Operational creditor cannot restrain liquidator from functioning without proving Board's decision was perverse or unreasonable

The Delhi HC dismissed a petition by an operational creditor seeking to restrain a liquidator from functioning, alleging misconduct in performance as an insolvency resolution professional. The court held that the Board is the regulatory authority for insolvency professionals, comprising government-appointed experts under IBC Part IV. Courts do not function as appellate authorities over expert decisions unless the administrative action is so unfair or unreasonable that no reasonable person would take such action. The court found the Board's decision-making process and final report neither perverse nor contrary to law, warranting no interference under Article 226. The enquiry process was deemed fair, reasonable, and transparent.

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Issues Involved:
1. Misconduct by the Insolvency Resolution Professional (IRP).
2. Failure to publish public announcements as per CIRP Regulations.
3. Incomplete Information Memorandum (IM) uploaded by the IRP.
4. Inaction by the Board on the complaint against the IRP.
5. Jurisdiction and scope of judicial review under Article 226 of the Constitution of India.

Summary:

1. Misconduct by the Insolvency Resolution Professional (IRP):
The Petitioner alleged that Respondent No. 2, appointed as the Insolvency Resolution Professional, did not perform his duties diligently and in accordance with the Insolvency and Bankruptcy Code, 2016 (IBC). The Petitioner sought a writ of mandamus directing the Board to take action against Respondent No. 2 for misconduct and to restrain him from functioning as a Liquidator during the pendency of the writ petition.

2. Failure to publish public announcements as per CIRP Regulations:
The Petitioner contended that Respondent No. 2 failed to publish the public announcement in two widely circulated newspapers within three days of his appointment, as mandated by Regulations 6(1) and (2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations). The announcements were published late and in newspapers with very limited circulation in the concerned area.

3. Incomplete Information Memorandum (IM) uploaded by the IRP:
The Petitioner claimed that Respondent No. 2 uploaded an incomplete Information Memorandum (IM) of the Corporate Debtor on its website, making it a public document, which was in contravention of the provisions of the IBC.

4. Inaction by the Board on the complaint against the IRP:
The Petitioner filed a complaint against Respondent No. 2 with the Board, highlighting the irregularities committed during the CIRP process. Despite a preliminary report finding some merit in the allegations, the Board did not take any action against Respondent No. 2. The Petitioner filed multiple RTI applications to inquire about the status of the complaint, and eventually, the Board informed that the complaint had been disposed of.

5. Jurisdiction and scope of judicial review under Article 226 of the Constitution of India:
The Court emphasized that under Article 226, it only looks into the decision-making process and does not interfere unless the process is contrary to law or tailored to help a particular party. The Court found no material to substantiate that the Board acted in favor of Respondent No. 2 or shielded his misdeeds. The Court noted that the final report recorded certain irregularities, which the Board would consider before appointing Respondent No. 2 in future cases. The Court reiterated that it does not substitute its conclusion for that of the experts unless there is a gross miscarriage of justice. The decision-making process by the Board was found to be fair, reasonable, and transparent.

Conclusion:
The writ petition was dismissed along with pending applications, as the Court found no infirmity in the decision-making process adopted by the Board.

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