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TMI Blog2024 (10) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/2020, (Annexure P-4,5,6 filed in July, 2020) seeking removal of the Respondent No. 2 as a Resolution professional, for which liberty was granted to the petitioner to take appropriate steps, once the IBBI decides his complaint made against the respondent-RP in terms of the order dated 27.07.2021 is Annexure P-7. ii. And IA 892/2022 (Annexure P-18)seeking decision of IA Nos. 266/2020, 462/2020 & 466/2020, (and consequently the said IAs also) disposed of in terms of the order dated 27.07.2021 (Annexure P- 7), filed by the petitioner and pending before the Respondent No. 1 for 2.9.22. iii. And IA 890/2-22 (Annexure P-20) to provide documents and other information to enable the applicant to file objections to the Resolution plan so submitted by the Respondent No.2 and pending adjudication for 02.09.2022. iv. And MA 4/ 2022 in IA 914 of 2020 (Annexure P-21), seeking disqualification of the proposed Resolution applicant, filed by the petitioner and pending before the Respondent No. 1 for 2.9.22. v. And IA 366/2020 titled Nipan Bansal v. Vipin Kumar (u/s 66,67 of the IBC) (Annexure P-22) seeking action against the petitioner for alleged fraudulent transactions, filed by the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed by respondent No. 2. Disciplinary Committee was constituted as per Section 220(1) IBC by the Board to consider the report of Inspecting Authority under Section 218 IBC. The matter was finally decided by IBBI (Disciplinary Committee) vide order dated 22.08.2022. The deficiencies, as noticed and conceded by RP, were found to be technical in nature, therefore, IBBI while taking a lenient view cautioned RP to be more careful in future while handling the process under the Code. Regarding delay in filing relationship disclosure with IBA pertaining to legal counsel appointed by RP, it was observed that there was laxity in obtaining undertaking from the Advocate and filing disclosure. However, as the delay had not caused any prejudice or loss to any stakeholder or the Corporate Debtor (CD), a lenient view was taken and RP was asked to be cautious in handling assignments. In respect to allegations regarding improper procedure for appointment of IRP as RP, it was observed by IBBI (DC) that no objection had been raised in 3rd CoC meeting by any of its members and infact no objection at any point of time had been raised and no prejudice had been caused to any of the stakeholders. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of all such portions of the factory, wherein the stocks, finished goods, and goods in production were stored, the doctrine of video recording of the plant and machinery, non-maintenance list of stocks and assets and the difference between valuations conducted on 19.03.2020 and on 18.03.2023, vehicles missing in valuation reports and non-availability of original bills of CIRP expenses." 9. Learned NCLT observed that role of suspended Director under IBC is to assist CoC in determining whether the Resolution Plan addresses the cause of default by the Company which is a mandatory requirement for the Resolution Plan. Thus, suspended Directors have a right to participate in the meetings of CoC and give suggestions. It was found that right of participation was not denied and in the scheme of Code, power to take decisions is of CoC. The lapses, if any, at worst it is observed were merely technical, therefore, there was no call to re- examine the allegations. Some of the other allegations raised were found to be in the nature of nitpicking, which did not affect the genuineness of Resolution Plan, proposed by RP under supervision of CoC. Learned NCLT did not deem it appropriate to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that his appointment per-se was not as per the statutory provisions and would go to the root of the matter. It is also brought to our notice that after the filing of the present writ petition, further orders had also been passed by the NCLAT while deciding IAs-266, 462 & 466 of 2020 again and rejecting the objections wherein reliance has been placed upon the report of IBBI. Counsel prays for time to place on record the said orders by filing appropriate application(s). It is also the contention that the proceedings were decided by the IBBI by a single Member and not by a Committee. Notice of motion. Mr.Garg and Mr.Gosain accept notice on behalf of respondent Nos.2 & 5, respectively. Service upon the rest of the respondents is dispensed with. Counsel for the petitioners does not press for interim relief in view of the fact that CM-7375-CWP-2023 in CWP-19562-2022 has been allowed today and the stay has been extended. To be heard along with CWP-19522-2022 on 24.08.2023." 