- Home
- /
- News Updates
- /
- ‘Difficult To Comprehend Reasoning,...
‘Difficult To Comprehend Reasoning, Logic Or Rationale In This Order’: Bombay High Stays IBBI Order Suspending Valuer’s Registration
Sharmeen Hakim
23 Jan 2023 9:56 AM IST
The Bombay High Court has granted a stay on an order passed by the Insolvency and Bankruptcy Board of India (IBBI) against a Registered Valuer, saying that it was “difficult to comprehend the reasoning, logic or rationale” in the order. A division bench of Justices G S Patel and S G Dige on January 12 stayed the operation of the IBBI order suspending Vishwanatha Prabhu's registration as...
The Bombay High Court has granted a stay on an order passed by the Insolvency and Bankruptcy Board of India (IBBI) against a Registered Valuer, saying that it was “difficult to comprehend the reasoning, logic or rationale” in the order.
A division bench of Justices G S Patel and S G Dige on January 12 stayed the operation of the IBBI order suspending Vishwanatha Prabhu's registration as a 'registered valuer'.
“The impugned order seems to us to have completely overlooked the inherent absurdity that it creates. It proceeds on the basis that the mere pendency of a criminal proceeding robs a person such as the Petitioner of his “fit and proper person” status because it supposedly affects his ‘integrity, reputation and character’,” the bench observed.
It added that “we are asked to believe that ... the integrity, reputation and character of the petitioner will suddenly get restored to some position anterior in time" if in future no charges are framed against him, or he is discharged, or the case is quashed or he is acquitted.
“In other words, it is being suggested that on account of mere accusations and allegations the Petitioner is already so guilty that his professional integrity, reputation, and character are tarnished. He has, in other words, already been found guilty — and not just before trial, but before charges are even framed,” the bench noted and granted interim relief in favour of the petitioner, who was represented by Advocate Bhavesh Parmar.
The petitioner was enrolled as a Registered Valuer with the IBBI in May 2019 after due process, but the registration was suspended on February 28, 2022 by a Whole Time Member of the IBBI “till he is exonerated of the charges.”
The reason for this suspension was Prabhu’s arrest in the Punjab and Maharashtra Cooperative Bank-Housing and Development Infrastructure Ltd loan fraud case.
Prabhu’s firm Yardi Prabhu Consultants had PMC bank as one of its clients – he was neither on the board of PMC bank nor HDIL. The bank had a panel with Yardi Prabhu Consultants as one amongst several valuers. It was because of this association that the Economic Offences Wing of Mumbai Police called Prabhu for investigation and eventually arrested him on March 12, 2020. He was released on bail only on June 20, 2022.
The IBBI issued a show cause notice to him in May 2021, while he was in custody, asking him why his registration should not be cancelled. The basis of the show cause notice was the charge-sheet filed by the EOW for Prabhu’s alleged role in the case linked to PMC bank, under sections 201, 406, 420, 465, 467, 468, 471 and 477A read with section 120B of the Indian Penal Code and Sections 46(1) and 47A of the Banking Regulation Act.
Prabhu contested the notice despite which the IBBI passed an order suspending his registration. The IBBI Whole Time Member, in its order, noted that the question that the authority needed to answer was whether the pendency of criminal proceedings impacts the integrity and reputation of the registered valuer and whether the same had an effect on his eligibility for continuing as an RV.
After noting down all the major sections in the charge-sheet filed by the EOW, the authority observed, “It is pertinent to note that the foundation of valuation services in a market economy lies on mutual trust between the valuer and the stakeholders. Based on the professional opinion of a valuer, for the purposes of Corporate Insolvency Resolution Process, CoC takes prudent commercial decisions. Therefore, it becomes crucial to engender as well as maintain the reputation and integrity of the valuation profession and the trust of the stakeholders, so that the decision makers in the market have adequate comport to take any crucial economic decision without any fear or doubt.”
It then passed an order suspending Prabhu’s registration observing, “Pendency of the criminal proceeding against Mr. Prabhu for the offences as stated above, adversely affected his integrity and reputation and makes him a person who is not ‘fit and proper’ to be eligible as a RV. Hence, the Authority finds that this is in violation of Rule 3(1)(k) of the Companies (Registered Valuers and Valuation) Rules, 2017.”
The HC division bench, however, outright disagreed with the reasoning calling it against the presumption of “innocent until proven guilty.”
“On the face of it, it is difficult to comprehend the reasoning, logic or rationale in this order, especially in paragraph 4.7. Anyone may set the criminal process in motion against anyone. There may be an FIR. There may even be a charge-sheet. But, except in certain specific statutes, the presumption in criminal jurisdiction in this country is still that a person is innocent until he is proved guilty,” the bench noted.
The court said even charges have not been framed against Prabhu and It is entirely possible that the court in question, when it takes up the charge-sheet, may not in fact frame charges against the him at all.
"Even that is not known. The Petitioner may apply for or may obtain a discharge or a quashing order at some appropriate stage. Even that is unknown. We believe that in fact a quashing application is in the process of being filed. There is in addition the possibility of the Petitioner’s acquittal. The impugned order proceeds on the basis that a simple allegation or accusation is enough to impeach the ‘integrity, reputation and character’ of a person, and that on a mere accusation a person is rendered unfit and improper,” the bench observed.
Staying the IBBI order during the pendency of the petition, the court directed that affidavit-in-reply on merits be filed and served on or before February 24, 2023.
"A Rejoinder is permitted by 10th March 2023. The Petition is to be listed peremptorily for final disposal at 2.30 pm on 16th March 2023," it added.
Vishwanatha Sridhar Prabhu Vs Vishwanatha Sridhar Prabhu [WRIT PETITION NO. 10440 OF 2022]
Citation: 2023 LiveLaw (Bom) 44