Disciplinary Proceedings Initiated By IBBI Can't Be Quashed By NCLT, Rules NCLAT [Read Order]
National Company Law Appellate Tribunal has held in the case of IBBI v. Rishi Prakash Vats & Ors. that once a disciplinary proceeding is initiated by the Insolvency and Bankruptcy Board of India (IBBI) on the basis of evidence on record, it is for the Disciplinary Authority, i.e., IBBI to close the proceeding or pass appropriate orders in accordance with law.
Such power having been vested with IBBI and in absence of any power with the Adjudicating Authority/ National Company Law Tribunal, the Adjudicating Authority cannot quash the proceeding, even if proceeding is initiated at the instance and recommendation made by the Adjudicating Authority/ National Company Law Tribunal, Appellate Tribunal observed.
Appellate Tribunal was hearing an appeal preferred by the Insolvency and Bankruptcy Board of India against order dated 5th February, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench quashing the disciplinary proceedings initiated by IBBI. The question for consideration before NCLAT was whether the Adjudicating Authority/ National Company Law Tribunal has jurisdiction to quash the disciplinary proceedings once initiated by the IBBI.
Brief facts of the case were that 'Corporate Insolvency Resolution Process' was initiated against Rana Global Limited ('Corporate Debtor'), in which Mr. Rishi Prakash Vats (1st Respondent) was appointed as a 'Resolution Professional'. For certain reason, 'Corporate Insolvency Resolution Process' was delayed and the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench passed order dated 26th April, 2018, whereby NCLT observing lackadaisical attitude on part of the financial creditor in proceedings as inexplicable considered it necessary and expedient to bring it to the notice of IBBI for an appropriate action and IBBI initiated a disciplinary proceeding against Mr. Vats.
Subsequently, Rishi Prakash Vats filed certain explanation before the Adjudicating Authority, showing the reasons for delay for execution of the 'Corporate Insolvency Resolution Process'. Since, the proper explanation was given by the 'Resolution Professional', the Adjudicating Authority expunged the earlier observation made on 26th April, 2018 and IBBI was informed about same. As IBBI continued proceeding, Adjudicating Authority passed impugned order on 5th February, 2019 and the disciplinary proceedings were quashed.
NCLAT in appeal noticed that once a disciplinary proceeding is initiated, the final order is required to be passed by the IBBI.
"Expunge of the earlier order made by the Adjudicating Authority on 26th April, 2018 may be a good ground to close the proceeding, but the Adjudicating Authority/ National Company Law Tribunal cannot quash the proceeding initiated by the IBBI," it said.
It set aside the last portion of the impugned order dated 5th February, 2019 relating to quashing of all disciplinary proceedings and remitted the matter to IBBI to pass appropriate order taking into consideration the reference of initiation of proceeding by the Adjudicating Authority as made on 26th April, 2018 and later acceptance of explanation. Accordingly appeal was disposed of with no costs.