11. It appears that it was incorrectly stated before Co-ordinate Bench that orders on various applications mentioned therein were passed by learned NCLAT whereas order dated 05.04.2023 dismissing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order was passed by an incorrectly constituted Disciplinary Committee (DC). 4. Petitioners were not joined with the proceedings by IBBI (DC) at any stage, therefore, principles of natural justice were violated with all aspects as raised in the complaint not being adjudicated upon. 14. Learned counsel for petitioners argued that appointment of respondent No. 2 - IRP/RP was not as per statutory provisions inasmuch as he secured 65.89% of votes only. Reference was made to e-voting result dated 18.01.2020. Respondent No. 2, it is stated, wrongly submitted that item No. 13 was carried whereas he had to secure 66% of the votes as per provisions of Section 22 of IBC. It is at subsequent point of time that one of the financial creditors namely Punjab National Bank having a share of 14.72% conveyed its approval of appointment of respondent No. 2 as RP vide mail dated 13.02.2022. Such post facto approval, it was contended, is illegal and impermissible. IA Nos. 111 and 112 of 2020 were filed under Section 60(5) read with Section 22(2) of IBC but were dismissed as withdrawn on 27.02.2020. These facts were noticed on 04.03.2020 when third meeting of CoC was held. Thus, there was intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Learned counsel for petitioners argued that till such proceedings are finalised, CIRP proceedings should be kept in abeyance. 17. Learned counsel for IBBI as well as respondent No.2- RP have opposed both the writ petitions. It was reiterated that CWP-19562-2022 is rendered infructuous in view of order dated 25.04.2023. In so far as CWP-8750- 2023 is concerned, it was contended that the only aim and objective of petitioners who are the suspended Director(s) of the corporate debtor is to stall CIRP proceedings by hook or by crook. Learned counsel for respondent No.1 submitted that IBBI is a statutory body established under Section 188 of IBC. It is responsible for implementation of the Code which consolidates and amends laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons for promoting entrepreneurship, availability of credit and to balance interest of all stake holders. IBBI, it was stated, is a unique regulator which regulates profession as well as processes. The IBBI has regulatory oversight over insolvency professionals, insolvency profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to relationship between respondent no.2 and the counsel is concerned, there was no relationship on 17.12.2019 i.e. the insolvency commencement date. In respect to the information which was reflected on the website of the Board same had been updated in view of submissions made by respondent no.2 after due verification. There is no violation of any fundamental or constitutional rights of petitioners which calls for interference by this Court. All allegations as raised in the complaint were subjected to scrutiny by inspecting Authority and necessary action taken by Disciplinary Committee on the relevant aspects. 19. Learned counsel for respondent no.2 while denying all allegations as raised against said respondent reiterated that he was validly appointed as RP with 80% voting share of CoC. It was further submitted that Disciplinary Committee after thorough consideration of the facts and circumstances of the case passed order dated 22.08.2022. It is specifically held therein that the shortcomings are not of such nature which effect rights of any of the parties. Petitioners, it was submitted, on one hand while relying on order dated 22.08.2022 filed application for revival of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and is pending before this Adjudicating Authority. The role of the RP, almost came to an end and that no further action is required to be taken by the RP, unless in the event of rejection of the resolution plan by this Adjudicating Authority. It is also to be seen that when allegations of mala fides or corruption or professional misconduct or any other sort are alleged against a RP, the same are to be adjudicated by the IBBI and basing on the orders passed by the IBBI, appropriate action would be taken by this Adjudicating Authority. Since, admittedly the applicant made complaint against the respondent-RP to the IBBI, at this stage, we are not inclined to adjudicate and give any finding on these IAs. 32. Accordingly, IA Nos. 265/2020, 266/2020, 462/2020 & 466/2020 are disposed of with a liberty to the applicant to take appropriate steps, once the IBBI decides his complaint made against the respondent-RP." 22. As noted above, complaint had been filed by petitioners in terms of Section 217 IBC against respondent no.2 - RP. IBBI appointed inspecting Authority to conduct inspection of respondent no.2 as per provisions of Section 218 IBC. Show cause notice was issued to respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case." 23. Learned NCLT revived