TaxTMI 
TaxTMI 
2026 (10) TMI 478
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..../2017-2018/10899. The instant appeal has been filed by the Appellant under Section 220 (7) of the Insolvency and Bankruptcy Code, 2016 ('Code') against the Order dated 16.06.2026 ("Impugned Order") passed by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India Bearing No. IBBI/DC/326/2026. Insolvency and Bankruptcy Board of India (IBBI) is the Respondent herein. 2. The Appellant submitted that he is a registered insolvency professional and was appointed to act in the CIRP of the Corporate Debtor in accordance with the statutory framework. The insolvency professional entity, Truvisory Insolvency Professionals Pvt. Ltd. ("Truvisory"), was appointed as the Resolution Professional of the Corporate Debtor by the Adjudicating Authority vide order dated 03.09.2024, communicated on 20.09.2024. Pursuant thereto, the Appellant was appointed as the authorised signatory of Truvisory for the present CIRP by virtue of the Board Resolution dated 20.09.2024. The Appellant therefore acted in the CIRP in the capacity so authorised and in furtherance of the statutory duties entrusted to the Resolution Professional. 3. The Appellant submitted that the Corporate Debtor wa....
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....ps to identify and realise the assets and receivables of the Corporate Debtor. With the assistance of the auditor, financial records were examined, receivables, advances and investments were identified, and communications were issued to concerned parties seeking balance confirmations, acknowledgments and payment. Despite such efforts, no response was received. 9. The Appellant submitted that the CIRP was duly pursued by inviting EOIs through Form-G published on 27.09.2024, pursuant to which five EOIs were received. Two IBBI-registered valuers were appointed in accordance with Regulation 27(1) of the CIRP Regulations to determine the fair value and liquidation value of the Corporate Debtor. 10. The Appellant contended that the valuation was materially affected by the absence of records and information concerning the financial assets inherited through amalgamation. The relevant assets had a book value of Rs. 5,456.48 Crore; however, one valuer assessed the relevant asset classes as "Non-ascertainable", while the other assigned "Nil" value to loans and advances and trade receivables, owing to lack of information and uncertainty regarding recoverability. 11. The Appellant subm....
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....rity under Section 30(6) of the Code, seeking Adjudicating Authority's approval of the CoC-approved resolution plan under Section 31 of the Code. The Appellant contended that the resolution plan was approved by the Adjudicating Authority vide order dated 13.08.2025. The Appellant had filed the approval application along with Form-H and proof of the Rs. 5 Crore performance security, and therefore complied with the requirements of Regulation 39(4). He further submitted that the application was filed seven days before expiry of the CIRP period. 17. The Appellant submitted that there was no concealment in Form-H. Clause 5.8 of the approved resolution plan expressly dealt with the financial assets having a book value of Rs. 5,456.48 Crore. Since these assets were not to be realised by the SRA under the plan, the Appellant contended that the amount was not required to be reflected as the "Total Realisable Amount under the Plan". 18. The Appellant contended that the valuation could not be treated as professional misconduct merely because a different assessment was subsequently preferred. The assets were independently valued by two IBBI-registered valuers on the basis of the informat....
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....he Appellant stated that the impugned order dated 16.06.2026, suspending his registration for two years, failed to appreciate the peculiar circumstances of the CIRP, the absence of cooperation from the erstwhile management, the independent valuation, the CoC's decisions, the express treatment of the disputed assets under Clause 5.8, the approval and implementation of the resolution plan, and the absence of any prior adverse finding against him. He accordingly contended that the findings under Regulation 39(4) and Sections 18(a) and 19(2) of the Code were legally and factually unsustainable and that the impugned order was liable to be set aside. 24. The Appellant contended that there was neither any complaint by a stakeholder against him nor any adverse finding by the Adjudicating Authority or this Appellate Tribunal concerning his conduct during the CIRP. Despite the absence of any such complaint or adverse finding, the IBBI proceeded directly against the Appellant without undertaking the statutory inspection/investigation contemplated under Section 218 of the Code. 25. The Appellant further submitted that the Respondent IBBI itself had challenged the order dated 13.08.2025 a....
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....se 5.8 concerning assignment of the disputed assets, was before the Adjudicating Authority and was approved. The Adjudicating Authority also subsequently recorded full implementation of the resolution plan on 13.02.2026 without recording any adverse finding against the Appellant. Accordingly, there was no concealment of any material fact. 30. The Appellant contended that assignment of the disputed assets could not be equated with realisation of those assets. The assets were assigned to the secured creditors because they were time-barred, had nil value and/or were held in defunct companies, with the object that any possible future recovery, if at all, would accrue to the secured creditors. No amount was realised or received by the Corporate Debtor pursuant to the assignment. 31. The Appellant submitted that the CoC's decision to assign the disputed assets caused no loss to any stakeholder. The assets were not sold or transferred to any third party for consideration; rather, they were assigned to the secured creditors in accordance with the CoC's commercial decision. Had such assignment not been made, the assets would have remained with the SRA without altering the resolution p....
