DC Relied On Figures From SCN Rather Than Investigating Authority's Report: Delhi High Court Reduces Suspension Of Insolvency Professional

The Court reduced the suspension period of an Insolvency Professional (IP) from two years to the period already served after holding that the penalty imposed by the Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India (IBBI) was disproportionate.

A Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela held that “In our opinion, the conclusion based on erroneous figures which are contrary to the Report of the Investigating Authority, which is a fact finding authority, had the potential of persuading the DC to impose a higher and stricter penalty.”

Advocate Mohit Nandwani appeared for the Appellant, while Advocate Amrita Singh represented the Respondents.

Brief Facts

The Single Judge had upheld the IBBI's decision to suspend the Appellant for two years.

The Appellant had challenged the suspension order, arguing that the DC had committed errors in its findings and that the Single Judge had failed to properly examine these errors.

The Appellant, who was registered with the IBBI as an Insolvency Professional since 2017, was appointed as an Interim Resolution Professional (IRP) and later confirmed as the Resolution Professional (RP) for GTHS Retails Pvt. Ltd.

The Appellant’s troubles began when the National Company Law Tribunal (NCLT) raised concerns about the valuation of assets in a liquidation process. This led to an investigation by the IBBI and a show cause notice (SCN) to the Appellant, alleging contraventions of the Insolvency & Bankruptcy Code (IBC) and related regulations.

The DC, after considering the investigation report and the Appellant’s reply, suspended the Appellant’s registration for two years.

Court’s Reasoning

The High Court noted, “Ordinarily, the writ court would not interfere in matters arising out of disciplinary proceedings or administrative decision, save and except where there is apparent or palpable infraction of a statute, statutory rule or regulation or the proceeding displays violation of the principles of natural justice.”

However, the Bench also pointed out, “Yet another facet to consider such category of matters is on the proportionality of the penalty imposed. It is trite that unless the penalty imposed is such which shocks the conscience of the Court, or that which no prudent man would reach, no interference by Courts is warranted, ordinarily.”

The Court remarked, “We find that rather than examining the authenticity, veracity and correctness of the Auditor’s Report, the DC had trashed it on the flimsy ground of it being an after thought.”

“Though, we are not interfering with the opinion of the DC that the appellant may have infracted certain procedural aspects of the IBC of obtaining Valuation Reports etc., we have considered the issue only with respect to the proportionality of penalty,” the Bench clarified.

Consequently, the Court ordered, “We are also aware that ordinarily in such cases, the remit to the DC on this aspect, would be the correct course of action, however, having regard to the fact that almost 1 year and 4 months of the penalty imposed have already lapsed i.e. from 01.12.2023 leaving 8 months remaining, we deem it appropriate not to remit the matter for decision of the DC lest it may get further delayed defeating the purpose of such remit. In that view of the matter and in our considered opinion, the penalty imposed of two years suspension from taking any assignment as IRP is reduced to the period already under gone and the suspension of the appellant would be deemed to come to an end from the date of this order.”

Accordingly, the High Court disposed of the Appeal.

Cause Title: Sandeep Kumar Bhatt v. Insolvency & Bankruptcy Board Of India (Neutral Citation: 2025:DHC:2252-DB)

Appearance:

Appellant: Advocate Mohit Nandwani

Respondents: Advocates Amrita Singh and Ankit Gupta

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