IBC-Gujarat High Court Stays The Order Of IBBI Disciplinary Committee

Background Facts

M/s Rang Super Shopping Private Limited (“Corporate Debtor”) was admitted to Corporate Insolvency Resolution Proceedings (“CIRP”) by the National Company Law Tribunal (“NCLT”) on 27.08.2019. Mr. Bhupendra Singh Rajput (“Petitioner/Insolvency Professional”) was appointed as the Interim Resolution Professional (“IRP”) and subsequently confirmed as the Resolution Professional of the Corporate Debtor.

On 17.10.2022 the Insolvency and Bankruptcy Board of India (“IBBI”) issued a Show Cause Notice to the Petitioner, alleging contraventions of various sections of the Insolvency and Bankruptcy Code, 2016 (“2016”) and IBBI (Insolvency Professionals) Regulations, 2016. It was alleged that in the CIRP of the Corporate Debtor, the Petitioner failed to take control and custody of the assets of the Corporate Debtor and further failed to open bank account and deposit the funds of the Corporate Debtor in the same.

On 23.3.2023, the Disciplinary Committee of IBBI passed an order suspending the registration of Petitioner as an Insolvency Professional for a period of 1 year. The Order recorded that the delay on the part of Petitioner in filing of application under Section 19(2) of IBC for non-cooperation of directors/promoters of Corporate Debtor; in taking control of assets of Corporate Debtor; and filing of Form G were well avoidable. Furthermore, the Petitioner failed to operate the liquidation account opened in accordance with the Liquidation Regulations.

The Petitioner challenged the Order of the Disciplinary Committee before the High Court.

Relevant Law

Section 220(1) of IBC

“Section 220. Appointment of Disciplinary Committee

1) The Board shall constitute a disciplinary committee to consider the reports of the investigating Authority submitted under sub-section (6) of section 218:

Provided that the members of the disciplinary committee shall consist of whole-time members of the Board only.”

Proceedings Before High Court

The Petitioner argued that the Disciplinary Committee’s order is signed by one member only. Whereas Section 220(1) of IBC necessitates that the Disciplinary Committee shall consist of “whole time members”, which implies that the said Disciplinary Committee should comprise at least of two whole time members. Since the coram comprised of merely one Member in the Petitioner’s case, the order was liable to be set aside.

The Bench has stayed the Disciplinary Committee’s order, while observing as under:

“Considering the aforesaid submissions advanced by Mr. Kavina, the learned Senior Counsel and considering the order passed in the Special Civil Application No.13767 of 2022 dated 20.7.2022, the order impugned dated 23.3.2023 vide No.IBBI/DC/156/2023 (Annexure-A) is stayed till next returnable date.”

Case title: Bhupendra Singh Rajput v Insolvency and Bankruptcy Board of India (IBBI)

Case No.: R/SPECIAL CIVIL APPLICATION NO. 6988 of 2023

Counsel for Petitioner: Mr Percy C. Kavina, Senior Counsel With Mr.Vishal J Dave.

Counsel for Respondent: Nipun Singhvi.

Click Here To Read/Download Order