NCLAT Stays IBBI Order Barring Insolvency Professional From Other CIRPs Despite Alleged Misconduct In One Case

The National Company Law Appellate Tribunal (NCLAT) in Delhi has recently stayed the operation of the Insolvency and Bankruptcy Board of India's (IBBI) order suspending an insolvency professional from continuing in his other ongoing assignments, while leaving the suspension undisturbed in the corporate insolvency resolution process (CIRP) from which he had been removed.

The interim relief allows him to continue in his other assignments pending adjudication of his appeal.

Judicial Member Justice N. Seshasayee and Technical Member Barun Mitra observed that although the IBBI has the authority to discipline insolvency professionals, the exercise of that power must comply with the principles of natural justice.

"...we are certain that the rule of audi alteram partem is sacrosanct in our jurisprudence, and no matter how high the nature of authority vested in an Authority, the doctrine emphasising the right of hearing should not be violated. The appellant therefore, cannot be banished without a hearing on the materials so placed," the tribunal observed.

The appeal was filed by insolvency professional Sachin Naveen Sinha. In September 2025, the Jaipur bench of the National Company Law Tribunal (NCLT) removed him from a CIRP after finding that he had failed to constitute a Committee of Creditors (CoC) for nearly two years despite the corporate debtor having a secured financial creditor.

The NCLT also directed him to refund ₹2 lakh received as his initial remuneration and recommended disciplinary action by the IBBI.

Acting on that recommendation, the IBBI suspended Sinha's registration for three years with effect from July 8, 2026. The suspension prevented him from functioning not only in that CIRP but also in three other insolvency resolution processes where he was serving as the resolution professional.

Sinha argued that the disciplinary proceedings related only to one CIRP and that the IBBI could not prevent him from functioning in unrelated assignments. He contended that the committees of creditors in those CIRPs retained the authority to decide whether to continue with him after being informed of the disciplinary order.

The IBBI, on the other hand, argued that suspension of a registration necessarily applies across all assignments and is comparable to the suspension of an advocate's sanad.

The tribunal noted that committees of creditors require the IBBI's confirmation before appointing a resolution professional. It also observed that the Board's regulations require it to communicate disciplinary orders to the committees of creditors in other assignments so that they may decide whether to continue with the professional.

The tribunal observed that the allegations against Sinha related to only one CIRP, whereas the disciplinary order extended to every assignment in which he was functioning as a resolution professional without referring to his conduct in those assignments.

"When one who is entitled to be heard but penalised without a hearing, our conscience instantly gets disturbed. It is not therefore, about the existence of authority or its extent which IBBI claims under Sec.220(2) of the Code but how it purports to exercise it," the tribunal held.

The tribunal found that Sinha had made out a strong prima facie case. It also held that the balance of convenience lay in his favour and that he would suffer irreparable injury if the suspension continued to operate in his other assignments.

"To conclude, we find that the appellant has made a strong prima facie case, that balance of convenience is in his favour and that irreparable injury will be caused if appellant is barred from associating with other assignments other than the one in which the Adjudicating Authority has removed him and recommended a disciplinary action against him. We accordingly suspend the Order of suspension imposed on the appellant with regard to other assignments in which the appellant is appointed as a resolution professional," the tribunal held.

The tribunal clarified that the IBBI may communicate the disciplinary order to the committees of creditors in Sinha's other insolvency proceedings. It held that the respective committees are free to decide whether to continue with him as the resolution professional.