IBC – IRP Appointment – Disciplinary Committee – Important questions of law and public importance raised in the writ petition

IBC provisions on IRP appointment – Challenge to the constitutional validity –

Important questions of public importance and law raised by the petitioner-IP Poonam Basak for consideration of the Hon’ble High Court of Bombay.

Few facts leading to the filing of the writ petition

The petitioner-IP was given show cause notice for violation of the provisions of the Code and the Regulations and thereafter, the matter was referred to the Disciplinary Committee of IBBI.

The Chairman of the IBBI as the Whole Time Member & Disciplinary Committee passed the order dated 11.8.2023 suspending the registration of the petitioiner-IP for a period of three years.

This was challenged in W.P.(L) No.23016 of 2023 by the petitioner – IP in the High Court of Bombay mainly on the grounds –

1. The Chairman as Disciplinary Committee of IBBI had no jurisdiction to pass the impugned order since he is not a Whole Time Member. According to IBBI, the Chairman is de-facto Whole Time Member and therefore, competent to pass the impugned order.
2. The petitioner has challenged the constitutional validity of Sections 7(5), 9(5), 16(2), 16(3), 16(4), 27(5), 82(1), 89(3), 97(1), 98(3), 98(5), 125(1), and 145(5) of IBC 2016 on the ground that all these sections require replacement of IP or non-appointment if disciplinary proceeding is pending against such IP. According to the petitioner, the provisions result in suspension of IP from the date of a show cause notice itself and same is against the principles of natural justice and the principles of innocence until proved guilty.

            The Hon’ble High Court, in its order dated 31.8.2023, prima facie found that Chairman and Whole Time Member are distinct category.  The Whole Time Member(s) can act as Disciplinary Committee. The impugned order was not passed by the Whole Time Member.  Prime facie, the High Court found the arguments of IBBI that Chairman being de-facto whole time Member is competent to act as  Disciplinary Committee would be contrary to the provisions of Section 189 of the Code. 

            In view of the above facts and the conclusions the Hon’ble Court has granted interim relief vide order dated 31.8.203