July 17, 2019

NCLAT Rules That Disciplinary Proceedings Initiated By Insolvency Regulator IBBI Cannot Be Quashed By NCLT

[ By Bobby Anthony ]


Disciplinary proceedings initiated by insolvency regulator Insolvency and Bankruptcy Board of India (IBBI) cannot be quashed by the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT) has ruled.

The NCLAT also specified that this would be the position even if the IBBI’s proceeding had been initiated at the instance and recommendation of the NCLT.

Corporate Insolvency Resolution Process (CIRP) was initiated against Rana Global Ltd (corporate debtor) in which Rishi Prakash Vats was appointed as a resolution professional.

However the CIRP was delayed and NCLT wanted the matter to be brought to the notice of IBBI for an appropriate action.

After this direction, IBBI initiated disciplinary proceeding against Rishi Prakash Vats.

Later, Rishi Prakash Vats gave an explanation to the NCLT about the reasons for the delay in CIRP. Thereafter, NCLT expunged the earlier observation made on April 26, 2018 and IBBI was informed about it.

As IBBI continued proceeding, NCLT passed its order on February 5, 2019 and the disciplinary proceedings were quashed.

In this connection, it may be recalled that IBBI had approached NCLAT against the NCLT’s February 5 order quashing the disciplinary proceedings initiated by IBBI against insolvency professional Rishi Prakash Vats.

The NCLAT held that once a disciplinary proceeding is initiated by the IBBI on the basis of evidence on record, it is for the IBBI to close the proceeding or pass appropriate orders in accordance with law.

IBBI is vested with such powers and in absence of any power with the NCLT, the adjudicating authority (NCLT) cannot quash the proceeding, the NCLAT had stated.

Therefore, the NCLAT had set aside the last portion of the NCLT’s February 5 order relating to quashing of all disciplinary proceedings.

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