Complainant Is 'Person Aggrieved,' Can Appeal Against Order In Insolvency Professional Misconduct Case: NCLAT

The National Company Law Appellate Tribunal (NCLAT), Delhi, has recently held that a complainant whose complaint leads to disciplinary proceedings against an Insolvency Professional (IP) can qualify as a “person aggrieved” under Section 220(7) of the Insolvency and Bankruptcy Code, 2016 (IBC).

The tribunal held that such a complainant can appeal against a final punitive order passed by the Insolvency and Bankruptcy Board of India's (IBBI) Disciplinary Committee.

Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha observed that a complainant on whose application disciplinary proceedings were initiated has an interest in the outcome of an appeal against the disciplinary order.

The bench said, “we are of the considered view that complainant (Caveator) on whose application the disciplinary proceedings were initiated certainly having an interest in the outcome of the appeal and therefore he is a proper party, if not necessary party, in this appeal and is a 'person aggrieved' within the meaning of Section 220(7) of the Code and is thus, also entitled to maintain an appeal before the NCLAT against an order of the Disciplinary Committee passed under sub-sections (2) to (5) of section 220.”

The tribunal held that the expression “any person aggrieved” in Section 220(7) cannot be restricted only to the insolvency professional against whom disciplinary action was taken.

The ruling arose from an appeal filed by insolvency professional Navneet Gupta against an IBBI disciplinary order. Sanjeev Mahajan, who had complained against Gupta, challenged the adequacy of the punishment imposed on Gupta.

Mahajan is the suspended director and promoter of Nimitya Hotel and Resorts Limited. The complaint concerned Gupta's alleged misconduct during the insolvency proceedings of the company.

Gupta argued that Mahajan's role ended after he filed the complaint. He contended that Mahajan had no right to participate in the disciplinary proceedings or the appeal.

The NCLAT rejected this narrow interpretation of Section 220(7). It held that the provision uses the broad expression “any person aggrieved” and cannot be confined to the delinquent insolvency professional.

The tribunal held that the law provides remedies to complainants at two different stages of the disciplinary process.

If the Board closes a complaint after finding that there is no prima facie case, the complainant can seek a review under Regulation 7(5) of the IBBI (Grievance and Complaint Handling Procedure) Regulations, 2017.

However, once the Disciplinary Committee passes a final punitive order under Section 220(2) to (5), the complainant can appeal to the NCLAT under Section 220(7).

The tribunal clarified that the appellate remedy covers final orders under Section 220(2) to (5). These include penalties, suspension or cancellation of registration, disgorgement, restitution, and costs.

It does not extend to procedural or interlocutory orders.

The bench further held that a complainant can appeal against the inadequacy of the punishment imposed on the insolvency professional. The right of appeal is therefore not confined to the delinquent insolvency professional.

The NCLAT also clarified that a complainant is not automatically required to be impleaded as a respondent in an appeal filed by the insolvency professional. However, the complainant can approach the NCLAT seeking impleadment.

The bench separately rejected an impleadment plea by Haravtar Singh Arora, a director and promoter of James Hotel Limited. It held that he was not connected with the disciplinary proceedings forming the subject matter of Gupta's appeal and therefore had no interest in its outcome.

The NCLAT dismissed Arora's application.