2026 (3) TMI 989 - AT - IBC

Procedural fairness requires a specific opportunity to explain; failure to do so upheld adverse observations against the IRP.

Whether adverse observations against the interim resolution professional for concealment, reconstitution of the committee of creditors without approval, ... Disciplinary proceeding against IRP - misrepresentation - concealment, reconstitution of the committee of creditors without approval - Duties of interim resolution professional - Principle of audi alteram partem and opportunity to be heard - suppression of facts - voting share of creditors. Principle of audi alteram partem and opportunity to be heard - Whether the observations recorded in paragraph 26 required expunction for want of opportunity to the IRP - HELD THAT:- The Tribunal had given the IRP specific directions to explain discrepancies and permitted the other side to file responses; the IRP did not avail the opportunity to explain either in writing or orally when the matters were listed. The Appellate Tribunal examined the sequence of filings, listing orders and the orders dated 11.12.2024 and 18.12.2024 and concluded that the IRP was afforded opportunity but failed to utilise it; therefore the complaint of denial of hearing in respect of paragraph 26 was held to be without merit. [Paras 30, 32] The contention that paragraph 26 should be expunged for breach of natural justice is rejected. Duty of interim resolution professional as an officer of the Tribunal - HELD THAT: - The Appellate Tribunal reviewed the record showing two applications filed by the IRP evidencing different CoC constitutions, delay in curing registry objections, omission to disclose the earlier filed IA in the later IA, and the backdating of a letter; having considered those facts and the Tribunal's findings on them, the Appellate Tribunal held that the impugned observations were supported by the record and that there was sufficient basis for the Tribunal to describe the IRP's conduct as prejudicial to the CIRP process and to suggest disciplinary inquiry. [Paras 22, 23, 30, 31, 33] The observations in paragraph 26 stand as justified on the material and were not required to be expunged. Final Conclusion: Both appeals were dismissed; the Appellate Tribunal found that the IRP had been afforded opportunity to explain and that the Tribunal's adverse observations about the IRP's conduct were supported by the record and therefore not to be expunged. Issues: Whether the adverse observations recorded against the Interim Resolution Professional in paragraph 26 of the Tribunal's order dated 29.01.2025 (finding concealment/reconstitution of the Committee of Creditors, backdating of a letter, and misconduct) should be expunged for lack of opportunity of hearing and for want of merit.Analysis: The issue was examined against the factual record of two interim applications (I.A. Nos. 942 and 671 of 2024) filed by the IRP under Regulation 17(1) of the IBBI (CIRP) Regulations, 2016 and related orders dated 11.12.2024 and 18.12.2024 where the IRP was directed to explain discrepancies and the opposite parties were afforded opportunity to respond. The Tribunal recorded material findings that the IRP had filed two inconsistent applications about constitution of the CoC, had not rectified registry objections timeously, had not disclosed the earlier application when filing the later one, had predated a letter to exclude a member, and had thereby misled the Tribunal and acted in a manner prejudicial to the CIRP process. The appellate review considered (i) whether an opportunity to explain was afforded and whether it was availed, (ii) the chronology and content of the IRP's filings, (iii) the Tribunal's direction to the IRP to explain discrepancies and the failure to provide explanation when the matters were listed, and (iv) corroborative consequences including setting aside the reconstitution and restoration of financial creditor status. The appellate determination treated the Tribunal's findings on concealment, reconstitution without approval, and backdating as supported by the record and by the IRP's failure to avail the opportunity given to explain, and applied the principle that procedural fairness does not protect a party who has been given specific opportunity and has not furnished explanation or cure of defects.Conclusion: The observations in paragraph 26 are not required to be expunged; the Tribunal's findings regarding the IRP's concealment, reconstitution of the CoC without approval, and related misconduct are upheld and the appeals challenging those observations are dismissed in favour of the respondents.