04 September 2024 Bankruptcy & Insolvency Law >> Business & Commercial Law  

In a recent legal dispute in the matter of Rohit J. Vora v/s Insolvency & Bankruptcy Board of India, New Delhi, the constitutionality of a Disciplinary Committee's composition under the Insolvency and Bankruptcy Code, 2016 (IBC) was scrutinized. The case centered on a writ petition challenging an order passed by the Disciplinary Committee, which resulted in the suspension of the petitioner’s registration as an Insolvency Professional (IP) for one year.

Background:

The petitioner, an Insolvency Professional appointed by the Insolvency and Bankruptcy Board of India (IBBI), faced disciplinary action based on an investigation report. The IBBI issued a show cause notice under Section 219 of the IBC, which led to a decision by the Disciplinary Committee, consisting of a single whole-time member, to suspend the petitioner’s registration. The petitioner contested this decision, arguing that it contravened the provisions of Section 220 of the IBC, which stipulates the composition of the Disciplinary Committee.

Legal Contention:

The core of the petitioner’s argument was that the Disciplinary Committee should consist of more than one whole-time member, based on the proviso to Section 220 of the IBC. The petitioner contended that the use of the term "members" in the proviso implied a requirement for multiple members, contrary to the single-member composition of the Committee that decided their case. The petitioner supported this argument by referencing a treatise on the IBC, previous judicial decisions, and an interim order from the Gujarat High Court.

On the other hand, the IBBI argued that the singular term “member” used in the proviso to Section 220 could also refer to a single member, supported by general statutory interpretation principles such as Section 13 of the General Clauses Act, 1897, which allows for singular terms to include the plural and vice versa. The IBBI's position was further reinforced by Clause 2(1)(c) of the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 (Regulations of 2017), which defines a Disciplinary Committee as consisting of one or more whole-time members.

Judicial Examination:

The court’s examination focused on the statutory interpretation of Section 220(1) of the IBC and the Regulations of 2017. The key point was whether the expression "members" in the proviso to Section 220(1) necessarily implied more than one member, or if it could include a single whole-time member as well.

The court noted that Section 220(1) of the IBC requires that the Disciplinary Committee’s members be whole-time members of the IBBI but does not specify the number of members. The proviso’s purpose is to ensure that all members are whole-time members, rather than stipulating the number of members. Clause 2(1)(c) of the Regulations of 2017, which allows for the Disciplinary Committee to be composed of either one or more whole-time members, was interpreted as providing clarity on the number of members. The Regulations were framed under the authority of Sections 220 and 240 of the IBC, and the court found that this interpretation aligned with the intent of the IBC.

Conclusion:

The court upheld the validity of the single-member Disciplinary Committee, concluding that the term “members” in the proviso to Section 220(1) of the IBC could encompass a single member. The Regulations of 2017, which define the Committee as consisting of one or more whole-time members, were deemed consistent with the IBC. Consequently, the challenge to the constitution of the Disciplinary Committee was dismissed, and the court clarified that this decision pertains solely to the composition of the Committee, leaving other contentions open for further proceedings. The ruling reaffirms the flexibility in the composition of disciplinary bodies under regulatory frameworks and underscores the importance of aligning statutory provisions with regulatory definitions.

  INSOLVENCY AND BANKRUPTCY CODE, 2016