Resolution Professional's one-year suspension upheld for IBC violations including inadequate due diligence and regulatory non-compliance

The HC dismissed the writ petition challenging the one-year suspension of a Resolution Professional's registration by IBBI. The suspension was based on contraventions of IBC provisions including lack of due diligence in verifying resolution plans, failure to object to improper SRA proposals regarding arbitration awards, and non-compliance with regulatory requirements for claim admissions. The court found sufficient basis for IBBI's show cause notice and upheld the Disciplinary Committee's findings based on NCLAT observations. Despite the Committee's failure to specify reasons for the suspension period, the court held the one-year suspension was not disproportionate and declined to interfere under writ jurisdiction.

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Issues Involved:

1. Legality of the suspension of the petitioner's registration as a Resolution Professional (RP).
2. Alleged lack of due diligence by the petitioner in verifying the Resolution Plan.
3. Non-intimation of the claim of Kanoria Chemicals & Industries Limited (KCIL).
4. Proportionality of the suspension period imposed by the Disciplinary Committee.

Issue-wise Detailed Analysis:

1. Legality of the Suspension of the Petitioner's Registration as RP:

The petitioner challenged the order of suspension issued by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI), arguing that there was no basis for the suspension of his registration as an Insolvency Professional (IP) for one year. The petitioner contended that the reprimand by the National Company Law Appellate Tribunal (NCLAT) was not sufficient grounds for suspension. However, the IBBI's counsel argued that the suspension was justified based on the petitioner's shortcomings noted by the NCLAT, which the petitioner did not challenge. The court found that the Disciplinary Committee acted within its jurisdiction and powers under Section 218 of the Insolvency and Bankruptcy Code, 2016. The decision was based on judicial findings that had attained finality, justifying the suspension.

2. Alleged Lack of Due Diligence by the Petitioner in Verifying the Resolution Plan:

The petitioner was accused of failing to perform due diligence in verifying the Resolution Plan, particularly regarding the claim of the Operational Creditor, KCIL. The NCLAT had observed that the petitioner did not object to the zero provisioning for KCIL and failed to communicate the admitted claim amount during the Corporate Insolvency Resolution Process (CIRP). The Disciplinary Committee found that the petitioner did not fulfill his duties as required under the Code and the relevant Regulations. The court noted that the findings of the NCLAT, which were not challenged by the petitioner, provided a sufficient basis for the IBBI's actions.

3. Non-Intimation of the Claim of KCIL:

The petitioner was also accused of failing to inform KCIL about the status of its claim, despite receiving multiple emails from KCIL. The NCLAT had reprimanded the petitioner for not being alert in responding to KCIL's inquiries and for failing to bring objectionable comments made by the Successful Resolution Applicant (SRA) to the notice of the Committee of Creditors and the Adjudicating Authority. The Disciplinary Committee concluded that the petitioner had contravened the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, by not adequately addressing KCIL's claim. The court upheld the Disciplinary Committee's findings, noting that the petitioner failed to challenge the NCLAT's observations.

4. Proportionality of the Suspension Period Imposed by the Disciplinary Committee:

The petitioner argued that the one-year suspension was excessive and disproportionate. However, the court found that the Disciplinary Committee, empowered by Section 220 of the Code, had considered all relevant aspects, including the conduct of the RP. The court determined that the suspension period was not so disproportionate as to shock the conscience of the court, and it declined to interfere with the Disciplinary Committee's decision. The court also referenced previous decisions, noting that the principle of proportionality did not apply to the case at hand.

In conclusion, the court dismissed the writ petition, finding no grounds to interfere with the Disciplinary Committee's decision to suspend the petitioner's registration as RP for one year. The court also rejected the petitioner's request to extend interim protection.

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