The High Court of Bombay upheld the decision of the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI) to suspend the petitioner, from acting as a Resolution Professional (RP) for one year. The court found that the suspension was justified based on the failure of the petitioner to perform his duties with due diligence during the Corporate Insolvency Resolution Process (CIRP) of M/s. Transparent Energy System Pvt. Ltd. The court emphasized that the Disciplinary Committee’s decision was based on clear legal and procedural grounds under the Insolvency and Bankruptcy Code (IBC), 2016.

1. Initiation of CIRP and Appointment of RP:

   • CIRP was initiated for M/s. Transparent Energy System Pvt. Ltd., and the petitioner was appointed as the RP by the National Company Law Tribunal (NCLT) on February 21, 2020.

2. Investigation and Show Cause Notice:

   • The IBBI, under Section 218 of the IBC, 2016, appointed an Investigating Authority (IA) to examine the conduct of the petitioner. A show cause notice was issued based on allegations of lack of due diligence in verifying the Resolution Plan and failing to update the status of a claim submitted by Kanoria Chemicals & Industries Limited (KCIL).

3. Petitioner’s Response and IBBI's Disciplinary Action:

   • The petitioner denied the allegations. However, the Disciplinary Committee, after conducting hearings, suspended the petitioner's registration for one year. The petitioner challenged this suspension before the Bombay High Court.

4. Arguments from the Petitioner:

   • The petitioner argued that the Disciplinary Committee’s decision was disproportionate and based on observations from the National Company Law Appellate Tribunal (NCLAT) without sufficient basis. He cited previous judgments to argue that the suspension was harsh.

5. Defense by IBBI:

   • IBBI defended the suspension, stating that the petitioner failed to fulfill his duties as an RP and the NCLAT’s findings were sufficient grounds for disciplinary action. They argued that the principles of natural justice were duly followed.

6. Court's Analysis and Findings:

   • The court examined the procedural compliance and found that the NCLAT’s findings against the petitioner, which he did not challenge, were valid grounds for the IBBI’s decision. The court noted that the suspension was proportionate given the petitioner’s failure to perform his duties diligently.

7. Final Judgment:

   • The High Court dismissed the writ petition, finding no procedural or legal irregularities in the IBBI’s decision to suspend the petitioner for one year.

Acts and Sections Discussed:

• Insolvency and Bankruptcy Code (IBC), 2016:

  • Section 30(2)(b) and (e): Discusses the responsibilities of a Resolution Professional in verifying the resolution plan.
  • Section 208(2)(a) and (e): Outlines the duties and code of conduct for insolvency professionals.
  • Section 218: Empowers the IBBI to investigate the conduct of insolvency professionals.
  • Section 220: Grants powers to the IBBI's Disciplinary Committee to take appropriate action based on its findings.

• Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016:

  • Regulation 13(2)(a) and (d): Relates to the duties of a Resolution Professional in handling creditor claims during CIRP.

Ratio:

The court upheld the suspension as the petitioner failed to demonstrate due diligence as per the IBC regulations, and the Disciplinary Committee's decision was proportionate and legally sound. The petitioner’s failure to challenge the NCLAT’s observations rendered them final, forming a legitimate basis for the disciplinary action. The court emphasized the principle that the discretion of the Disciplinary Committee should not be interfered with unless it is shown to be arbitrary or unreasonable.

Subjects:

Corporate Law, Insolvency Proceedings, Disciplinary Action against Insolvency Professionals.

IBC 2016, Resolution Professional, Disciplinary Action, Corporate Insolvency, Judicial Review