Disciplinary Committee's Decision on Insolvency Professional's Allegations Sparks Legal Battle

The Disciplinary Committee found Mr. Arun Mohan facing serious allegations related to contraventions as an Insolvency Professional, including alleged demands for a bribe. Despite his arguments on statutory compliance before the Show Cause Notice issuance, the Committee raised concerns about his fitness and propriety to continue in his role. Mr. Mohan's bail was granted, and he sought to quash the FIR and challenge the judicial custody order in the High Court. The Committee directed that Mr. Mohan refrain from taking any assignments under the Code until cleared of charges, with notifications sent to relevant institutions.

---

---

Issues Involved:
1. Alleged contraventions by Mr. Arun Mohan as an Insolvency Professional (IP).
2. Complaint and FIR against Mr. Arun Mohan alleging demand for a bribe.
3. Compliance with statutory requirements before issuing the Show Cause Notice (SCN).
4. Determination of Mr. Arun Mohan's fitness and propriety to continue as an IP.
5. Legal proceedings and judicial custody of Mr. Arun Mohan.

Detailed Analysis:

1. Alleged Contraventions by Mr. Arun Mohan:
The Insolvency and Bankruptcy Board of India (IBBI) issued a Show-Cause Notice (SCN) to Mr. Arun Mohan based on his role as an Interim Resolution Professional (IRP) in the Corporate Insolvency Resolution Process (CIRP) of FR Tech Innovations Pvt. Ltd. The SCN alleged contraventions of Section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 (Code), Regulation 7(2)(a), (b), (f), (h), and (i) of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations), and various clauses of the Code of Conduct under regulation 7(2).

2. Complaint and FIR Against Mr. Arun Mohan:
A complaint was filed by Mr. Nishant Bugalia alleging that Mr. Arun Mohan demanded a bribe in connection with the claim submitted during the CIRP. This led to the registration of an FIR by the CBI on 11th January 2020, and Mr. Mohan was subsequently arrested and remanded to judicial custody. The complaint and verification report prima facie disclosed the commission of an offense punishable under Section 120B of the Indian Penal Code, 1860 (IPC) read with Section 7 and Section 7A of the Prevention of Corruption Act, 1988.

3. Compliance with Statutory Requirements Before Issuing SCN:
Mr. Arun Mohan argued that the IBBI did not comply with statutory requirements under Sections 217, 218, 219, and 220 of the Code before issuing the SCN, as no independent investigation was conducted. However, the Disciplinary Committee (DC) found this argument untenable, noting that Regulation 11 of the IP Regulations empowers the IBBI to issue an SCN based on material available on record if the facts prima facie disclose any contravention of the Code, Rules, or Regulations.

4. Determination of Fitness and Propriety:
The DC emphasized the importance of an IP performing duties with integrity, transparency, and accountability. The presence of the FIR and judicial remand for alleged offenses involving a demand for a bribe raised serious questions regarding Mr. Mohan's fitness and propriety to continue as an IP. The DC noted that the IP must abide by the Code of Conduct specified in the First Schedule to the IP Regulations to ensure public confidence in the insolvency regime.

5. Legal Proceedings and Judicial Custody:
Mr. Mohan was granted bail by the Special Judge (PC Act) on 25th January 2020. He filed a criminal writ petition before the Hon'ble High Court of Delhi to quash the FIR and set aside the judicial custody order. The High Court admitted the petition and adjourned the matter to 15th December 2020, clarifying that no further adjournments would be granted.

Order:
The Disciplinary Committee, exercising powers under Section 220(2) of the Code and relevant regulations, issued the following directions:
1. Mr. Arun Mohan shall not seek or accept any process or assignment under the Code until exonerated of the charges.
2. A copy of the order shall be forwarded to the ICSI Institute of Insolvency Professionals where Mr. Arun Mohan is enrolled.
3. A copy of the order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal for information.

The show-cause notice was thus disposed of.

---