Tribunal Declines Interim Stay on Disciplinary Order Against Kannan Tiruvengadam, Citing Breach of Protocol and Compromised Independence in Liquidation Process
In a significant decision on October 14, 2026, the National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, dismissed the interim stay application filed by Kannan Tiruvengadam, an Insolvency Professional (IP), against his suspension by the Insolvency and Bankruptcy Board of India (IBBI). The suspension spans two years, alongside directions for his replacement in all ongoing insolvency assignments.
The appellant challenged the disciplinary order passed by the IBBI Disciplinary Committee (DC) on September 3, 2026, which held him guilty of serious misconduct during his tenure as liquidator in the liquidation of BRG Iron & Steel Co. Private Limited. The charges centered on the private sale of the corporate debtor (CD) as a going concern to Rimjhim Ispat Limited without prior consultation with the Stakeholders' Consultation Committee (SCC) and without obtaining the necessary prior approval from the Adjudicating Authority (AA), contrary to the Insolvency and Bankruptcy Code (IBC), 2016 and related regulations.
The NCLAT bench, comprising Justice Mohammad Faiz Alam Khan and Member (Technical) Naresh Salecha, noted that despite the appellant's submission of legal opinions justifying the private sale after receiving the offer of Rs. 507.20 crore-which was above the last reserve price of Rs. 506.03 crore from failed auctions-he bypassed established procedures. The Tribunal observed that the liquidator had assured the SCC and the AA that prior approval would be sought before finalizing any private sale, a commitment that was not honored.
The disciplinary committee also took serious note of Kannan Tiruvengadam's repeated failure to appear in person before it during the inquiry, despite being granted multiple opportunities and specifically requested to attend hearings. Although the appellant contended that representation through counsel sufficed, the Tribunal held that such conduct reflected an evasive attitude undermining the continuous "fit and proper person" requirement mandated for insolvency professionals.
The investigation, initiated upon a confidential memorandum and corroborative evidence shared by the Central Board of Direct Taxes (CBDT), revealed that the appellant irregularly shared confidential information, including drafts of legal opinions, with the prospective buyer, raising serious concerns of compromised independence and possible connivance. The NCLAT underscored the gravity of these findings, emphasizing the importance of integrity and professionalism expected of insolvency professionals entrusted with managing companies of substantial value.
The appellant's submission highlighting his long-standing professional career and the absence of complaints from SCC members was not sufficient to outweigh the prima facie evidence and the need to maintain stakeholder confidence in the insolvency resolution process. The Tribunal held that once an insolvency professional is found tainted, there is no scope for continuation in other ongoing insolvency cases.
Consequently, the NCLAT declined to stay the operation of the disciplinary order, including the appellant's suspension and replacement in ongoing assignments, thereby reinforcing the IBBI's regulatory authority and the procedural safeguards enshrined in the IBC framework.
The appeal is scheduled for final hearing on November 18, 2026.
This judgment reinforces the strict adherence required from insolvency professionals to the procedural and ethical standards under the Insolvency and Bankruptcy Code and related regulations, ensuring transparency and stakeholder trust in corporate insolvency processes.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Interim stay against disciplinary order of IBBI - NCLAT declined to stay suspension of Insolvency Professional and direction for his replacement in ongoing assignments - Prima facie, private sale of corporate debtor as going concern was conducted without prior consultation with Stakeholders' Consultation Committee and despite earlier indication that approval of Adjudicating Authority would be sought - Once an Insolvency Professional is found tainted, no space remains for him to continue in other CIRPs pending appeal.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 206, Section 220(7), IBBI (Liquidation Process) Regulations, 2016 Regulations 31A, 32, 33, IBBI (Insolvency Professionals) Regulations, 2016 Regulation 4(1)(g), IBBI (Inspection and Investigation) Regulations, 2017
