Other-Power of IBBI

Whether IBBI Disciplinary Committee constituted under Section 220 of the IBC can consist of a Single Whole-Time Member – Rohit J. Vora Vs. Insolvency & Bankruptcy Board of India (IBBI) – Bombay High Court

Division Bench of Hon’ble Bombay High Court held that:

(i) The proviso to Section 220(1) of IBC merely requires that the members of the Disciplinary Committee should be whole-time members of the IBBI. The said proviso does not seek to provide the number of members who should constitute the Disciplinary Committee.
(ii) While Section 220(1) of the Code deals with constitution of a Disciplinary Committee with the requirement that its members ought to be whole-time members of the IBBI, the constitution of the Disciplinary Committee as regards the number of its members is provided by Clause 2(1)(c) of the Regulations of 2017.
(iii) Regulation 2(1)(c) of the IBBI (Inspection and Investigation Regulations) Regulations, 2017 cannot be said that this clause travels beyond what has been provided by Section 220(1).
(iv) It would be permissible to constitute a Disciplinary Committee consisting of either a single whole-time member or more than one whole-time member of the IBBI.

Whether IBBI Disciplinary Committee constituted under Section 220 of the IBC can consist of a Single Whole-Time Member – Rohit J. Vora Vs. Insolvency & Bankruptcy Board of India (IBBI) – Bombay High Court Read Post »

Replacement of Resolution Professional in Personal Insolvency on the basis of suspension of registration by IBBI in Disciplinary proceedings – Sandeep Kumar Bhatt Vs. State Bank of India and Ors. – NCLAT New Delhi

In this case, the Resolution Professional in personal guarantee insolvency has been replaced on application field by a creditor taking ground of suspension of registration of the resolution professional by the IBBI.

Replacement of Resolution Professional in Personal Insolvency on the basis of suspension of registration by IBBI in Disciplinary proceedings – Sandeep Kumar Bhatt Vs. State Bank of India and Ors. – NCLAT New Delhi Read Post »

Suspension of authorisation for assignment (AFA) pending consideration of show cause notices issued under Section 219 of IBC is not contrary to law | Clause 23A of Model Bye-Laws and Governing Board of IPAs Regulations, 2016 cannot be held to be ultra vires – Kairav Anil Trivedi Vs. Insolvency & Bankruptcy Board of India (IBBI) and Ors. – Bombay High Court

The Hon’ble Bombay High Court (Division Bench) did not find that Clause 23A of the Schedule of IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 travel beyond what has been empowered to be done under the Code.

The Bench also considered the office noting placed on record which indicates that DGM (IBBI) was directed to undertake investigation and held that it cannot be said that the Investigating Authority in the absence of any order in writing proceeded to conduct an investigation in terms of Section 218(1) of the Code.

The Court referring the decision in CA V. Venkata Sivakumar Vs. IBBI and Ors. (2024) ibclaw.in 59 HC did not find that the suspension of AFA pending consideration of the show cause notices is in any manner contrary to law or unwarranted in the facts of the present case.

Suspension of authorisation for assignment (AFA) pending consideration of show cause notices issued under Section 219 of IBC is not contrary to law | Clause 23A of Model Bye-Laws and Governing Board of IPAs Regulations, 2016 cannot be held to be ultra vires – Kairav Anil Trivedi Vs. Insolvency & Bankruptcy Board of India (IBBI) and Ors. – Bombay High Court Read Post »

Para 2.1 “Amount realized” and Para 2.5 “Period for calculation of fee” of IBBI Circular dated 28.09.2023 are struck down as being ultra vires the Liquidation Process Regulations and the IBC | Para 2.2 “other liquidation cost”, Para 2.3 “Amount distributed to stakeholders” and Para 2.4 “Amount of Realisation/Distribution” are upheld – Amit Gupta Vs. Insolvency and Bankruptcy Board of India and Anr. – Bombay High Court

In this landmark judgment, a division bench of the Hon’ble High Court of Bombay interpreted all five paras of the IBBI Circular issued on 28.09.2023.

