Jitender Kumar Jain vs Union Of India Through The Secretary
- Court
- Bombay High Court
CNR No : HCBM020028182025
2026:BHC-OS:19004-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 2817 OF 2025
Jitender Kumar Jain … Petitioner
Versus
Union of India & Ors. … Respondents
WITH
WRIT PETITION (L) NO. 5263 OF 2025
Edelweiss Asset Reconstruction Company
Limited (acting in Capacity as Trustee of
EARC Trust SC 233) … Petitioner
Versus
Insolvency and Bankruptcy Board
of India & Ors. … Respondents
Mr. Rahul Dev a/w Mr. Arjun Amin and Mr. Pranav Shetty i/by Argus
Partners for Petitioner in WPL/2817/2025 and for Respondent No.2 in
WPL/5263/2025.
Mr. Bhalchandra Palav a/w Mr. Aniket Dighe and Ms. Pinky Pawar i/by
M/s. Bhal and Co. for Petitioner in WPL/5263/2025.
Mr. Vinit Jain a/w Shazia Ansari and Mr. Gaurav Mehta for Respondent
No.1-UOI in WPL/2817/2025.
Mr. Pankaj Vijayan a/w Mr. Utsav Mishra for Respondent No.2 in
WPL/2817/2025 and for Respondent No.1 in WPL/5263/2025.
Ms. Apeksha Sharma i/by NDB Law for Respondent No.4-Bank of
Baroda in WPL/5263/2025.
CORAM : MANISH PITALE AND
SHREERAM V. SHIRSAT, JJ.
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RESERVED ON : 7 JULY 2026
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PRONOUNCED ON : 25 AUGUST 2026
MINAL
SANDIP
PARAB
Digitally signed by
MINAL SANDIP
PARAB
Date: 2026.08.25
16:52:21 +0530
Judgment (Per Manish Pitale, J.) :
. Both these petitions have been filed to challenge order dated
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18 December 2024 passed by the Disciplinary Committee of the
respondent No.2-Insolvency and Bankruptcy Board of India
(hereinafter referred to as ‘Board’), whereby the petitioner-
Jitender Kumar Jain (petitioner in Writ Petition (Lodging) No.
2817 of 2025) was suspended for a period of three months from
performing the role of insolvency professional/liquidator under
the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC)
and the Regulations framed thereunder. Additionally, the aforesaid
petitioner in Writ Petition (Lodging) No. 2817 of 2025 also
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challenged the show cause notice dated 9 July 2024, which led to
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the said impugned order dated 18 December 2024. The
petitioner in Writ Petition (Lodging) No. 5263 of 2025 i.e.
Edelweiss Asset Reconstruction Company Limited (hereinafter
referred to as ‘Edelweiss’) was one of the secured financial creditor
of the corporate debtor in the context of which the petitioner-
Jitender Kumar Jain was appointed as liquidator.
2. The corporate debtor i.e. ‘Aaj Ka Anand Papers Limited’ had
availed loan facility and in the light of defaults in repayment
thereof, the account of the corporate debtor was declared as a
Non-Performing Asset (NPA). The respondent-State Bank of India
(SBI) filed a petition under Section 7 of the IBC, which led to
initiation of Corporate Insolvency Resolution Process (CIRP). The
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petition was admitted on 31 March 2022.
3. But, the process of CIRP failed and thereupon, the corporate
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debtor was admitted into liquidation by an order dated 12 April
2023 passed by the National Company Law Tribunal (NCLT). The
petitioner-Jitender Kumar Jain was appointed as liquidator and he
constituted Stakeholders’ Consultation Committee (SCC). The
SCC included respondent-SBI and other secured creditors i.e.
Bank of Baroda and the petitioner-Edelweiss.
4. It is the case of the petitioner-Jitender Kumar Jain that the
promoters/ex-directors of the corporate debtor had adopted an
obstructionist attitude all through the proceedings of liquidation.
According to the said petitioner, they left no stone unturned in
derailing the process and also in making false and frivolous
allegations against the said petitioner. In the process, the
promoters filed applications before NCLT to further delay and
derail the process. One such application was dismissed with heavy
cost of Rs. 1 lakh. According to the petitioner-Jitender Kumar
Jain, despite the said approach of the promoters, he navigated the
process of liquidation to the best of his ability and to the
satisfaction of the members of the SCC. It is further stated by the
petitioner-Jitender Kumar Jain that he was harassed by false and
bogus police complaints filed by the promoters of the corporate
debtor to such an extent that, at a point in time in August 1993,
he had even offered to resign as the liquidator. But, the lenders,
including the members of the SCC, unanimously requested him to
continue and to fight against such bogus complaints. The aforesaid
situation was brought to the notice of this Court in writ petitions
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that were filed and pending.
