IBBI Was Justified in Taking a Lenient View on RP Guilty of Technical Issues as It Caused No Harm to Stakeholders or CD | HC

Case Details: Sarish Mittal v. National Company Law Tribunal - [2024] 166 taxmann.com 702 (HC-Punjab & Haryana)

Judiciary and Counsel Details

• Mrs Lisa Gill & Mrs Amarjot Bhatti
• Sandeep Suri, Adv., for the Petitioner.
• Chetan Mittal, Sr. Adv., Himanshu Gupta & Ritvik Garg, Arun Gosain and Ms Swati Arora, Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor was admitted into the CIRP, and respondent 2 was appointed as RP. The petitioners, i.e., the suspended directors of the corporate debtor, filed a complaint against RP before IBBI, alleging various malafides, misrepresentations, and fraud on the part of RP.

The IBBI appointed an Inspecting Authority (IA) to conduct an inspection against RP. A show cause notice (SCN) was issued to RP for alleged contravention of various provisions of the Insolvency and Bankruptcy Code and Insolvency Professionals Regulations, 2016. RP filed a reply.

On receipt of the report of the Investigating Authority, the Disciplinary Committee was constituted in terms of section 220(1) of the IBC to consider the report of the inspecting Authority. Deficiencies, as noticed and conceded by RP, were found to be technical in nature. Therefore, the IBBI, while taking a lenient view, cautioned the RP to be more careful in future while handling processes under the Code.

The petitioners filed an application before the NCLT on the ground that the IBBI vide order dated 22-8-2022 had found RP guilty of misconduct. Therefore, he should be removed and further sought direction by the NCLT to decide all allegations raised by it before an application is filed for approval of a resolution plan.

However, the NCLT vide the impugned order dismissed all the applications on the ground that the NCLT did not deem it appropriate to delve into issues as raised against the order passed by the IBBI. The petitioners then filed a writ petition seeking directions to the NCLT to decide all applications seeking the removal of RP.

It was noted that no prejudice or loss had been caused to any of the stakeholders of the corporate debtor by non-disclosure of the relationship, and CoC at no point of time had raised any objection qua appointment of respondent No. 2 as RP with Resolution Plan having been approved by the CoC and was pending approval before the NCLT, a lenient view was taken.

High Court Held

The High Court observed that the Disciplinary Committee had not merely proceeded on account of acceptance of its jurisdiction by respondent No. 2 but also considered the matter with reference to applicable provisions and relevant judgments.

The High Court held that the petitioners were unable to point out any illegality or irregularity in the procedure followed by the respondent-Board in deciding the complaint filed by the petitioners while looking into all material aspects as raised by the complainant. Thus, there was no ground for remanding the matter for a fresh decision by the IBBI.

List of Cases Reviewed

• JK Paper Ltd. v. SEBI (Writ petition No. 3341 of 2020), dated 06.10.2020 (para 31) followed.

List of Cases Referred to

• Others v. Ex-Constable Ram Karan, 2022 (1) SCC 373 (para 24).