The Hon’ble Bench also held that the very issuance of a show cause notice has the effect of stopping the IP from taking up new work by reason of Bye-Law 23A in the Model Bye-Laws that are statutorily specified in the Schedule. The Court takes judicial notice of the serious repercussions on IPs when the IBBI issues a show cause notice. The moment disciplinary proceedings are initiated, the IP’s authorisation to conduct his assignments stands suspended. Such a position enabled by subordinate law can have serious implications for IPs. This position may also have the effect making the IBBI reticent to issue show cause notices, considering the debilitating impact it can have on any IP. This situation deserves to be reviewed by the IBBI.

Para 2.1 “Amount realized” and Para 2.5 “Period for calculation of fee” of IBBI Circular dated 28.09.2023 are struck down as being ultra vires the Liquidation Process Regulations and the IBC | Para 2.2 “other liquidation cost”, Para 2.3 “Amount distributed to stakeholders” and Para 2.4 “Amount of Realisation/Distribution” are upheld – Amit Gupta Vs. Insolvency and Bankruptcy Board of India and Anr. – Bombay High Court Read Post »

High Court upholds the Constitutional Validity of Section 204 of IBC and Regulation 23A of IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 | Section 204 of IBC is only an enabling provision | Both IBBI and IPAs can initiate parallel proceedings – CA V.Venkata Sivakumar Vs. Insolvency and Bankruptcy Board of India and Ors. – Madras High Court

Hon’ble High Court holds that:
(i) There is no discretion vested with the IPAs and the suspension is automatic, once the disciplinary proceedings are initiated. Therefore, it can neither be termed as manifestly arbitrary nor be challenged on the ground of any confirmation of unguided/unbridled power.
(ii) The requirement of issuance of show cause notice cannot be read into a provision of ad-interim suspension.
(iii) Only to avoid hardships, normally swift and prompt completion of the process of disciplinary proceedings is insisted upon. Therefore, the petitioner or any other aggrieved professional can only insist upon prompt completion of the proceedings and the hardship cannot be a ground for challenging the very regulation itself.
(iv) Accordingly, finding no infirmity, we uphold the constitutional validity of the Regulation 23A of the IBBI (Model Bye-Laws and Governing Board of IPAs) Regulations, 2016.
(v) The very provision of the twin tire control will not give rise to illegality or the presumption of double jeopardy.
(vi) Further, in a given case, for the very same action, it may be possible that both IBBI and IPAs can initiate action. Even under Criminal Law, there can be prosecution and punishment by different agencies or more than one penal provision of law, if the gravamen of the charge differs. If only gravamen of the charge is self same, double jeopardy arises.
(vii) The Regulations and Bye-laws which are framed under Section 204 of the IBC clearly provide checks and balances. The procedure for taking disciplinary action and the appellate remedies are provided. Therefore, it cannot be said to be confirmation of excessive or unbridled power. Section 204 of IBC is only an enabling provision and therefore, we see no constitutional infirmity in any of the provisions under Section 204 (a) (b) (c) (d) and (e) of IBC.

High Court upholds the Constitutional Validity of Section 204 of IBC and Regulation 23A of IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 | Section 204 of IBC is only an enabling provision | Both IBBI and IPAs can initiate parallel proceedings – CA V.Venkata Sivakumar Vs. Insolvency and Bankruptcy Board of India and Ors. – Madras High Court Read Post »

Whether once an Insolvency Professional is appointed as a Liquidator by NCLT, he moves away from the orbit of IBC and ceases to be governed by IBC | Whether IBBI can exercise any jurisdiction to issue the show cause notice to a Liquidator – Ad.(CA) V.Venkata Siva Kuma Vs. Insolvency and Bankruptcy Board of India and Ors.- Madras High Court

In this case, the pointed allegation made against the petitioner (Insolvency Professional) in the show cause notice issued by IBBI is that the petitioner while discharging his responsibilities under Sec. 230 of the Companies Act, he shared the details of the valuation report of the assets of the company with all the scheme proponents, as a result of which all of them quoted the same price.

Hon’ble Madras High Court while dismissing writ petition filed against IBBI show cause notice, held that:
(i) Liquidation of a Corporate Debtor is not alien to the scheme of IBC.
(ii) Merely because Insolvency Professional was directed to perform a role by NCLT, it does not prima facie entertain an idea that he ceases to be governed by IBC, and Regulations framed thereunder.
(iii) When the Insovlency Professional ceases to be a Resolution Professional, and starts wearing the cap of a liquidator, the role of IIIP of ICAI vis-a-vis its member ceases
(iv) This petition is dismissed, and the petitioner will have all the liberty to put forth his entire line of defence disciplinary enquiry, which needless to say includes all that the grounds on the basis of which he has now challenged the show cause notice.

