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NCLAT Expunges Adverse Remarks Against Ashish Rathi Over Clerical Error
The has set aside made against a former , ruling that an inadvertent in a mandatory form filed during the cannot be characterised as “” of duty when it caused no to any stakeholder and had no impact on the approved resolution plan. The bench, comprising Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha, expunged the remarks and the direction to forward the order to the , while leaving the rest of the lower tribunal’s order unaffected.
Background: A Minor Discrepancy in
The appeal arose from the CIRP of , a company that entered insolvency proceedings under the . Ashish Arjunkumar Rathi was initially appointed as the and later confirmed as the . During the process, submitted a resolution plan that received 100% approval from the . The plan was then placed before the , for approval.
While seeking approval, Rathi filed , the that accompanies a resolution plan. The Cuttack bench noticed a discrepancy concerning the claim of . The company had originally claimed approximately ₹34.51 crore, and the admitted amount was about ₹34.50 crore — a difference of merely ₹59,464. In , however, the admitted amount was incorrectly reflected as the amount originally claimed. Rathi maintained that this was a purely clerical and inadvertent error.
No , No Impact
Rathi argued that the mistake had not altered the amount admitted to the creditor, nor had it affected the composition of the , the voting shares of creditors, the treatment or distribution of claims under the resolution plan, or the commercial decision taken by the Committee. The resolution plan itself remained unchanged, and the amount payable to operational creditors under the plan was unaffected.
Despite these submissions, the Cuttack bench described the error as a “” on the part of the . It observed that the amount claimed by a creditor had been reflected incorrectly in , even though the records showed the original claim was higher. At the same time, the bench recorded that the discrepancy was not causing any to Chhattisgarh State Power Distribution Company and noted that the amount proposed under the plan for operational creditors was very small compared with the claims received or admitted.
Appeal on Grounds of
Rathi challenged the adverse remarks before the NCLAT, contending that he had not been issued a notice or given an opportunity to explain the circumstances surrounding the discrepancy before the observations were made. This, he argued, violated the principles of . He further submitted that the direction requiring a copy of the order to be forwarded to the IBBI could have serious professional and reputational consequences.
Before the appellate tribunal, Rathi conceded that there had been an error but maintained that it was a that had neither benefited any stakeholder nor caused any loss or to a creditor. He also submitted that the discrepancy had not influenced the outcome of the insolvency resolution process and would have been immediately rectified had it been noticed earlier.
The NCLAT’s Reasoning
The NCLAT agreed with Rathi’s contentions. It found that the discrepancy in was a clerical or , with the admitted claim amount having inadvertently been reflected in place of the amount originally claimed. The bench asked Rathi whether the IBBI had ever imposed a penalty on him or issued him a notice for any earlier irregularity or misconduct. He submitted that he had an unblemished professional record and had never received a penalty or notice from the Board.
Accepting his contention, the appellate tribunal observed that an isolated inadvertent , without any intention or statutory violation, could not be equated with “” warranting . The bench held that such adverse remarks could not be sustained in the absence of a finding of fraud, deliberate misconduct, negligence, wrongful gain, or to any stakeholder.
The NCLAT also emphasised that the error had caused no to any stakeholder and had no impact on the approved resolution plan or the CIRP. Accordingly, it expunged the adverse observations in the Cuttack bench’s order regarding dereliction of duty by Rathi, as well as the direction to forward the order to the IBBI.
Legal Analysis: Defining the Bounds of
The judgment is significant for insolvency practitioners as it clarifies the threshold for judicial censure of Resolution Professionals. The NCLAT’s ruling reinforces that not every mistake, even one that appears in a statutory form, constitutes . The key factors are the absence of mala fides, the lack of any real to stakeholders, and the fact that the error did not affect the outcome of the CIRP.
The decision also underscores the importance of . The lower tribunal’s failure to issue a notice or provide an opportunity to be heard before making adverse remarks was a critical flaw. The NCLAT’s intervention sends a clear message that judicial remarks carrying professional consequences must be preceded by .
Implications for Insolvency Practitioners
Resolution Professionals can take some comfort from this ruling. The NCLAT has recognised that the insolvency process involves voluminous documentation and that isolated typographical errors, especially those that are promptly acknowledged and have no material impact, should not attract severe condemnation. However, the judgment does not give a blanket immunity; it specifically notes the absence of any prior disciplinary action against Rathi and the lack of any finding of fraud or deliberate misconduct.
Going forward, practitioners should continue to exercise due diligence in filing statutory forms, but the judgment provides a safeguard against disproportionate criticism for minor, inadvertent errors. It also highlights the need for tribunals to observe procedural fairness before branding a professional with stigmatising remarks.
Conclusion
The NCLAT’s decision to expunge the adverse remarks against Ashish Arjunkumar Rathi is a measured and principled outcome. By focusing on the absence of and the nature of the mistake, the appellate tribunal has drawn a clear line between genuine clerical errors and . The ruling reinforces the standards of and professional accountability under the IBC, offering guidance for both tribunals and insolvency professionals navigating the complexities of the CIRP.