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.... in the factual circumstances existing at the relevant time. 35. The Appellant contended that, under the unamended Section 19 of the Code applicable during the CIRP, proceedings seeking cooperation were contemplated against the persons then constituting the management. The erstwhile directors had already resigned years before commencement of the CIRP. The subsequent amendment to Section 19, notified on 26.05.2026, enabling proceedings against erstwhile directors, could not retrospectively be applied to fasten liability upon the Appellant for conduct during the earlier CIRP period. 36. The Appellant accordingly submitted that none of the three principal allegations-non-disclosure in Form-H, failure to ensure proper valuation, or non-filing of an application under Section 19(2)-establishes professional misconduct. The disputed assets were expressly dealt with in Clause 5.8 of the approved plan; their nil/non-ascertainable valuation was undertaken by independent registered valuers after the Appellant's efforts to obtain information; and the decision regarding Section 19(2) was taken in exceptional circumstances after consideration by the CoC. These matters, therefore, could not ....
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....to be discharged by the Resolution Professional and it is provided therein that an insolvency professional must not misrepresent any facts or situations, refrain from being involved in any action that would bring disrepute to the profession, act with objectivity, disclose the details of any conflict of interest to the stakeholders maintain complete independence in professional relationships, ensure that he or his relatives do not knowingly acquire any such assets, not take up an assignment under the Code if he or any of his relatives, etc., are involved and many other disclosures, including that he will not influence the decision or the work of the committee of creditors under section 21of the code. It is submitted that the findings recorded in the Impugned Order, concerning disclosure in Form-H and the valuation exercise, go directly to these obligations, since the integrity of the information placed before the CoC and the Adjudicating Authority is foundational to the resolution process, and any compromise thereof, once established after due inquiry, cannot be treated lightly merely because the particular resolution plan was ultimately approved and implemented. 42. The IBBI ela....
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....obligation addressed to the Adjudicating Authority and not merely a matter internal to the valuation exercise. 46. In response to the reliance placed on Kamal Aggarwal (supra), the IBBI clarified before us that on behalf of the IBBI that the said decision turned on a bona fide, isolated interpretive choice made by the Insolvency Professional concerned on a single question, whereas the findings in the present case, on the Board's case, span multiple and distinct aspects of the Appellant's conduct of the CIRP disclosure in Form-H, the valuation exercise, compliance with Regulation 39(4), and the approach to Section 19(2) of the Code and it is for the Appellant to establish, at the final hearing, that each of these stands on the same footing as a singular bona fide interpretive judgment. 47. It is submitted that the fact that the underlying CIRP has been completed and the resolution plan implemented does not detract from the disciplinary consequence flowing from a finding of misconduct in the conduct of that very CIRP. On the contrary, it is submitted that the settled and implemented status of the resolution plan removes any possible prejudice to the resolution process itself fr....
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....Order dated 16.06.2026, in exercise of powers under Section 220 of the Code read with Regulation 13 of the IBBI (Inspection and Investigation) Regulations, 2017, suspending the registration of the Appellant as an Insolvency Professional for a period of two years, the order to come into force on expiry of thirty days from the date of its issue. The Impugned Order records two heads of contravention. First, that the Appellant failed to disclose, in the Form-H compliance certificate filed before the Adjudicating Authority, the assignment to the secured financial creditors of assets, comprising outstanding loans and advances, trade receivables and non-current investments, of a book value of Rs. 5,456.48 Crore, constituting approximately 82% of the Corporate Debtor's total book value of Rs. 6,615 Crore, in contravention of Regulation 39(4) of the CIRP Regulations read with Clause 2 of the Code of Conduct. Second, that the Appellant failed to take adequate steps, including recourse to Section 19(2) of the Code, to secure the information necessary to enable the registered valuers to arrive at a determinate valuation of the aforesaid assets, in contravention of Sections 18(a) and 19(2) of t....
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....t as professional misconduct on the part of the Appellant merely because the IBBI takes a different view of the recoverability of the relevant assets, when the valuation was independently conducted by two IBBI-registered valuers on the material actually available to them, and the Appellant had himself taken steps, albeit unsuccessfully, to procure balance confirmations from the concerned debtors. 56. It is further submitted that the timeline for filing the application under Section 31 of the Code was substantially complied with, the application having been filed seven days prior to expiry of the CIRP period, and that Regulation 39(4) employs the language of "endeavour", which, according to the Appellant, does not admit of a rigid or inflexible construction. 57. As regards Section 19(2) of the Code, it is submitted that the erstwhile directors had ceased to hold office years before commencement of the CIRP and were untraceable, and the promoters were in custody throughout; the decision not to pursue an application under Section 19(2) was taken after deliberation with, and with the concurrence of, the CoC, as acknowledged by its members in the meeting of the Implementation and ....
