Insolvency Professional's one-year suspension upheld for non-disclosure violations and unauthorized valuation services under IBC Section 28(1)(f)

Delhi HC upheld one-year suspension of Insolvency Professional by Disciplinary Committee. Petitioner violated IBC provisions by engaging brother's firm without proper disclosure to Committee of Creditors despite CoC approval, and using valuation services without CoC fee approval. Court found violations of Code of Conduct clauses and IBC Section 28(1)(f). However, HC rejected allegation of failing to pursue water charges recovery, noting civil suit was filed. Suspension upheld on two valid grounds despite third ground being unsupported.

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Issues Involved:
1. Non-disclosure of related party transaction with M/s Ibay Capital.
2. Submission of valuation report by M/s iVAS Partners without CoC approval.
3. Failure to take action against Gravity Facility Management Solutions Pvt. Ltd.

Issue-wise Detailed Analysis:

1. Non-disclosure of Related Party Transaction with M/s Ibay Capital:
The primary issue was the Petitioner's engagement of M/s Ibay Capital, a firm owned by his brother, without proper disclosure to the Committee of Creditors (CoC) or the Insolvency Professional Agency (IPA). The Respondent alleged this was in contravention of Section 23B of the Code of Conduct, which prohibits Insolvency Professionals from engaging relatives in their assignments. The Petitioner argued that M/s Ibay Capital provided only back-office support, not "professional services," and thus did not require disclosure. However, the Court found that the services provided fell within the definition of "professional," requiring disclosure. The Court concluded that the Petitioner violated clauses of the Code of Conduct, Section 28(1)(f) of the IBC, and the circular dated 16th January 2018. The Court did not find a violation of the circular dated 12th June 2018, as the Impugned Order did not specify unreasonable expenses related to M/s Ibay Capital.

2. Submission of Valuation Report by M/s iVAS Partners Without CoC Approval:
The Respondent contended that the Petitioner engaged M/s iVAS Partners as a valuer without CoC approval, violating Regulation 34 of the CIRP Regulations. The Petitioner argued that while the appointment of professionals is the Resolution Professional's prerogative, the CoC must ratify their fees, which was done in the 13th CoC meeting. However, the Court found no record of CoC approval for M/s iVAS Partners' fees. The Court concluded that the Petitioner violated Regulation 34 of the CIRP Regulations, as the CoC did not approve the expenses incurred for M/s iVAS Partners.

3. Failure to Take Action Against Gravity Facility Management Solutions Pvt. Ltd.:
The Respondent alleged that the Petitioner failed to act against Gravity Facility Management Solutions Pvt. Ltd. for diverting funds. The Petitioner countered that he had initiated a recovery suit, resulting in a settlement where the Corporate Debtor received Rs. 60 Lakhs. The Court found that the Petitioner had indeed taken appropriate action, and the Impugned Order did not account for this. Therefore, the Court concluded that this contravention was not made out.

Conclusion:
The Court upheld the suspension based on the first two issues, finding that the Petitioner failed to disclose the related-party engagement with M/s Ibay Capital and did not secure CoC ratification for M/s iVAS Partners' fees. However, the Court found the third ground regarding Gravity Facility Management Solutions Pvt. Ltd. to be unsubstantiated. Consequently, the Petitioner's plea to set aside the suspension order in its entirety was not granted. The case was disposed of along with pending applications.

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