HC Upholds IBBI’s 2-Year Suspension of Insolvency Professional for Failing to Protect Corporate Debtor’s Assets

Case Details: Sandeep Kumar Bhatt v. Insolvency and Bankruptcy Board of India - [2024] 167 taxmann.com 136 (HC-Delhi)

Judiciary and Counsel Details

• Subramonium Prasad, J.
• Arvind Shukla, Mohit Nandwani, Advs. & Kamal Deep Tyagi, CMA, for the Petitioner.
• Ms Amrita Singh & Ankit Gupta, Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor was undergoing the CIRP and the petitioner-IP was appointed as RP. Later, a Liquidation process was initiated against the corporate debtor. Thus, the petitioner was discharged from this case.

The Liquidator filed an application for dissolution of the assets of the Corporate Debtor. The NCLT raised serious doubts upon the entire CIRP/liquidation proceedings and called upon the petitioner and the liquidator to explain efforts made for the realisation of the value of assets.

The petitioner filed his reply to queries sought by the NCLT. Thereafter, the IBBI issued a notice of investigation to the petitioner. The Investigating Authority (IA) observed that the petitioner had failed to preserve and protect the assets of the corporate debtor and also failed to submit the CIRP forms within the time prescribed under the circular issued by the IBBI.

A Show Cause Notice (SCN) was issued to the petitioner by the IBBI. The petitioner replied to show cause notice. After due consideration of the investigation report and reply to show cause notice, the Disciplinary Committee of IBBI passed an order suspending the registration of the petitioner for a period of two years.

The petitioner then filed an instant writ petition challenging the order passed by the IBBI. It was noted that since the petitioner had failed to protect the assets of the corporate debtor and there was a substantial delay in the submission of forms by the petitioner with the Board, several instances of failure on the part of the petitioner had been found in failing to protect the assets of the company and, therefore, order of the Disciplinary Committee was justified.

Further, after due consideration of the investigation report and reply to show cause notice, the Disciplinary Committee of the IBBI passed an order suspending the registration of the petitioner for a period of two years.

High Court Held

The High Court held that since the Board had followed the procedure before passing the order suspending the petitioner, there was no reason to interfere with the order passed by the respondents.

List of Cases Referred to

• Ayurvedic Sciences & Anr. v. Bikartan Das & Ors. 2023 SCC OnLine SC 996 (para 15)
• Jagdish Mandal v. State of Orissa (2007) 14 SCC 517 (para 17)
• Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) (2016) 8 SCC 622 (para 17)
• Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd. (2016) 16 SCC 818 (para 17)
• In Silppi Constructions Contractors v. Union of India (2020)16 SCC 489 (para 18).