TMI Blog2023 (11) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... Insolvency Professional because she is not a fit and proper person to be appointed as Insolvency Professional - As rightly contended by the learned Counsel for the Board, an Insolvency Professional is vested with the responsibility of managing the operations of the company undergoing the insolvency resolution process and all the assets of such a company are looked after by the Insolvency Professional. A reading of the Regulations indicates that the Board can take a decision that a person who has been involved in any kind of financial irregularity cannot be appointed as an Insolvency Professional. The fact that the financial irregularity occurred 11 years ago and that the Petitioner has already paid the penalty for the same. Though the Petitioner might be eligible to be considered to be appointed as an Insolvency Resolution Professional but the decision of the Board not to permit the Petitioner to function as an Insolvency Professional cannot be said to be arbitrary - The question of adjudging as to whether a person is suitable for a particular job or not should be left to the appointing authority and more particularly when the appointing authority consists of experts. It is for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as the 2003 Regulations ). It is stated that an enquiry was conducted and it was found that the Petitioner had bought and sold equal quantities of shares in large volume in four scrips, namely, Amtek Auto Ltd, Amtek India Ltd, Monnet Ispat Ltd and Ahmednagar Forgings Limited through Religare Securities Limited, ISF Securities Limited, India Infoline Securities Limited and Narayan Securities Private Limited with prior knowledge that certain entities have already placed buy orders for the abovementioned scrips and thereby the Petitioner has done front running in the said scrips and has thereby violated Regulation 3 (a), 3 (b), 3 (c), 3 (d) and 4(1) of the 2003 Regulations. b) Resultantly, a penalty of Rs. 1 Crore was imposed on the Petitioner by the adjudicating officer under Section 15HA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act ). c) The Order imposing penalty on the Petitioner was challenged by the Petitioner before the Securities Appellate Tribunal (hereinafter referred to as the Tribunal) whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner before the Sessions Court of Kolkata under Section 24 of the SEBI Act. It is stated that Arrest Warrants were issued against the Petitioner by the Sessions Court. It is stated that the Warrants of arrest of the Petitioner was challenged by the Petitioner in the High Court of Calcutta by filing CRR No. 2005/2019 which was dismissed by the Calcutta High Court vide Order dated 22.08.2019. Order dated 22.08.2019 was challenged by the Petitioner before the Apex Court by filing SLP (Crl.) No. 8887/2019 which was disposed of by the Apex Court. 3. In view of the above mentioned facts, the Board rejected the application of the Petitioner herein for grant of certificate of registration as an Insolvency Professional on the ground that the Petitioner is not fit and eligible for grant of the registration. 4. It is this Order which is under challenge in the present Writ Petition. 5. Learned Senior Counsel appearing for the Petitioner contends that the Petitioner cannot be condemned for life for the events that transpired in 2015. He states that the Petitioner has already paid the Penalty and has suffered much. He states that pursuant to the Order of the Apex Court there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 206 of the IBC provides that no person shall render his services as insolvency professional without being enrolled as a member of an insolvency professional agency and registered with the Board. Section 208 stipulates the functions and obligations of insolvency professionals which are as under: Section 208. Functions and obligations of insolvency professionals. (1) Where any insolvency resolution, fresh start, liquidation or bankruptcy process has been initiated, it shall be the function of an insolvency professional to take such actions as may be necessary, in the following matters, namely: (a) a fresh start order process under Chapter II of Part III; (b) individual insolvency resolution process under Chapter III of Part III; (c) corporate insolvency resolution process under Chapter II of Part II; [(ca) pre-packaged insolvency resolution process under Chapter III-A of Part II;] (d) individual bankruptcy process under Chapter IV of Part III; and (e) liquidation of a corporate debtor firm under Chapter III of Part II. 1 [(1A) Where the name of the insolvency professional proposed to be appointed as a resolution professional, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e debtor for determining the financial position of the corporate debtor, including information relating to (i) business operations for the previous two years; (ii) financial and operational payments for the previous two years; (iii) list of assets and liabilities as on the initiation date; and (iv) such other matters as may be specified; (b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15; (c) constitute a committee of creditors; (d) monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors; (e) file information collected with the information utility, if necessary; and (f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with section 29; (h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans.]