The Insolvency and Bankruptcy Code, 2016, (hereinafter referred as ‘IBC’) provides that only in cases where no disciplinary proceedings are pending against the insolvency professional that he/ she may be appointed as interim resolution professional, resolution professional, liquidator, or bankruptcy trustee.
The Insolvency and Bankruptcy Board of India (hereinafter referred as ‘IBBI’) vide its circular dated April 23, 2018, has shed light on the provisions regarding disciplinary proceeding and clarified when the disciplinary proceedings are considered as pending against an insolvency professional. However, the IBC does not define the meaning of the phrase ‘disciplinary proceedings’.
Issue of show cause notice:
The IBC entails provisions regarding the issue of show cause notice following an inspection/ investigation as well as provisions with respect to the constitution of a disciplinary committee for consideration of the said inspection/ investigation report.
Based on the findings of such report as well as other evidences, the provisions of the IBC as well as regulations made under it provide for the issue of show cause notice as well as the disposal of the same by the above-mentioned disciplinary committee.
Key points of the circular:
The following two key observations were made by IBBI in the above-mentioned circular:
Firstly, from the point of time whereby IBBI issues the show cause notice up till the time when the same is disposed by the disciplinary committee, a disciplinary proceeding shall be considered as pending against an insolvency professional.
And secondly, upon issue of show cause notice to the insolvency professional, such insolvency professional shall not accept any fresh assignment as interim resolution professional, resolution professional, liquidator, or a bankruptcy trustee under the Code.