2022 (10) TMI 640 - HC - Insolvency and Bankruptcy

Court emphasizes broader interpretation of 'management' for Insolvency Professional registration, directs fresh assessment.

Mr. Arvind Kumar Agrawal Versus Insolvency & Bankruptcy Board of India (IBBI), Dr. Navrang Saini, Whole Time Member, Ministry of Corporate Affairs

The court reviewed a case where an application for a Certificate of Registration as an Insolvency Professional was rejected due to perceived lack of ... Rejection of application for grant of Certificate of Registration as an Insolvency Professional (IP) under Regulation 7 of the Insolvency & Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 - rejetection of application by Whole Time Member of Insolvency & Bankruptcy Board of India on the ground that the petitioner is self-employed and is running a Consultancy and Valuation business and does not have the managerial experience as a salaried employee. HELD THAT:- When the petitioner has already passed the Insolvency Professional Examination of IBBI and has already undergone 50 (fifty) hours Pre - registration Education Course as mandated by the IBBI under the Regulations, 2016, and claims to have managerial experience, this Court is of the considered opinion, that application needs to be decided afresh, if the petitioner also submits other documents on record to demonstrate that he was actually managing a team which also requires management expertise as provided under Regulation 5(3)(c)(iii)(b) or (c) and also possesses educational qualification as per the said Regulation. The impugned order dated 18.11.2021 (Annexure P/1) passed by respondent No.2 is hereby quashed and the matter is remanded back to the respondent Whole Time Member of Insolvency & Bankruptcy Board of India with a liberty to the petitioner to file additional documents within two weeks time as observed by this court, to demonstrate his eligibility to claim the IP certificate, and the concerned respondent is also directed to take decision on the petitioner’s application afresh - Petition disposed off. Issues:1. Rejection of application for Certificate of Registration as an Insolvency Professional based on lack of managerial experience.2. Interpretation of the term 'management' under the Insolvency & Bankruptcy Board of India Regulations, 2016.3. Examination of eligibility criteria for registration as an Insolvency Professional under Regulation 5 of the Regulations, 2016.4. Judicial review of the impugned order dated 18.11.2021 and remand of the matter for fresh consideration.Issue 1: Rejection of Application for Certificate of Registration as an Insolvency Professional based on Lack of Managerial ExperienceThe petitioner filed a writ petition challenging the rejection of their application for a Certificate of Registration as an Insolvency Professional by respondent No.2. The rejection was based on the ground that the petitioner, being self-employed and running a Consultancy and Valuation business, lacked managerial experience as a salaried employee. The petitioner contended that being self-employed does not preclude one from having managerial experience and cited the absence of a specific definition of 'management' in the Regulations, 2016. The court noted the petitioner's argument that managing one's own business entails managerial skills and directed a fresh consideration of the application to assess the petitioner's eligibility based on the relevant criteria.Issue 2: Interpretation of the Term 'Management' under the Insolvency & Bankruptcy Board of India Regulations, 2016The court analyzed the impugned order's findings, emphasizing the requirement for an Insolvency Professional (IP) to possess managerial experience to effectively manage distressed corporate debtors. The court observed that the petitioner's consultancy and valuation services did not align with the traditional salaried managerial experience. However, the court acknowledged the petitioner's argument that consultancy also involves managerial aspects and referred to a similar business engaged in 'Building and Construction' to support the petitioner's case. The court highlighted the need for a broader interpretation of 'management' beyond traditional employment scenarios to include self-employed individuals demonstrating managerial expertise.Issue 3: Examination of Eligibility Criteria for Registration as an Insolvency Professional under Regulation 5 of the Regulations, 2016The court delved into Regulation 5 of the Regulations, 2016, outlining the eligibility criteria for registration as an Insolvency Professional. The regulation stipulates various pathways for professionals to qualify, including specific experience requirements in law or management fields. Considering the petitioner's completion of required courses and the Insolvency Professional Examination, the court emphasized the need for a holistic assessment of the petitioner's managerial experience and educational qualifications as per the regulations. The court directed the respondent to reevaluate the application based on the petitioner's submission of additional documents demonstrating eligibility.Issue 4: Judicial Review of the Impugned Order and Remand for Fresh ConsiderationAfter a thorough examination of the submissions and regulations, the court quashed the impugned order dated 18.11.2021 and remanded the matter back to the respondent for a fresh decision. The court granted the petitioner the opportunity to submit additional documents within a specified timeframe to substantiate their managerial experience and educational qualifications. The respondent was directed to issue a reasoned order within six weeks from receiving the court's directive, emphasizing that the court did not assess the merits of the case. Consequently, the writ petition was allowed, and all pending applications were disposed of accordingly.