Gujarat High Court Stays IBBI Order Directing IP To Undergo 4 Months Of Probation
The High Court of Gujarat Bench comprising of Justice Biren Vaishnav while adjudicating a petition filed in Sunil Kumar Agarwal S/O. Kishan Lal Agarwal Versus Insolvency and Bankruptcy Board of India (IBBI), has stayed the operation of an order passed by Disciplinary Committee of IBBI, directing an Insolvency Professional to undergo 4 months of probation under other experienced...
The High Court of Gujarat Bench comprising of Justice Biren Vaishnav while adjudicating a petition filed in Sunil Kumar Agarwal S/O. Kishan Lal Agarwal Versus Insolvency and Bankruptcy Board of India (IBBI), has stayed the operation of an order passed by Disciplinary Committee of IBBI, directing an Insolvency Professional to undergo 4 months of probation under other experienced insolvency professionals.
Background Facts
Mr. Sunil Kumar Agarwal ("Insolvency Professional/Petitioner") is an Insolvency Professional who was appointed as the Interim Resolution Professional in the Corporate Insolvency Resolution Process ("CIRP") of Brain Master's Classes Pvt. Ltd. ("Corporate Debtor"). The Insolvency Professional had received Show Cause notice from the Insolvency and Bankruptcy Board of India ("IBBI") alleging failure to discharge his duties. The Disciplinary Committee of IBBI had found that the Insolvency Professional did not file necessary application in the CIRP of the Corporate Debtor for either approval of resolution plan or liquidation. It was further alleged that when CIRP of the Corporate Debtor expired on 10.03.2020, the Insolvency Professional did not file an application for extension of period for approving the resolution or liquidation.
The Disciplinary Committee vide an order dated 21.11.2022 had imposed a penalty of Rs. 2 Lakhs on the Insolvency Professional and had further directed him to work as a probationer for four months with other experienced Insolvency Professionals. The Insolvency Professional challenged the Order dated 21.11.2022 before the High Court.
Contentions Of The Petitioner
The Insolvency Professional argued that under Section 12(2) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), a resolution professional shall file an application before the Adjudicating Authority to extend the period of CIRP beyond 180 days, if instructed to do so by a resolution passed by a meeting of the Committee of Creditors (CoC) by a vote of 66% of the voting shares. The requisite application could not be filed since there was no direction from the CoC.
Decision Of Court
The Bench observed that the materials on record established that the Insolvency Professional had all intentions to conduct a meeting of CoC before the CIRP expiry period. However, the meeting could not take place due to COVID-19 lockdown. It was CoC which had not taken efficient measures to complete the CIRP of the Corporate Debtor. "Even in the summary findings where the order of the adjudicating authority is quoted, it is made out that it was not the case that the C.O.C had raised any dissatisfaction with regard to the conduct of the petitioner or that there had been a lapse on his part."
It was observed that no negligence could be attributed to the Insolvency Professional who was to follow the provisions of Section 12(2) of IBC. The Bench issued notice to the IBBI, subject to the condition that the Insolvency Professional deposits Rs.2 lakhs as given under the Order dated 21.11.2022 with the registry, on or before 09.12.2022. The Bench further granted ad-interim stay on the Order dated 21.11.2022 during the pendency of the petition.
Case Title: Sunil Kumar Agarwal S/O. Kishan Lal Agarwal Versus Insolvency and Bankruptcy Board of India (IBBI)
Case No.: R/Special Civil Application No. 24566 Of 2022
Counsel for Petitioners: Mr. Percy C. Kavina (Senior Counsel) With Mr.Vishal J Dave and Nipun Singhvi.