IBBI prescribes Norms for Disciplinary proceedings against Insolvency Professionals [Read Circular]

Insolvency Practitioners

The Insolvency and Bankruptcy Board of India ( IBBI ), on Monday, prescribed the entire procedure to be followed in connection with commencing of the disciplinary actions against the insolvency professionals under the Insolvency and Bankruptcy Code, 2016.

The Insolvency and Bankruptcy Code, 2016 envisages that an insolvency professional may be appointed as interim resolution professional, resolution professional, liquidator, or a bankruptcy trustee if no disciplinary proceeding is pending against him. Some of these provisions are extracted at Annexure A. 2. The Code, however, does not define ‘disciplinary proceeding’.

As per sections 219 and 220 of the Insolvency and Bankruptcy Code, show-cause notice can be initiated against erred professionals after inspection or investigation and can form a disciplinary committee for consideration of the inspection or investigation report.

As per the circular, a show cause notice is issued after application of mind to the material available on record or on consideration of the inspection or investigation report. The disciplinary committee disposes of the show cause notice by a reasoned order in adherence to principles of natural justice. The reasoned order carries the determination of contravention, if any, of the provisions of the Code, the rules, and regulations, or guidelines, directions or orders issued by the Insolvency and Bankruptcy Board of India. Thus, a disciplinary proceeding commences with the issue of show cause notice and concludes with the disposal of show cause notice by a reasoned order.

The circular further clarified that (i) a disciplinary proceeding is considered as pending against an insolvency professional from the time he has been issued a show cause notice by the Insolvency and Bankruptcy Board of India till its disposal by the disciplinary committee; and (ii) an insolvency professional who has been issued a show cause notice shall not accept any fresh assignment as interim resolution professional, resolution professional, liquidator, or a bankruptcy trustee under the Code.

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