IBBI denies Registration as IP against whom Criminal Proceedings are pending, Slams ICSI IIP for Recommendation [Read Order]

The Insolvency and Bankruptcy Board of India ( IBBI ) has rejected an application for registration as an Insolvency Professional (IP) against whom criminal proceedings are pending for serious offenses under the Indian Penal Code. While denying registration to the applicant, the Board also criticized the ICSI Institute of Insolvency Professionals for giving a wrong opinion that the person is fit and proper to be enrolled as IP.

The applicant, a professional member of the ICSI Institute of Insolvency Professionals (ICSI IIP) has submitted an application seeking a certificate of registration as an Insolvency Professional with the recommendation of ICSI IIP for registration of the applicant as an IP finding him as a fit and proper person for registration as an IP.

In the application, the applicant has said that criminal proceedings are pending against him before the lower Court. He came to know about the inclusion of his name in the FIR at a very later stage, i.e. after 3 years of filing the initial FIR.

The Board, after verification, found that the person is not a fit and proper person for registration as an IP and sought for the explanation from the side of the applicant.

As per regulation 4(g) of the Regulations, no individual shall be eligible to be registered as an IP if he is not a fit and proper person. Among others, integrity, reputation, and character are taken into account to determine if an individual is a fit and proper person.

In the order, the Board noted that the Code essentially provides a market mechanism for time-bound and orderly resolution of insolvency, wherever possible, and ease of exit, wherever required. “This ensures ease of doing business and the most efficient use of resources all the time. An IP plays an important role in resolution, liquidation and bankruptcy processes of companies, and individuals.”

It was noted that the various serious offenses such as rioting and unlawful assembly (section 147 and 149), causing hurt (section 323), criminal trespass (section 447), house-trespass after preparation for hurt, assault or wrongful restraint (section 452), and criminal intimidation (section 506) of the Indian Penal Code has been charged against the applicant in the charge sheet. According to the Board, the alleged charges are serious and are punishable with imprisonment up to seven years.

Before concluding, Dr. Navrang Saini (Whole Time Member, IBBI) added that “I am, however, disturbed by the conduct of the ICSI IIP, which is a front-line regulator. It has supported and recommended the registration of the applicant with a legal opinion which has held that the applicant is a fit and proper person, after explicitly recording that the charge sheet has not been filed against him. The fact is that a charge sheet has been filed against the applicant. Probably, the legal opinion would have been different if full and correct facts were placed before the learned legal Counsel.”