Refusal To Register As IP Due To Low Cibil Score And NI Act Proceedings, Gujarat High Court Sets Aside Order

Background Facts

Mr. Gundeep Singh Sood ("Petitioner") had submitted an application before Insolvency Professional Agency of Institute of Cost Accountants of India ("IPA ICAI"), for the purpose of enrolling himself as an Insolvency Professional. The ICAI rejected the application vide an order dated 13.08.2021, on the ground that proceedings under Section 138 of the Negotiable Instruments Act, 1881 was pending against the Petitioner in New Delhi and Kolkata Courts. The Order further stated that as per Regulation 4(g) of the IBBI (Insolvency Professionals) Regulations, 2016, no individual shall be eligible to be registered as an Insolvency Professional, if he is not a fit and proper person. The integrity, reputation and character of the Applicant are taken into account to determine if an individual is a fit and proper person. The IPA ICAI had held that in light of pending criminal cases and low score in the CIBIL Report, the Petitioner is not found satisfactory. Therefore, the Petitioner cannot be appointed as an Insolvency Professional.

The Petitioner challenged the Order dated 13.08.2021 before the High Court.

Contentions Of The Petitioner

The Petitioner submitted that he had passed the Limited Insolvency Examination conducted by the Insolvency and Bankruptcy Board of India ("IBBI") on 23.11.2020, in accordance with Regulation No.5 of the IBBI (Insolvency Professionals) Regulations, 2016. A certificate was also issued to the Petitioner in pursuance of the same.

Decision Of The Court

The Bench observed that the Petitioner was a Director in Krrome Glass Pvt. Ltd., Kolkata, which became financially stressed and NCLT Kolkata had initiated of Corporate Insolvency Resolution Process ("CIRP") against the said company on 17.01.2020. Further, the Petitioner was also a Director in Pabanso India Pvt. Ltd., which had issued Cheques that were dishonored. Being a Director of the Company, the Petitioner was joined in the complaints under Section 138 of the Negotiable Instruments Act.

The Bench observed that because of the financial incapacity of the Company, the CIBIL score of the Petitioner was not upto the mark. The IPA ICAI did not consider these facts while passing the order dated 13.08.2021.

"Accordingly, as the order is passed without detailed examination of the facts and the reasons as set out in the petition, the order impugned is quashed and set aside only on this count with a liberty to the respondent to pass a fresh order in light of Regulation No.4 of the Regulations, 2016 taking into consideration the facts narrated in context of the petitioner's capacity as a Director of the Companies and the consequential CIBIL score."

The Bench set aside the Order dated 13.08.2021 and has directed the IPA ICAI to pass a fresh order, by taking into consideration the fact that Petitioner's CIBIL score was low due to its engagement as a Director in the Companies.

Case Title: Gundeep Singh Sood v Insolvency Professional Agency Of Institute Of Cost Accountants Of India.

Case No.: 2022 LiveLaw (Guj) 403

Counsel for the Petitioner: Mr. Kamlesh P Vaidankar, Ms Nilu K Vaidankar.

Counsel for Respondent: Mr. MN Marfatia.

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