5. In this backdrop, when one such Writ Petition bearing No.
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10244 of 2023 was taken up for hearing before this Court on 12
October 2023, it was orally submitted that the promoters of the
corporate debtor had preferred a complaint against the petitioner-
Jitender Kumar Jain. It came to light that such a complaint was
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submitted on 3 July 2023, by a promoter / ex-director of the
corporate debtor, wherein general allegations were made against
the petitioner-Jitender Kumar Jain, as regards violation of
provisions of the IBC and Regulations framed thereunder. It was
alleged that he was acting malafide with ulterior motive and for
unethical gains, thereby causing mental and monetary suffering to
the said complainant. It was also alleged that the said petitioner
had damaged the reputation and credibility of the complainant
and his family members, further alleging that he was acting along
with the other stakeholders to intentionally cause suffering to the
complainant. It was claimed that the cause of action being
continuous, the complaint was within limitation.
6. Thereafter, the complainant submitted a further set of
grievances in writing. While the first complaint was as per the
requisite form under Regulation 3(3) of the Insolvency and
Bankruptcy Board of India (Grievance and Complaint Handling
Procedure) Regulations, 2017 (hereinafter referred to as
‘Grievance Regulations 2017’), the second set of grievances
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submitted in writing on 10 August 2023 were not in the said
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form. It appears that respondent No.2-Board proceeded to treat
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the second set of grievances submitted in writing on 10 August
2023 also as a complaint and on the basis of the two complaints,
reached a conclusion that a prima facie case was made out against
the petitioner-Jitender Kumar Jain and on that basis, ordered an
investigation under Regulation 7(7) of the Grievance Regulations
2017. The investigation was directed to be conducted through
respondent No.5 i.e. the Executive Director of the Board, who in
turn appointed respondent No.6 i.e. Deputy General Manager of
the Board as an Investigating Authority, to investigate into the
allegations.
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7. Thereafter, on 2 February 2024, the respondent No.6
served a notice of investigation upon the petitioner-Jitender
Kumar Jain under Regulation 8 of the Insolvency and Bankruptcy
Board of India (Inspection and Investigation) Regulations, 2017
(hereinafter referred to as ‘Investigation Regulations 2017’). In
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response, the said petitioner submitted detailed reply on 30 April
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2024 refuting all the allegations made in the complaints. On 10
May 2024, the respondent No.6 submitted investigation report to
the respondent-Board through its Executive Director i.e.
respondent No.5. Thereupon, the respondent-Board through
respondent No.8 i.e. another Deputy General Manager of the
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Board, issued the impugned show cause notice dated 9 July 2024
under Regulations 11 and 12 of the Investigation Regulations
2017 to the petitioner-Jitender Kumar Jain, specifying five aspects
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concerning the manner in which the said petitioner had performed
his assignment as liquidator of the corporate debtor.
8. There is no dispute about the fact that the five issues raised
in the said show cause notice were not concerned with the
grievances raised in the complaints, which led to the investigation
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being conducted. On 30 August 2024, the petitioner-Jitender
Kumar Jain submitted a detailed reply to the show cause notice,
responding to each of the five issues raised therein. Additionally,
the said petitioner referred to the manner in which the promoters
of the corporate debtor were obstructing the process of liquidation
and the manner in which bogus police complaints were filed
against the said petitioner and the proceedings that had to be
initiated before this Court on various issues. The petitioner-
Jitender Kumar Jain refuted the allegations made in the show
cause notice in the context of the five specific issues raised therein.
9. Thereafter, hearing was conducted and the said petitioner
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further placed written submissions dated 10 October 2024 before
the Disciplinary Committee of the respondent-Board. In the said
written submissions, the said petitioner further elaborated his
stand and also referred to case law in support of his submissions.
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Thereafter, on 18 December 2024, the Disciplinary Committee
of the respondent-Board through respondent No.4 i.e. its whole
time member passed the impugned order, inflicting the penalty of
suspension of the authorisation for assignment of the said
petitioner for a period of three months. Aggrieved by the same,
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the petitioner-Jitender Kumar Jain filed Writ Petition (Lodging)
No. 2817 of 2025 and petitioner-Edelweiss filed Writ Petition
(Lodging) No. 5263 of 2025. Notices were issued in the writ
petitions.
10. It is to be noted that in the light of the impugned order,
suspending the petitioner-Jitender Kumar Jain for a period of
three months, he resigned from the role of liquidator of the
corporate debtor, but the members of the SCC resolved that the
petitioner be requested to withdraw his resignation and
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accordingly, he withdrew his resignation on 10 January 2025 and
he was permitted to continue as liquidator of the corporate debtor.