. (i) present all resolution plans at the meetings of the committee of creditors; (j) file application for avoidance of transactions in accordance with Chapter III, if any; and (k) such other actions as may be specified by the Board. 11. A perusal of the abovementioned Sections shows that an Insolvency Professional performs very important functions in the insolvency resolution process of a company. An Insolvency Professional virtually takes over the company during the period it goes through the insolvency resolution process. An Insolvency Professional in fact becomes the heart and brain of the company under the insolvency resolution process and a person having slightest of disqualification cannot be permitted to be appointed as an Insolvency Professional otherwise the entire purpose of the IBC will g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per person to be appointed as Insolvency Professional. As rightly contended by the learned Counsel for the Board, an Insolvency Professional is vested with the responsibility of managing the operations of the company undergoing the insolvency resolution process and all the assets of such a company are looked after by the Insolvency Professional. 14. A reading of the Regulations indicates that the Board can take a decision that a person who has been involved in any kind of financial irregularity cannot be appointed as an Insolvency Professional. The fact that the financial irregularity occurred 11 years ago and that the Petitioner has already paid the penalty for the same. Though the Petitioner might be eligible to be considered to be appointed as an Insolvency Resolution Professional but the decision of the Board not to permit the Petitioner to function as an Insolvency Professional cannot be said to be arbitrary. The allegations against the Petitioner were serious. It is well settled that the basis of considering as to whether a person is suitable for a job or not cannot be laid down in a straight jacket formula. The question of adjudging as to whether a person is suitable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute in which the duty has been set out. Even if the duty is not set out clearly and specifically in the statute, it may be implied as correlative to a right . 23. In the performance of this duty, if the authority in whom the discretion is vested under the statute, does not act independently and passes an order under the instructions and orders of another authority, the Court would intervene in the matter, quash the order and issue a mandamus to that authority to exercise its own discretion. 24. In Vice-Chancellor, Utkal University v. S.K. Ghosh [AIR 1954 SC 217 : 1954 SCR 883] this Court pointed out that in a proceeding for mandamus, the Court cannot sit as a court of appeal or substitute its own discretion for that of the authority in which the statute had vested the discretion. It was pointed out: 18. We also think the High Court was wrong on the second point. The learned Judges rightly hold that in a mandamus petition the High Court cannot constitute itself into a court of appeal from the authority against which the appeal is sought, but having said that they went on to do just what they said they could not. The learned Judges appeared to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal. At other times it says nothing about it. In all these cases the courts will not themselves take the place of the body to whom Parliament has entrusted the decision. The courts will not themselves embark on a rehearing of the matter. See Healey v. Minister of Health [(1955) 1 QB 221 : (1954) 3 All ER 449] . 27. Lord Denning further observed as under: (p. 682) If the decision-making body is influenced by considerations which ought not to influence it; or fails to take into account matters which it ought to take into account, the court will interfere. See Padfield v. Minister of Agriculture, Fisheries and Food [1968 AC 997 : (1968) 1 All ER 694]. (emphasis supplied) 28. In Sterling Computers Ltd. v. M N Publications Ltd. [(1993) 1 SCC 445 : AIR 1996 SC 51 : (1993) 1 SCR 81] it was pointed out that while exercising the power of judicial review, the Court is concerned primarily as to whether there has been any infirmity in the decision-making process? In this case, the following passage from Professor Wade's Administrative Law was relied upon: (SCC p. 457, para 17) The doctrine that powers must be exercised reasonably has to be reconciled w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is room for reasonable people to hold differing opinions as to which is to be preferred . ( Lord Diplock in Secy. of State for Education and Science v. Tameside Metropolitan Borough Council [1977 AC 1014 : (1976) 3 All ER 665] AC at p. 1064.) The Court cannot substitute its judgment for the judgment of administrative authorities in such cases. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervene. (emphasis supplied) 18. Even though the Petitioner can be registered as an Insolvency Resolution Professional but for determining as to whether the Petitioner is fit and proper candidate it is for the Board to take account of any consideration as it deems fit, including but not limited to the criteria of integrity, reputation and character. The Petitioner has been found guilty of fraudulent practices of violating market integrity and the decision of the Respondent Board to refuse the registration of the Petitioner as an Insolvency Professional on the basis of the decision of the Apex Court cannot be said to be so perverse or irrational warranting interference under Article ..... X X X X Extracts X X X X X X X X Extracts X X X X
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