Info About Insolvency Professionals Facing Disciplinary Proceedings Exempt From RTI Act, Says IBBI

Even as the Insolvency and Bankruptcy Code promised to accelerate insolvency cases and raised the demand for insolvency professionals, the Insolvency and Bankruptcy Board of India (IBBI) claims information about insolvency professionals facing disciplinary proceedings is exempt from disclosure under the RTI Act.

The IBBI claimed exemption under section 8(1)(h) of the RTI Act which exempts an information which would impede the process of investigation or apprehension or prosecution of offenders.

The exemption was claimed in response to an RTI application moved by advocate Nipun Singhvi, who is an expert in the field of Insolvency.

Singhvi had sought information about insolvency professionals who have been issued show cause notice for disciplinary proceedings as clarified in circular issued by the IBBI on April 23, 2018.

In response, IBBI said, "information sought is exempt under section 8(1)(h) of the RTI Act since providing such information would impede the process of prosecution and adjudication of the insolvency professional under investigation".

Intending to move in appeal, Sighvi says, "Right to Know is a fundamental right of all stakeholders and Insolvency law is in rem".

He adds that names of resolution professionals served show cause notice or facing disciplinary proceedings should be made public as the 2018 circular provides against appointment of any such person ad a resolution professional and if the names of such persons are not made public, corporate entities might end up appointing them as IRPs which in turn will defeat the entire legal process.

In its circular dated April 23, 2018, the Board had said that IBC envisages that an insolvency professional may be appointed as interim resolution professional, resolution professional or liquidator or a bankruptcy trustee if no disciplinary proceeding is pending against him.

Section 219 of the Code provides for the issuance of show cause notice. The disciplinary proceedings begin with the issuance of show cause notice following an investigation, which the circular says is issued after due application of mind to the material available on record or the investigation report.

As per the circular, a disciplinary proceeding is considered pending against an insolvency professional from the time he has been issued show cause notice by the IBBI till its disposal by the disciplinary committee and an insolvency professional who has been issued a show cause notice shall not accept any fresh assignment as interim resolution professional, resolution professional, liquidator, or a bankruptcy trustee under the Code.

Soon after the issuance of this circular, the Board had penalised five debt professionals for dubious conduct such as engaging in private communication with a single lender, lapses in tracing irregular transactions and nepotism.