Chandra Prakash Jain Vs Insolvency And Bankruptcy Board of India (Gujarat High Court)
In a significant interim order, the Gujarat High Court has temporarily halted the six-month suspension of an insolvency professional (IP) imposed by the Insolvency and Bankruptcy Board of India (IBBI). The case, Chandra Prakash Jain v. Insolvency and Bankruptcy Board of India, challenges the procedural validity of the IBBI’s disciplinary action, raising critical questions about the agency’s regulatory framework.
The petitioner, represented by Senior Advocate Percy Kavina, contended that the IBBI’s order was procedurally flawed and thus “void ab initio.” The core of the argument rested on two main points: the improper issuance of the initial show-cause notice and the alleged bias in the disciplinary process.
First, it was argued that the show-cause notice, which initiated the disciplinary action, was invalid because it was issued by the IBBI’s Chief General Manager, not the “Board” itself. According to Sections 2 and 188 of the Insolvency and Bankruptcy Code (IBC), 2016, only the statutory “Board” has the authority to issue such notices. This procedural error, the petitioner’s counsel argued, rendered the entire disciplinary proceeding void from the start.
Second, the petitioner challenged the composition of the Disciplinary Committee. The disciplinary order was issued by a full-time IBBI member who had also been involved in the investigation against the IP. This, it was argued, violated Regulation 3(1) of the IBBI (Inspection and Investigation) Regulations, 2017, which explicitly prohibits an investigating authority from being part of the Disciplinary Committee. The petitioner contended that this dual role of investigator and adjudicator violated the principles of natural justice and amounted to a biased process.