the earlier applications i.e. IA No.265, 266, 462 and 466 of 2020. Statutory appeal challenging order dated 25.04.2023 dismissing the said applications stands filed by petitioners. Present writ petition was filed in April, 2023 challenging order dated 22.08.2022 passed by IBBC. 24. In our considered opinion, scope of judicial review in present proceedings wherein petitioners seek setting aside of order dated 22.08.2022 passed by IBBI, taking a lenient view qua shortcomings on the part of RP besides declaring all CIRP proceedings before learned NCLT to be illegal and non-est, is limited. Primary argument raised before us was that once RP was found guilty of the breach in question there was no occasion for the Board to have taken a lenient view especially as the violations go to the root of the matter. It was strenuously argued on behalf of petitioners that RP should have been removed immediately and all proceedings carried out by him till date should be declared illegal and non-est by the Board. It is to be noted at this stage that scope of judicial review in respect to proportionality/quantum of punishment is limited inasmuch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such delays did not cause any prejudice or loss to any of the stakeholder of the CD, the DC takes a lenient view and advises Mr. Bansal to be more cautious in handling assignments." 26. In respect to the findings regarding improper procedure for appointment of IRP as RP, impugned order dated 22.08.2022 reads as under:- "4.6.1 The DC observes that the agenda for appointment of IRP as RP was first placed for voting before CoC in its 1st meeting dated 07.01.2020. The agenda was not approved as it received only 65.89% votes in its favour which fell short of mandatory 66% required for approval of resolution for appointment of IRP as RP as per section 22(2) of the Code. Later PNB who is one of the FC with voting share of 14.72% sent mail on 13.02.2022 according its approval for appointment of IRP as RP. Consequently, Mr. Bansal filed application before AA dated 17.02.2020 for confirmation of IRP as RP as after the email from PNB, the total voting share, as calculated by Mr. Bansal, in favour of appointment of IRP as RP went to $0.60%. The DC notes that not putting the agenda again to vote is a technical mistake. Instead of adding up the votes of previous meeting with that of PNB decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as raised in the applications before learned NCLT are very well within the realm of consideration by learned NCLAT. Parallel adjudication on said aspects by this Court is not called for. 29. Another aspect and argument raised by learned counsel for petitioners was that constitution of Disciplinary Committee is not in accordance with the applicable provisions inasmuch as a single member can not constitute a 'Committee'. It was argued that an objection in this regard had been raised by respondent No. 2 as well but merely because he thereafter acceded to the jurisdiction of the committee, it proceeded to decide the matter in an illegal and arbitrary manner. It is relevant to note that Disciplinary Committee has not merely proceeded on account of acceptance of its jurisdiction by respondent No. 2 but also considered the matter with reference to the applicable provisions and relevant judgments on the issue, which is apparent from a bare reading of para 3.2 of impugned order dated 22.08.2022. It is pertinent to note that there is no definition of Disciplinary Committee in IBC. Section 220 of IBC, which provides for appointment of Disciplinary Committee reads as under : - "(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it was held that a person or persons appointed by the Registrars under the Andhra Pradesh Cooperative Societies, 1964 to manage affairs of the Society would constitute a 'Committee'. Reference was also made to foreign precedents including Reynell Vs. Lewis (16 LJ Ex.30) wherein it was observed that term 'Committee' means an individual or body to which others have committed or delegated a particular duty or who have taken on themselves to perform it in the expectation of their act being confirmed by the Body they profess to represent or act for. 31. In the given facts and circumstances, we do not find any infirmity or irregularity in the constitution of a single member Disciplinary Committee. It is to be noted that no malafide is alleged qua Disciplinary Committee. We also do not find any merit in the argument raised on behalf of petitioners that they should have been afforded an opportunity of personal hearing/hearing by Disciplinary Committee prior to its decision on the complaint filed by it. There is merit in the argument raised on behalf of IBBI that in terms of the provisions of Section 217 and 220 of IBC read with Regulation 30 of IBBI (Inspection and In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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