IMPORTANT POINT
The court affirmed that the IBBI's issuance of show cause notices and the suspension of the Authorization for Assignment were valid under the Insolvency and Bankruptcy Code, 2016 and its regulations.

JUDGMENT :

(A.S. Chandurkar, J.) :

1. Rule. Rule made returnable forthwith and heard the learned counsel for the parties.

2. The challenge raised in this writ petition is to the show cause notices dated 26th October 2023 and 10th April 2024 that have been issued to the petitioner by the Insolvency & Bankruptcy Board of India proposing to take action against him for violations under the Insolvency and Bankruptcy Code, 2016 and Regulations framed thereunder. The petitioner besides seeking restoration of his Authorization for Assignment also challenges the validity of Clause 23A provided in the Schedule to the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 (“2016 Regulations”) as well as Clause 23A of the Bye-Laws of ICSI Institute of Insolvency Professionals by urging the same to be ultra vires.

3. Facts relevant for considering the challenge as raised in the writ petition are that the petitioner is presently registered with the Insolvency & Bankruptcy Board of India (“IBBI”) as an Insolvency Professional (“IP”). This registration is granted under The Insolvency & Bankruptcy Code, 2016 (“Code”) read with the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. The IBBI, through its Deputy General Manager issued a show cause notice to the petitioner on 26th October 2023 under Section 219 of the Code read with Regulations 11 and 12 of the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 (“2017 Regulations”). In the show cause notice, reference was made to an investigation report that was submitted by the Investigating Authority. On the basis of the said investigation report, the petitioner was called upon to show cause why action should not be taken to cancel the petitioner’s registration as an IP. The petitioner submitted his reply to the said show cause notice and denied the allegations made therein. Further proceedings in that regard are pending.

4. Thereafter on 10th April 2024, the IBBI, through its Deputy General Manager issued another show cause notice to the petitioner under Section 219 of the Code read with Regulations 11 and 12 of the Regulations of 2017, calling upon the petitioner to show cause why suitable actions under Section 220 of the Code should not be taken against the petitioner. Reference in the show cause notice was made to the investigation report dated 8th March 2024 and the same was made the basis of the show cause notice. The petitioner submitted his reply to the said show cause notice and denied the allegations made therein.

5. With the issuance of the aforesaid show cause notices, the Authorization for Assignment (“AFA”) of the petitioner came to be suspended. It is in this backdrop that the petitioner has raised a challenge to the aforesaid show cause notices as well as the action of suspending the AFA pending adjudication of the show cause notices.

6. Mr. Pratik Sarkar, learned counsel for the petitioner raised various contentions in support of the prayers made in the writ petition. He submitted that :-

(a) Section 218 of the Code empowers the IBBI to undertake action in the matter of a complaint received under Section 217 of the Code as regards the functioning of an IP. The Board by an order in writing can issue directions to any person or persons to act as an investigating authority for conducting an inspection or investigation. In absence of there being any order in writing issued by the Board, it was not permissible to undertake any inspection or investigation on the complaint received under Section 217 of the Code. It was urged that in the present case, there was no order passed by the IBBI to undertake such investigation as was evident from the response of the IBBI to the information sought under the Right to Information Act, 2005. Hence issuance of the show cause notices to the petitioner was without jurisdiction. Further, the requirements of