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....ion) Regulations, 2017 obliges the Board only to intimate the disciplinary order to the Committees of Creditors of the other assignments, leaving it to the commercial wisdom of each such Committee to take its own decision, and that the rule of audi alteram partem constrains automatic cross-assignment replacement absent a finding of misconduct qua that assignment. 63. Reliance is additionally placed on the decision of the Disciplinary Committee dated 09.10.2023 in Kamal Aggarwal (Insolvency Professional), for the proposition that a bona fide exercise of professional judgment by an Insolvency Professional does not amount to professional misconduct. It is submitted that the Appellant's reliance on independent, IBBI-registered valuers, and his consistent placement of all material facts before the CoC at every stage of the process, exemplifies precisely such bona fide professional judgment, and ought not to be equated with misconduct warranting suspension. 64. It is further submitted that the quantum of suspension of two years, is disproportionate when measured against the Appellant's record spanning more than thirty assignments, the absence of any finding of collusion, mala fide ....
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....manifest a case in the Appellant's favour as to displace the presumption of regularity attaching to a reasoned order passed after issuance of show cause notice, consideration of the Appellant's detailed response, and grant of personal hearing. On a prima facie reading of the record placed before us, we find that each of the Appellant's contentions raises a triable issue requiring evaluation of the underlying record including the contemporaneity and adequacy of disclosure made to the CoC and the Adjudicating Authority, the sufficiency of the steps taken by the Appellant before the valuers returned findings of "Nil" or "Non-ascertainable" value, and the true scope and mandatory or directory character of Section 218 vis-à-vis Sections 219 and 220 none of which is, in our considered view, capable of being conclusively resolved in the Appellant's favour at the interim stage. We are, therefore, unable to hold that a prima facie case of the strength necessary to warrant stay of a disciplinary order has been made out. 67. On the reliance placed on Kamal Aggarwal (supra) and on the plea of proportionality of the quantum of suspension by the Appellant, we are of the view that both ....
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.... that may follow, operationalise the legal effect of suspension and do not, by themselves, amount to an exercise of the power of replacement under Section 27 of the Code. 70. As regards reliance on order dated 1707.2026 in case of Sachin Naveen Sinha (supra), we are of view that, a recall application against that order being pending, it would not be appropriate to treat it as a settled statement of the law binding on this Bench at the present stage. In any event, even on the reasoning of that order, the Committees of Creditors of the Appellant's other assignments would remain free to exercise their commercial wisdom upon intimation under Regulation 13(7); what the Appellant seeks by the present application is, in substance, to forestall that very process of intimation and consequent consideration by those Committees, which, for the reasons discussed above, we are not persuaded ought to be granted at this stage. 71. We find that the Co-ordinate Bench in the referred case considered the authority of the IBBI to suspend a Resolution Professional from acting as such in every assignment without the CoC of each of those assignments, joining the issue on a finding of professional mi....
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.... Resolution Professional. In this regard Section 206 of the code may be recalled wherein it is provided that the insolvency professional who is registered with the Board may only render his services as resolution Professional. 74. Regulation 13 of the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017, which governs the disposal of show-cause notices, is of much significance. Sub-regulation (3) thereof expressly provides that the order of the Disciplinary Committee may provide for, inter alia, any of the actions under sub-sections (2), (3) and (4) of Section 220, or "any other action or direction as may be considered appropriate." More importantly, sub-regulation (7) mandates that in case where the service provider is an insolvency professional, the Board shall intimate the order to all the members of committee of creditors of the insolvency resolution processes in which he is acting as an interim resolution professional or resolution professional, as the case may be, and to the Adjudicating Authority. 75. This provision is crystal clear, mandatory and leaves no room for doubt that the Board is under a statutory obligation to intimate th....
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....e hold that the intimation of the suspension order to the Committees of Creditors of the other insolvency processes in which the appellant was acting as Resolution Professional, and the consequential direction for his removal therefrom, is fully within the jurisdiction of the Disciplinary Committee and the Board as the same is expressly contemplated under Regulation 13(7) of the Inspection and Investigation Regulations and is a necessary and legitimate consequence of the order of suspension passed under Section 220(2) of the Code. We may also add that the scheme of the Code and the Regulations is designed to ensure that disciplinary action against an insolvency professional is effective and that the insolvency processes under the Code is not left in the hands of a person who has been found tainted and unfit to continue as a registered professional. Any other interpretation that would permit a suspended Resolution Professional to continue in other ongoing insolvency processes, as a matter of right, would render the power of suspension largely ineffective and would be contrary to the legislative intent of the Code. 79. If the argument which has been advanced in terms that a Resolu....
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....assignment; his continuation is at all times subject to the regulatory framework governing his registration. Should the Appellant succeed in the appeal, his registration would stand restored, and it would remain open to the concerned Committees of Creditors, in the exercise of their commercial wisdom, to consider his continuation or reappointment as they may deem appropriate. 81. We are, therefore, unable to hold that the balance of convenience lies in favour of the Appellant. Weighing the triable, but not manifestly established nature of the Appellant's challenge to the Impugned Order against the public interest in ensuring that disciplinary orders of the IBBI, passed after due process, are not rendered ineffective pending appeal, particularly where the findings bear upon the integrity of disclosures made to stakeholders and to the Adjudicating Authority, we find that the equities do not favour grant of interim stay. 82. We would also observe that dismissal of the IBBI's own appeal against approval of the resolution plan on the short ground of 103 days' delay, without consideration of its merits, does not, by itself, amount to a finding vindicating the Appellant's conduct du....