Bombay High Court Quashes Insolvency Professional's Suspension Over SCN Based On Extraneous Material

The Bombay High Court has quashed an Insolvency and Bankruptcy Board of India (IBBI) Disciplinary Committee order suspending insolvency professional Jitender Kumar Jain's authorisation for assignment for three months.

The court found that the show-cause notice issued to Jain was based on material outside the investigation conducted against him.

A Bench of Justice Manish Pitale and Justice Shreeram V. Shirsat delivered the judgment on August 25, 2026.

The case concerned Jain's role as liquidator of Aaj Ka Anand Papers Limited. The National Company Law Tribunal admitted the company into liquidation on April 12, 2023, after its corporate insolvency resolution process failed.

Jain was appointed as liquidator and constituted the Stakeholders' Consultation Committee, which included State Bank of India, Bank of Baroda, and Edelweiss Asset Reconstruction Company.

The proceedings against Jain began after a promoter/ex-director of the company lodged a complaint on July 3, 2023. The complaint alleged violations of the Insolvency and Bankruptcy Code and the regulations framed under it.

The promoter submitted another set of grievances on August 10, 2023. The court noted that these grievances were not in the prescribed complaint form. The Board nevertheless treated them as a complaint and ordered an investigation after finding a prima facie case against Jain.

Jain was served with a notice of investigation and submitted a detailed reply refuting the allegations. The investigating authority submitted its report to the Board on May 10, 2024.

The investigation report found no actionable material against Jain. The Board nevertheless issued a show-cause notice on July 9, 2024, raising five separate issues.

This became the central issue before the High Court.

The court held that the matters raised in the show-cause notice were not the grievances that had triggered the investigation. It therefore found that the notice was based on material “extraneous to the investigation report.”

Jain responded to the show-cause notice and later filed written submissions. The Disciplinary Committee subsequently passed its order on December 18, 2024, suspending his authorisation for assignment for three months.

The disciplinary action concerned three issues. The first was the constitution of the Stakeholders' Consultation Committee. The other two concerned presentation of liquidation costs before the committee and delay in issuing the first and second auction notices.

The High Court also examined the findings concerning the auction delays. It noted that Jain had placed material explaining why the second auction could not be conducted within 15 days after the first auction failed. The court further noted that the National Company Law Tribunal had condoned the delays.

However, the Disciplinary Committee did not treat the NCLT's condonation as a relevant factor. The High Court considered this another instance of a crucial factor being ignored while deciding against Jain.

The court also considered the statutory procedure applicable when the show-cause notice was issued.

It noted that Section 219 of the Insolvency and Bankruptcy Code was amended on April 6, 2026 to add the words “or on the basis of material available on record”.

Those words were not present in Section 219 when Jain received the show-cause notice in July 2024. The court therefore examined the disciplinary action under the procedure that applied at that time.

Edelweiss, a secured financial creditor and member of the Stakeholders' Consultation Committee, also challenged the disciplinary order. The judgment records that Edelweiss supported Jain and was interested in the proper and efficient completion of the liquidation process.

The High Court ultimately allowed both challenges. It set aside the December 18, 2024 disciplinary order imposing the three-month suspension.

For Petitioners: Advocates Rahul Dev along with Arjun Amin and Pranav Shetty instructed by Argus Partners, Bhalchandra Palav along with Advocates Aniket Dighe and Pinky Pawar instructed by Bhal and Co.

For Respondents: Advocates Vinit Jain along with Shazia Ansari and Gaurav Mehta, Pankaj Vijayan Utsav Mishra, Apeksha Sharma instructed by NDB Law