Whether once an Insolvency Professional is appointed as a Liquidator by NCLT, he moves away from the orbit of IBC and ceases to be governed by IBC | Whether IBBI can exercise any jurisdiction to issue the show cause notice to a Liquidator – Ad.(CA) V.Venkata Siva Kuma Vs. Insolvency and Bankruptcy Board of India and Ors.- Madras High Court Read Post »

Whether filing of Record of Default(RoD) of Information Utility is mandatory? and without obtaining an Authentication of Default(AoD) as per IU Regulation 21, no application under Sec. 7 can be filed by Financial Creditor? – Vijay Kumar Singhania Vs. Bank of Baroda and Anr. – NCLAT New Delhi

In this landmark judgment, Hon’ble NCLAT, bench comprising of three members, held that:
(i) IU Regulation 20 although has been amended w.e.f 14.06.2022 but there is no amendment either in Section 7 of the IBC which empowers Financial Creditor to file record of the default recorded in the information utility or such other record and default as may be specified or in Rules 2016 or CIRP Regulations 2016.
(ii) The statutory scheme contemplates furnishing record of default by the financial creditor as recorded with the information utility or such other record or evidence of default as may be specified.
(iii) Record of default recorded with the information utility is not the only document which has to be furnished by financial creditor.
(iv) Regulations framed by the Board as per Section 240(1) has to be consistent with provisions of the Code and the Rules. When Section 240 itself provides that regulations have to be consistent with provision of Code and Rules, no regulation can be implemented or enforced which is not in consonance with the Code and the Rules.
(v) If IU Regulation 20(1A) is to be read as Regulation now mandating the Financial Creditor to file only the record of default in the information utility, the said Regulation will not be consistent with provision of Section 7(3) of the Code and AAA Rule 4 which provides that what documents have to be filed by the Financial Creditor.
(vi) IU Regulation 20(1A) cannot be read to mean that after the said amendment brought in regulation w.e.f 14.06.2022 an application filed under Section 7 which is not supported by information of default from an information utility is to be rejected and if the Financial Creditor has filed other evidence to prove default which is contemplated by the AAA Rules, 2016 and the CIRP Regulations, 2016, the said application has not to be considered.
(v) Filing of counter claim or money suit shall not absolve the Appellant from its liability to discharge its debt and if there is a financial debt which is due and default is committed by the Corporate Debtor proceedings under Section 7 can be initiated. Mere filing of the counter claim or money suit cannot lead to dismissal of Section 7.

Whether filing of Record of Default(RoD) of Information Utility is mandatory? and without obtaining an Authentication of Default(AoD) as per IU Regulation 21, no application under Sec. 7 can be filed by Financial Creditor? – Vijay Kumar Singhania Vs. Bank of Baroda and Anr. – NCLAT New Delhi Read Post »

IBBI comprises of experts is the authority to regulate the functioning of Insolvency Professionals, Courts do not sit as an Appellate Authority over the decisions taken by the experts – Abba Consultants Pvt. Ltd. Vs. Insolvency and Bankruptcy Board of India & Ors. – Delhi High Court

Hon’ble High Court held that:
(i) Board is the authority to regulate the functioning of the Insolvency Professionals and the Board comprises of experts in the field who have been appointed by the Central Government to carry out the functions specified under Part IV of the IBC. It is well settled that Courts do not sit as an Appellate Authority over the decisions taken by the experts.
(ii) The Court does not find that the decision making process adopted by the Board or the decision based on the final report is perverse or is contrary to law or against public interest, which would warrant interference from this Court under Article 226 of the Constitution of India.
(iii) If the process adopted in the enquiry is fair, reasonable and transparent then the Writ Court does not interfere with the findings to substitute its own conclusion to the one arrived at by the authority simply because another view is possible.

IBBI comprises of experts is the authority to regulate the functioning of Insolvency Professionals, Courts do not sit as an Appellate Authority over the decisions taken by the experts – Abba Consultants Pvt. Ltd. Vs. Insolvency and Bankruptcy Board of India & Ors. – Delhi High Court Read Post »

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