Bombay High Court Upholds Suspension Of Resolution Professional For Deficiency In Discharge Of Duties

The Bombay High Court bench of Justices A.S. Chandurkar and Rajesh S. Patil has upheld that the suspension order passed by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI) against the Resolution Professional (RP) for lack of due diligence in verifying the Resolution Plan and non-intimation of the claims of an operational creditor. Facts: The Petitioner, Vijendra Kumar Jain was appointed as the RP of M/s Transparent Energy System Pvt. Ltd. (Corporate Debtor) by the National Company Law Tribunal (NCLT) on 21.02.2020. The IBBI, in exercise of powers under section 218 of the Insolvency and Bankruptcy Code, 2016, appointed an Investigating authority to conduct an investigation. On 11.07.2023, IBBI issued a show cause notice to the petitioner. The notice brought up two issues: the operational creditor Kanoria Chemicals & Industries Ltd. (KCIL) had not been notified of their claim, and the Resolution Plan had not been properly verified. The National Company Law Appellate Tribunal (NCLAT) reprimanded the RP in its judgment on 11.04.2023. The Tribunal stated that RP should have responded to the emails regarding the admitted claim amount and informed the Committee of Creditors and the Adjudicating Authority about the Successful Resolution Applicant's objections to the Arbitral award. The Disciplinary Committee of the IBBI passed an order on 12.08.2024, stating that the petitioner failed to perform his duties under the Code and Regulations made thereunder. The petitioner's registration as a Resolution Professional was suspended for one year. The petitioner filed the writ petition challenging the suspension. Arguments: Petitioner's Arguments: The National Company Law Appellate Tribunal (NCLAT) had merely reprimanded the petitioner for a lack of diligence, which should not have been the basis for the suspension.As per section 30 of the Code, it is not necessary for a Resolution Professional to comment on every aspect of the Resolution Plan. No loss was suffered by any person to require action to be taken against the petitioner.The suspension of the registration for one year was disproportionate to the conduct of the petitioner. Respondent's Arguments: The NCLAT noted various shortcomings in the discharge of duties by the petitioner as RP. The petitioner accepted the order and did not challenge the same. The IBBI was justified in acting against the petitioner on finding that he had not acted diligently. The Court in exercise of jurisdiction under Article 226 of the Constitution ought not to sit in appeal and reconsider the entire matter.Observations: The court noted the conduct of the petitioner as RP in discharge of duties was found to be highly deficient. The observations of the NCLAT formed the basis for holding that the petitioner failed to act in accordance with Regulation 13(2) (a) and (d) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The court observed that the Disciplinary Committee had based its decision on the findings of the NCLAT and concluded that the conduct of the petitioner as RP was deficient. The petitioner did not challenge the NCLAT judgment. The court held that the suspension of the petitioner's registration for one year was justified and not highly disproportionate. The IBBI's actions were within its jurisdiction under Section 218 of the Code. The court dismissed the writ petition. Case Title: Vijendra Kumar Jain v. Insolvency & Bankruptcy Board of India (IBBI) & Anr. Case Number: Writ Petition No. 12320 of 2024 Neutral Citation: 2024:BHC-AS:41058-DB Counsel for the Petitioner: Mr. Gaurav Joshi, Senior Advocate, with Mr. Chaitanya Nikte, Ms. Esha Malik and Mr. Swapnil Sangle, Advocates. Counsel for the Respondents: Mr. Pankaj Vijayan with Ms. Sushmita Chauhan, Advocates for Respondent No.1-IBBI. Mr. Vinit Jain with Mr. Ashutosh Mishra, Advocates for Respondent No.2-Union of India. Date of Judgment: 16.10.2024 Click Here To Read/Download The Order

Bombay High Court Upholds Suspension Of Resolution Professional For Deficiency In Discharge Of Duties

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Tazeen Ahmed

Bombay High Court Upholds Suspension Of Resolution Professional For Deficiency In Discharge Of Duties

Tazeen Ahmed

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