Conflict of Interest: IBBI Puts Insolvency Professional on Notice, Defers Action [Read Order]
The IBBI clarified that it does not possess the CoC's voting records, which are maintained by the RP and are protected by a fiduciary relationship.
The Insolvency and Bankruptcy Board of India (IBBI) has disposed of a Show Cause Notice (SCN) issued against Insolvency Professional for an alleged conflict of interest, deferring any final action until the National Company Law Tribunal (NCLT) rules on a related application.
The Disciplinary Committee (DC) found that while there was a prima facie case of a violation of the Insolvency and Bankruptcy Code (IBC), the core issue was also sub-judice before the NCLT in a separate application. To avoid conflicting findings and multiplicity of proceedings, the DC directed the IBBI Board to await the NCLT's decision before re-examining the matter.
The SCN was issued based on a complaint against the Resolution Professional (RP) for Bengal Emta Coal Mines Limited (Corporate Debtor). The primary allegation was that he had compromised his independence and objectivity by providing financial assistance of Rs. 1,00,000 to Sarika Maiwall, a successful resolution applicant (SRA).
The RP contended that the relationship was duly disclosed, there was no personal benefit involved, and the assistance was a bona fide effort to rescue the Corporate Debtor from liquidation, which is consistent with the objectives of the IBC. However, the DC held that RP ‘s actions prima facie violated Section 208(2)(a) & (e) of the IBC and the Insolvency Professionals Regulations.
Crucially, the DC noted that the facts forming the basis of the SCN were also the subject matter of IA No. 1502/2024, which was pending adjudication before the NCLT. The DC observed that allowing both proceedings to continue simultaneously could lead to conflicting findings and multiplicity of proceedings. Accordingly, the SCN was disposed of with a direction to the IBBI Board to examine the matter afresh after the disposal of the pending application by the NCLT.
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In a separate but related development concerning information disclosure under the Right to Information Act, 2005, an Appellate Authority has dismissed an appeal that sought to compel the IBBI to disclose the voting patterns of a Committee of Creditors (CoC) in a Corporate Insolvency Resolution Process (CIRP).
The appellant had filed an RTI application seeking these details, which the IBBI's Central Public Information Officer (CPIO) stated were not available. The appellant argued that as the regulator overseeing insolvency processes, the IBBI was "holding" this information and was unjustified in denying access.
The Appellate Authority, however, upheld the IBBI's position. It reiterated that the RTI Act applies only to information that is "held by or under the control of" a public authority. The IBBI clarified that it does not possess the CoC's voting records, which are maintained by the RP and are protected by a fiduciary relationship.
The court affirmed that these records are exempt from disclosure under Section 8(1)(d) of the RTI Act, which protects information held in a fiduciary capacity.
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