The court ruled the chairperson lacked jurisdiction to act as a disciplinary committee, rendering the proceedings null and void.
In a significant decision by the Calcutta High Court, the disciplinary action taken by the Insolvency and Bankruptcy Board of India (IBBI) against Insolvency Professional Sashi Agarwal was overturned due to procedural deficiencies. The judgment, delivered by Justice Shampa Sarkar, highlighted critical lapses in the jurisdiction and procedural adherence by the IBBI.
The case revolved around the cancellation of Agarwal's registration as an Insolvency Professional, which was ordered by the Chairperson of IBBI acting as the Disciplinary Committee. The court found that the Disciplinary Committee must consist solely of whole-time members as per Section 220 of the Insolvency and Bankruptcy Code, 2016. The chairperson, therefore, did not possess the jurisdiction to act in this capacity, making the disciplinary proceedings null and void.
Justice Sarkar underscored the importance of compliance with statutory provisions and stated that the procedural lapses in the proceedings against Agarwal vitiated the disciplinary action. The court emphasized that the show cause notice issued to Agarwal was not preceded by a mandatory inspection or investigation, as required under Section 218 of the Insolvency and Bankruptcy Code.
Furthermore, the court criticized the IBBI for not acting independently, as directed by the Supreme Court, and for relying solely on the observations of the National Company Law Appellate Tribunal (NCLAT). The judgment noted that the IBBI had previously conducted an inspection of Agarwal's assignments, which did not reveal any irregularities, yet failed to take this into account before initiating disciplinary action.
The court’s decision not only sets aside the disciplinary order but also invalidates the show cause notice, emphasizing the necessity for adherence to statutory procedures. However, it granted the IBBI the liberty to initiate fresh proceedings, provided they are in accordance with the law.
This judgment serves as a reminder of the importance of procedural integrity and the boundaries of jurisdiction within regulatory bodies, reaffirming the principles of natural justice in administrative actions.
Bottom line:-
Insolvency and Bankruptcy Code, 2016 - Disciplinary Committee of Insolvency and Bankruptcy Board of India (IBBI) must consist of whole-time members only as per Section 220 - Chairperson lacks jurisdiction to act as Disciplinary Committee.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 218, 219, 220, IBBI (Insolvency Professional) Regulations, 2016 Regulation 11, IBBI (Inspection and Investigation) Regulations, 2017
Sashi Agarwal v. Union of India, (Calcutta) : Law Finder Doc id # 2941930
