A Resolution Professional is bound by a strict Code of Conduct under IBBI regulations; appellate courts will not interfere with findings of professional misconduct where such findings are supported by independent disciplinary proceedings and affirmed previous judicial observations regarding the professional's conduct.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 208(2)(a), 217-220 - CIRP Regulations - Regulation 38(3)(e) - IBBI (Insolvency Professionals) Regulations, 2016 - Regulations 4, 5, 7, 7(2), 7(2)(a), 7(2)(h), 7(2)(i), 11 - Profession conduct of Resolution Professional - The Court held that a Resolution Professional is bound by a Code of Conduct requiring utmost integrity, competence, and confidentiality. Failure to adhere to these standards, including improper inclusion of co-applicants or failure to ensure compliance with Section 29A/30(2) of the Code, justifies investigation by the IBBI. (Paras 2, 3, 10, 11)

Facts of the case:
The Appellant, a Resolution Professional, challenged the findings of the NCLT recorded in paragraph 53 of an order dated 01.09.2021, which criticized his professional conduct during the CIRP of Viceroy Hotels Ltd. and recommended an IBBI investigation. The Appellant argued that these observations were based on an earlier NCLAT order dated 18.11.2019, which he claimed had been reversed by the Supreme Court. The Respondents maintained that the conduct of the Appellant constituted a series of lapses, including the unauthorized inclusion of co-applicants and failure to ensure regulatory compliance.

Findings of Court:
The Court observed that the disciplinary committee of the IBBI had already established misconduct against the Appellant in proceedings dated 20.04.2020, resulting in a monetary penalty. Furthermore, the previous adverse observations against the Appellant had been affirmed by the Supreme Court. Consequently, there was no basis to interfere with the Tribunal's direction for further investigation.

Issues: Whether findings of professional misconduct against a Resolution Professional are sustainable when based on prior adverse judicial observations and established disciplinary findings.

Ratio Decidendi: An appellate tribunal will not interfere with findings of professional misconduct when such findings are predicated upon previously affirmed judicial orders and independent disciplinary findings establishing a history of casual conduct and non-compliance with statutory duties.

Result: Appeal dismissed.

Table of Content
1. statutory obligations and code of conduct for resolution professionals. (Para 1 , 2 , 3)
2. challenge to nclt findings regarding professional misconduct and reliance on prior appellate orders. (Para 4 , 5 , 6 , 7 , 8 , 9)
3. judicial restraint in interfering with findings based on affirmed prior orders and disciplinary committee decisions. (Para 10 , 11 , 12 , 13 , 14 , 15)

The Appellant, is a registered Resolution Professional, and the services thus rendered by him in the capacity of being the registered Resolution Professional is being exclusively governed by the provisions contained under the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. It is upon the consideration of the eligibility as contemplated under Regulation 4 of IBBI (Insolvency Professionals) Regulations, 2016, and upon being satisfied with the qualifications and experience as contemplated under Regulation 5, an individual is directed to be enrolled with the IBBI and is issued with a Certificate of Registration under Regulation 7, to act as an Insolvency Professional, after having been registered thus in accordance with the provisions of the aforesaid Regulations of 2016.

2. Upon issuance of the Certificate of Registration of under Regulation 7 as an Insolvency professional, he has to abide by the conditions given under Regulation 7(2) and particularly Regulation 7(2)(h) which is the Code of Conduct as specified under the first schedule of the Regulations 2016. The said Code of Conduct requires maintenance of utmost integrity and fair functioning of the Insolvency Professional, since being the representative of the Tribunal for conducting of the CIRP or such other responsibilities, which is vested upon the Insolvency Professional, upon being registered under Regulations of 2016. It requires that, a person thus registered as a Insolvency Professional, shall have professional competence and acumen, that he is expected to maintain utmost confidentiality over the proceedings which are being conducted by him upon being appointed as a Resolution Professional, and that besides various other stipulations for discharging the duties as contained therein, he will be guided by the restrictions contained in Clause 28 & 29 of first schedule of the Regulations of 2016.

3. In case of failure of the IP to discharge the assigned duties in the manner prescribed, IBBI has been authorised to initiate and conduct investigations and disciplinary proceedings against the said IP in accordance with the provisions contained under sections 217-220 of the Code read with Regulation 11 of IBBI (IP) Regulations, in a manner as prescribed under the provisions of Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017.

4. The Appellant herein, being an Insolvency Professional, has been referred to by Ld. NCLT, Hyderabad to IBBI for investigation into the entire process of CIRP of M/s Viceroy Hotels and the acts of the Appellant therein by virtue of the directions given in para-53 of the impugned order dated 01.09.2021 passed on IA No.281/2019, as it was preferred in CP(IB) No.219/7/HDB/2017.

5. The instant Company Appeal at hand has been preferred by Appellant / Resolution Professional in his personal capacity, questioning the part of the impugned order which has been rendered against him by the Learned NCLT. The challenge given by the Appellant is restricted to the finding which has been recorded by the Learned Tribunal as against his alleged professional misconduct, which has been recorded in para 53 of the impugned order, which is extracted hereunder: -

“53. We feel that the successful resolution applicant has tried to circumvent the provisions of the Code, by purportedly including M/s Tolaram Inc, Singapore as a co-applicant when there was no such mention in the original resolution plan submitted by the Resolution Professional. It was only mentioned that M/s Tolaram Inc was an investor in M/s CFM only.

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2026 Supreme(Online)(NCLAT) 419

NATIONAL COMPANY LAW APPELLATE TRIBUNALSharad Kumar Sharma, Judicial MemberKoteswara Rao Karuchola – AppellantVersusAsset Reconstruction Company (India) Ltd – RespondentCompany Appeal (AT) (CH) (Ins) No. 330/2021

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Sharad Kumar Sharma, Judicial Member
Koteswara Rao Karuchola – Appellant
Versus
Asset Reconstruction Company (India) Ltd – Respondent
Company Appeal (AT) (CH) (Ins) No. 330/2021