Good reputation and character is very important for appointment as an Insolvency Professional under the insolvency law and past actions cannot be ignored to judge fitness for the job, the Delhi High Court has said.
The court’s observations came while dismissing a petition by a banker challenging the Insolvency and Bankruptcy Board of India’s refusal to register her as an Insolvency Professional (IP) on the ground that she was found guilty of violating Securities and Exchange Board of India (SEBI) norms in 2015.
The petitioner contended she cannot be condemned for life for the events that transpired in 2015 when she has already paid the penalty for the violations.
In a recent order, the court said discretionary powers have been accorded to the Board in order to ensure that the corporate insolvency process is “clean and free”, and a clean “immediate past” does not give a clean chit for appointment as an Insolvency Professional.
“While judging as to whether a person is fit and proper to be appointed as an Insolvency Professional his past actions and conduct cannot be ignored and the fact that immediate past was clean does not give a clean chit to the person that his candidature will be considered,” said Justice Subramonium Prasad.
“Discretion has been given to the Board to ensure that the corporate insolvency process is clean and free. Good reputation and character of a person is very important for appointment as an Insolvency Professional. The decision to determine as to whether a person is fit and proper to be appointed as Insolvency Professional is based on the subjective satisfaction of the Board,” the court stated.
It said an insolvency professional becomes the “heart and brain” of a company going through the insolvency resolution process by virtually taking it over and a person with “slightest of disqualification” cannot be appointed to the position as it would vitiate the entire purpose of the Insolvency and Bankruptcy Code.
It noted that in the present case, the petitioner was found guilty of fraudulent practices of violating market integrity and the decision of the Board not to permit her to function as an IP, even though she was eligible to be considered, cannot be said to be arbitrary.
The court said the regulations empowered the Board to take a decision to not allow a person involved in any kind of financial irregularity to be appointed as an IP.
“Though the Petitioner might be eligible to be considered to be appointed as an Insolvency Resolution Professional but the decision of the Board not to permit the Petitioner to function as an Insolvency Professional cannot be said to be arbitrary. The allegations against the Petitioner were serious,” it observed.
“The question of adjudging as to whether a person is suitable for a particular job or not should be left to the appointing authority and more particularly when the appointing authority consists of experts. It is for the experts to decide as to who is best and most qualified for a particular job. The antecedents of a person is an important criterion to decide as to whether the said person is suitable for the post or not,” it said.