Case Note & Summary
The petitioner, Vijendra Kumar Jain, was appointed as Resolution Professional (RP) for M/s. Transparent Energy System Pvt. Ltd. (Corporate Debtor) by the National Company Law Tribunal (NCLT) on 21st February 2020. The Insolvency and Bankruptcy Board of India (IBBI) appointed an Investigating Authority (IA) to investigate the matter. After receiving the investigation report, IBBI issued a show cause notice on 11th July 2023 alleging two grounds: lack of due diligence in verifying the Resolution Plan and non-intimation of the claim of Kanoria Chemicals & Industries Limited (KCIL) despite being aware of its partial admission. The petitioner replied to the show cause notice on 24th July 2023 denying the allegations. A virtual hearing was held on 31st January 2024, and thereafter the Disciplinary Committee of IBBI, comprising two Whole Time Members, passed an order on 12th August 2024 suspending the petitioner's registration as RP for one year, effective after thirty days. Aggrieved, the petitioner filed a writ petition under Article 226 of the Constitution of India challenging the suspension order. The petitioner argued that the suspension was disproportionate and without legal basis, relying on the NCLAT order dated 11th April 2023 which only reprimanded him for lack of due diligence. He also cited the decision in Ranjit Thakur v. Union of India to argue that the punishment was harsh. The IBBI supported the order, contending that the petitioner had failed to perform his duties diligently and that the principles of natural justice were followed. The court, after hearing the parties, held that the disciplinary committee had followed due process and the punishment of one-year suspension was not disproportionate. The court noted that the petitioner had failed to exercise due diligence in verifying the resolution plan and did not intimate the claim of KCIL. The court also observed that in exercise of writ jurisdiction, it does not sit in appeal over disciplinary orders unless they are perverse or violative of natural justice. Accordingly, the writ petition was dismissed.
Headnote
A) Insolvency and Bankruptcy Code - Disciplinary Proceedings - Proportionality of Punishment - Sections 30(2)(b), (e), 208(2)(a), (e) of the Insolvency and Bankruptcy Code, 2016 - The court examined whether the suspension of the petitioner's registration as Resolution Professional for one year was disproportionate to his conduct. The petitioner had failed to exercise due diligence in verifying the resolution plan and did not intimate the claim of an operational creditor despite being aware. The court held that the punishment was not disproportionate and the disciplinary committee had followed due process. (Paras 1-10) B) Constitutional Law - Judicial Review - Scope under Article 226 - The court considered the extent of interference with disciplinary orders passed by statutory bodies. It held that in exercise of writ jurisdiction, the court does not sit in appeal and will not re-appreciate evidence unless the order is perverse or violative of natural justice. (Paras 5-6) C) Insolvency and Bankruptcy Code - Duties of Resolution Professional - Due Diligence - Sections 30(2)(b), (e) of the Insolvency and Bankruptcy Code, 2016 - The court noted that the petitioner as RP failed to raise objections to zero provisioning of a claim despite admitting the full claim amount, and failed to respond to queries of the operational creditor. This constituted lack of due diligence. (Paras 2, 6)
Issue of Consideration
Whether the order of the Disciplinary Committee of IBBI suspending the petitioner's registration as Resolution Professional for a period of one year was disproportionate and without legal basis.
Final Decision
The Bombay High Court dismissed the writ petition, upholding the order of the Disciplinary Committee of IBBI suspending the petitioner's registration as Resolution Professional for a period of one year.
Law Points
- Proportionality of disciplinary action
- Scope of judicial review under Article 226
- Duties of Resolution Professional under IBC
- Due diligence in verification of resolution plan
- Non-intimation of claims
