Insolvency Professional's two-year suspension upheld for procedural irregularities in e-auction conduct as Liquidator

Bombay HC dismissed a writ petition challenging suspension of an Insolvency Professional's registration for two years due to procedural irregularities in conducting e-auction as Liquidator. The court found no breach of natural justice as petitioner was given adequate opportunity to respond and oral hearing. The suspension was based on NCLT and NCLAT orders finding questionable conduct regarding short timeframe between auction notice and e-auction date. HC held the two-year suspension was proportionate and not excessive, noting petitioner could continue existing assignments subject to creditors' discretion. The disciplinary committee's order was neither perverse nor irrational, warranting no interference.

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Issues Involved:

1. Legality of the suspension of the petitioner's registration as an Insolvency Professional by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI).
2. Alleged procedural irregularities in the conduct of the e-auction by the petitioner as a Liquidator.
3. Alleged delays and inconsistencies in public announcements by the petitioner as Interim Resolution Professional (IRP).
4. Allegation of double jeopardy in penalizing the petitioner.
5. Proportionality of the penalty imposed.

Issue-wise Detailed Analysis:

1. Legality of Suspension:
The petitioner challenged the order dated 30th January 2024 by the Disciplinary Committee (DC) of IBBI, which suspended his registration as an Insolvency Professional for two years. The court examined whether the principles of natural justice were adhered to, noting that the petitioner was given a show cause notice, an opportunity to reply, and a personal hearing. The court found no breach of natural justice, and thus, the scope for challenging the order was limited to examining perversity and irrationality. The court concluded that the DC's decision was justified and legally sound.

2. Procedural Irregularities in E-auction:
The petitioner, as a Liquidator, conducted an e-auction on 8th April 2022, which was set aside by the NCLT due to procedural irregularities. The NCLT found that the petitioner did not maintain the required thirty-day period between the auction notice publication and the e-auction. The petitioner had also incorrectly mentioned dates in the auction notice, leading to confusion. The NCLAT upheld the NCLT's decision, and these findings formed the basis for the DC's action against the petitioner. The court found no error in the DC's reliance on these adjudications to proceed against the petitioner.

3. Delays and Inconsistencies in Public Announcements:
In the matter of DEPL, the petitioner, as IRP, delayed the public announcement by twenty-nine days after the NCLT's admission order. The DC found no satisfactory explanation for this delay. Additionally, discrepancies in the public announcement regarding the last date for claim submissions were noted. The court found the DC's conclusions regarding the petitioner's negligence and carelessness to be justified and supported by the material on record.

4. Allegation of Double Jeopardy:
The petitioner argued that being directed to bear the auction expenses and facing suspension constituted double jeopardy. The court rejected this argument, stating that bearing auction expenses did not absolve the petitioner of his conduct as Liquidator, which had been questioned by both the NCLT and NCLAT. The court held that the suspension was not a second punishment for the same event but a consequence of breaching the Code of Conduct.

5. Proportionality of Penalty:
The petitioner contended that the two-year suspension was excessive. The court disagreed, noting that the suspension was based on adjudications by the NCLT and NCLAT, which had attained finality. The DC's decision was within its jurisdiction, and the suspension was not disproportionate. Furthermore, the petitioner was not completely barred from ongoing assignments, as the CoC/SCC could decide on the continuation of his services.

Conclusion:
The court found no merit in the petitioner's challenge to the DC's order. The suspension was neither irrational nor disproportionate, and the petition was dismissed with no order as to costs.

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