 10528