Good Reputation & Character Of Person Very Important For Appointment As Insolvency Professional: Delhi HC
The Delhi High Court observed that good reputation and character of a person is very important for appointment as an Insolvency Professional.
The Court observed thus in a writ petition filed by a woman against the order of the Insolvency and Bankruptcy Board by which her application was rejected for registration as a Resolution Professional.
A Single Bench of Justice Subramonium Prasad held, “Discretion has been given to the Board to ensure that the corporate insolvency process is clean and free. Good reputation and character of a person is very important for appointment as an Insolvency Professional. The decision to determine as to whether a person is fit and proper to be appointed as Insolvency Professional is based on the subjective satisfaction of the Board. While judging as to whether a person is fit and proper to be appointed as an Insolvency Professional his past actions and conduct cannot be ignored and the fact that immediate past was clean does not give a clean chit to the person that his candidature will be considered.”
The Bench said that, it is for the experts to decide as to who is best and most qualified for a particular job and the antecedents of a person is an important criterion to decide as to whether the said person is suitable for the post or not.
Senior Advocate Viraj R. Datar represented the petitioner while CGSC Asheesh Jain and GP Keshav Sehgal represented the respondents.
Facts of the Case -
The petitioner was a banker by profession and she had applied for being a registered Insolvency Professional under the Insolvency and Bankruptcy Code, 2016 (IBC) with the respondent Board. However, her application was rejected on the ground that she was not a fit and proper person to be appointed as an Insolvency Professional. There were allegations against her for violation of Regulation 3 (a), 3 (b), 3 (c), 3 (d) and 4(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. An enquiry was conducted and it was found that she had bought and sold equal quantities of shares in large volume in four scrips with prior knowledge that certain entities had already placed buy orders for the said scrips.
Resultantly, a penalty of Rs. 1 crore was imposed on the petitioner by the adjudicating officer under Section 15HA of the Securities and Exchange Board of India Act, 1992 (SEBI Act). She challenged such order before the Securities Appellate Tribunal (SAT) which affirmed the same. The matter was then taken to the Apex Court which had dismissed her appeal and upheld the order. Since she did not deposit the penalty amount, recovery proceedings were initiated by the SEBI and criminal proceedings were initiated against her before the Sessions Court. The Board rejected her application for grant of certificate of registration as an Insolvency Professional and hence she challenged this before the High Court.
The High Court in view of the facts and circumstances of the case noted, “A reading of the Regulations indicates that the Board can take a decision that a person who has been involved in any kind of financial irregularity cannot be appointed as an Insolvency Professional. The fact that the financial irregularity occurred 11 years ago and that the Petitioner has already paid the penalty for the same. Though the Petitioner might be eligible to be considered to be appointed as an Insolvency Resolution Professional but the decision of the Board not to permit the Petitioner to function as an Insolvency Professional cannot be said to be arbitrary. The allegations against the Petitioner were serious. It is well settled that the basis of considering as to whether a person is suitable for a job or not cannot be laid down in a straight jacket formula.”
The Court said that the question of adjudging as to whether a person is suitable for a particular job or not should be left to the appointing authority and more particularly when the appointing authority consists of experts.
“Even though the Petitioner can be registered as an Insolvency Resolution Professional but for determining as to whether the Petitioner is fit and proper candidate it is for the Board to take account of any consideration as it deems fit, including but not limited to the criteria of integrity, reputation and character. The Petitioner has been found guilty of fraudulent practices of violating market integrity and the decision of the Respondent Board to refuse the registration of the Petitioner as an Insolvency Professional on the basis of the decision of the Apex Court cannot be said to be so perverse or irrational warranting interference under Article 226 of the Constitution of India”, added the Court.
The Court, therefore, observed that the decision taken by the Board does not suffer from any irregularity which requires interference by the Court under Article 226 of the Constitution.
Accordingly, the High Court dismissed the petition.
Cause Title- Pooja Menghani v. Insolvency and Bankruptcy Board of India & Anr. (Neutral Citation: 2023:DHC:8335)