S.220 IBC | Prima Facie Disciplinary Committee Can Consist Only Of Whole Time Members: Bombay High Court Stays Insolvency Professional's Suspension

The Bombay High Court has stayed the suspension of registration of Insolvency Professional (IP) Kairav Anil Trivedi, who is accused of misrepresentation and entering into unauthorised agreement in a Corporate Insolvency Resolution Process (CIRP).A division bench of Justice BP Colabawalla and Justice MM Sathaye observed that prima facie, the order against Trivedi was passed by the Chairperson of the Insolvency and Bankruptcy Board of India (IBBI) and not its Whole Time Member empowered to pass a disciplinary order.“…prima facie we are of the opinion that the Disciplinary Committee can consist only of Whole Time Member(s), who can then pass orders. In the present case, the impugned order dated 23.05.2023 is passed by Mr. Ravi Mital, who, at least on the Website of the IBBI, is shown as the Chairperson of the IBBI and not its Whole Time Member”, the court observed.The ad-interim stay, granted on June 20, will continue till IBBI files an affidavit-in-reply in Trivedi’s writ petition against the suspension of his registration. The court posted the matter on July 4, 2023.On May 23, 2023, the disciplinary committee had passed an order signed by Ravi Mital, IBBI Chairman, suspending Trivedi’s registration for six months.The court said that prima facie, as per section 220 of the Insolvency and Bankruptcy Code, 2016 read with definition of “Disciplinary Committee” in the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017, the disciplinary committee can only consist of Whole-Time Members who can then pass disciplinary orders.BackgroundTrivedi was appointed as an interim resolution professional (IRP) for the CIRP of M/s. Prince MFG Industries Pvt. Ltd. IBBI, under Section 218 of the IBC, appointed an Investigating Authority to conduct investigation in the CIRP. Based on the findings in the Investigation Report, IBBI issued show cause notice to Trivedi on March 21, 2023. The disciplinary committee conducted a virtual hearing on April 28.As per the show cause notice, Trivedi incorrectly recorded that the Committee of Creditors (CoC) appointed him as the Resolution Professional (RP) for the CIRP in the minutes of the first CoC meeting. It was further alleged that the CoC had actually voted against Trivedi’s appointment as RP, and in its second meeting it approved appointment of one Pradeep Kabra as the RP. As per regulation 17(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, an Insolvency Professional appointed as an IRP has to perform the functions of an RP till another RP is appointed. It is a temporary arrangement and does not mean that the IRP is confirmed or appointed as RP, the disciplinary committee recorded in its order.The disciplinary committee also found that Trivedi entered into a Memorandum of Understanding with Sarvashree Industries Pvt. Ltd. for Contract Manufacturing Activity without approval of the CoC. The disciplinary committee found that Trivedi had already entered into the MoU while the CoC was still considering getting it vetted.Trivedi suppressed having already entered into the MoU and did not maintain required transparency resulting in violation of sections 28(1)(h), 208(2)(a) &(e) of the IBC and regulation 7(2)(a) and 7(2)(h) read with clauses 1, 2, 3, 5 and 14 of the Code of Conduct of the IP Regulations, the disciplinary committee concluded.Thus, Ravi Mital, IBBI Chairman passed an order to come into force 30 days after being passed on May 23, 2023, and suspended Trivedi’s registration as Insolvency Professional for six months.Advocates Nirman Sharma, Parag Sawant, Akshay Doctor, Ansh Karnawat and Manali Sawant represented Trivedi. Advocates Savita Ganoo and Abhishek Bhadang represented Union of India. Advocates Pankaj Vijayan and PN Lakshmi Sagar represented IBBI.Case no. – Writ Petition (L) No. 16317 of 2023Case Title – Kairav Anil Trivedi v. Union of India and Ors.Click Here To Read/Download Order

S.220 IBC | Prima Facie Disciplinary Committee Can Consist Only Of Whole Time Members: Bombay High Court Stays Insolvency Professional's Suspension

Amisha Shrivastava

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S.220 IBC | Prima Facie Disciplinary Committee Can Consist Only Of Whole Time Members: Bombay High Court Stays Insolvency Professional's Suspension

Amisha Shrivastava

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Amisha Shrivastava

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