Delhi HC upholds IBBI's two-year suspension of insolvency professional for failing to preserve assets and violating IBC provisions

Delhi HC dismissed petition challenging IBBI's two-year suspension of insolvency professional's registration. Court held single-member disciplinary committee was legally valid and IBBI need not await adjudicating authority proceedings before conducting inquiry. Petitioner failed to preserve corporate debtor's assets, didn't transfer complete records to liquidator, and allowed suspended directors to transfer funds, violating IBC provisions. Court applied limited judicial review scope in technical commercial matters, finding IBBI followed due procedure and no arbitrariness established.

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Issues Involved:
1. Legality of the Disciplinary Committee's order suspending the Petitioner's registration.
2. Compliance with procedural requirements and principles of natural justice.
3. Constitution and composition of the Disciplinary Committee.
4. Petitioner's failure to preserve and protect the assets of the Corporate Debtor.
5. Delay in submission of CIRP Forms.
6. Scope of judicial review under Article 226 of the Constitution of India.

Detailed Analysis:

1. Legality of the Disciplinary Committee's Order:
The Petitioner challenged the Order dated 01.11.2023, passed by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI), which suspended the Petitioner's registration as an Insolvency Professional for two years. The Order was based on findings that the Petitioner violated several provisions of the Insolvency and Bankruptcy Code (IBC) and related regulations.

2. Compliance with Procedural Requirements and Principles of Natural Justice:
The Petitioner argued that the Order was passed without considering the facts and evidence placed by him and that the principles of natural justice were not followed, as he was not informed about incriminating documents relied upon by the Disciplinary Committee. The Court found that the investigation and disciplinary proceedings were conducted as per the procedure, and there was no perversity or arbitrariness in the impugned Order.

3. Constitution and Composition of the Disciplinary Committee:
The Petitioner contended that the Disciplinary Committee was improperly constituted, as it comprised only one member, contrary to Section 220(1) of the IBC, which mandates at least two members. The Court held that Section 220 only requires the Committee to consist of whole-time members of the Board and does not mandate a minimum of two members. The Court applied Section 13(2) of the General Clauses Act, 1987, which allows singular words to include the plural and vice versa, thereby validating the one-member Committee.

4. Petitioner's Failure to Preserve and Protect the Assets of the Corporate Debtor:
The investigation report highlighted multiple failures by the Petitioner, including:
- Failure to realize Work-in-Progress (WIP) amounting to Rs. 79.54 lakhs.
- Allowing the suspended ex-director to transfer Rs. 1.11 lakhs from the Corporate Debtor's account.
- Not taking control and custody of the Corporate Debtor's assets and business records.
- Failure to hand over complete records to the Liquidator.
The Court found substantial deficiencies in the Petitioner's performance and upheld the Disciplinary Committee's findings.

5. Delay in Submission of CIRP Forms:
The Petitioner admitted to delays in submitting CIRP Forms 1, 3, and 5, which were required under the circular issued by the IBBI on 14th August 2019. The Court noted that there was a delay of 414 days for Form 1 and 11 days each for Forms 3 and 5. The Petitioner sought condonation of the delay, citing the early era of IBC and procedural doubts, but the Court found this insufficient to overturn the Disciplinary Committee's decision.

6. Scope of Judicial Review under Article 226 of the Constitution of India:
The Court reiterated that its jurisdiction under Article 226 is supervisory and not appellate. It does not substitute its own conclusions for those of the expert bodies unless the decision is perverse or in contravention of the law. The Court emphasized that the role of the Resolution Professional is critical to the IBC's purpose, requiring high standards of professional ethics. The Court found no procedural violations by the IBBI and upheld the Disciplinary Committee's decision, dismissing the Petition.

Conclusion:
The Petition was dismissed, and the Order of the Disciplinary Committee suspending the Petitioner's registration for two years was upheld. The Court found that the Petitioner failed to preserve and protect the assets of the Corporate Debtor, delayed the submission of required forms, and violated several provisions of the IBC and related regulations. The Court also confirmed the legality of the one-member Disciplinary Committee and the compliance with procedural requirements.

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