The pleadings in the writ petitions were completed and although,
the petitioner-Jitender Kumar Jain appears to have suffered the
suspension period, he is keenly pursuing this writ petition in order
to clear his name and to demonstrate that the impugned order,
rendering findings against him, is unsustainable. Edelweiss, as one
of the secured financial creditor and member of the SCC, in its
petition has also supported the petitioner-Jitender Kumar Jain and
it has highlighted the manner in which the promoters of the
corporate debtor had harassed the said petitioner, while he was
performing the role of liquidator. The writ petition was contested
by respondent No.2-Board through its Counsel, when the
petitions were taken up for hearing.
11. Mr. Rahul Dev, learned counsel appearing for the petitioner-
Jitender Kumar Jain in Writ Petition (Lodging) No. 2817 of 2025
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submitted that in the present case, at the outset, this Court may
note that although the impugned order inflicted penalty of
suspension of registration for a period of three months, by
operation of Clause 23A of the Insolvency and Bankruptcy Board
of India (Model Bye-Laws and Governing Board of Insolvency
Professional Agencies) Regulations, 2016 (hereinafter referred to
as ‘Model Bye-Laws’), the authorisation for assignment of
petitioner-Jitender Kumar Jain stood suspended immediately upon
initiation of disciplinary proceedings by the Board. As a
consequence, the said petitioner suffered suspension not only for
the three months period, but also for the period starting from
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issuance of show cause notice dated 9 July 2024.
12. It was submitted that in the present case, the principles of
natural justice were violated with impunity and on that ground
alone, the impugned show cause notice as well as the impugned
order deserve to be set aside. It was submitted that the documents
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on record clearly demonstrate that the complaint dated 3 July
2023 submitted in specific form by one of the promoters of the
corporate debtor, was barred by limitation. It was absolutely vague
and general allegations were levelled against the petitioner-
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Jitender Kumar Jain. The second set of grievances raised on 10
August 2023, were not even in the form prescribed under the
Grievance Regulations 2017 and yet, it was treated as the second
complaint, thereby demonstrating procedural irregularity. It was
emphasized that although investigation into the said complaints
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was initiated and after delay of eight months, a notice of
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investigation dated 2 April 2024 was served upon the petitioner-
Jitender Kumar Jain, in the light of the response given by the said
petitioner, no substance was found in the allegations levelled in the
said complaints. The petitioner-Jitender Kumar Jain asserts the
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aforesaid fact on the ground that the show cause notice dated 9
July 2024 raised five issues that had nothing to do with the
grievances raised in the aforesaid two complaints. It was submitted
that on this ground alone, the show cause notice was rendered
without jurisdiction and bad in law.
13. In this context, it was submitted that although Section 219
of the IBC as it then stood, stipulated that the respondent-Board
could issue show cause notice to a service provider like the said
petitioner, upon completion of inspection and investigation under
Section 218 thereof, in the present case, the show cause notice was
evidently not issued on the basis of the investigation report and it
was issued on the basis of material that purportedly came on
record. In other words, while the petitioner-Jitender Kumar Jain
was issued notice in the context of the investigation, he was never
made aware about the ‘material’ on the basis of which the
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impugned show cause notice dated 9 April 2024 was issued. This
according to the learned counsel for the said petitioner, violated
principles of natural justice and therefore, the show cause notice
itself stood vitiated. It was also submitted that the copy of the
investigation report was not made available to the petitioner-
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Jitender Kumar Jain and this also violated the principles of natural
justice.
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14. In respect of the impugned order dated 18 December 2024,
it was submitted that the petitioner-Jitender Kumar Jain was found
guilty of having contravened the provisions of the IBC and the
Regulations framed thereunder, on the issues of irregular
constitution of the SCC, failure to present liquidation costs in SCC
meeting and delay in issuance of the first and second auction
notices. Upon rendering the said findings, the Disciplinary
Committee of the respondent-Board inflicted the penalty of
suspension of authorisation for assignment of the petitioner-
Jitender Kumar Jain for a period of three months. In this context,
it was submitted that even if the findings in the impugned order
were to be taken into consideration, it could not be said that the
petitioner-Jitender Kumar Jain had indulged in any misconduct. At
worst, it could be said to be a situation of negligence or oversight,
which would not qualify as misconduct. It was emphasized that
none of the members of the SCC or any of the lenders had raised
any grievance with regard to the said five issues, on which the said
petitioner was found to have contravened the provisions of the
IBC and the Regulations framed thereunder.
15. It was further submitted that the said issues concerned
interpretation of the relevant Regulations and since more than one
interpretation was possible, it could not be said that the said
petitioner had indulged in misconduct, only because his
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interpretation did not find favour with the disciplinary committee
of the respondent-Board. On this basis, it was submitted that the
impugned order deserved to be set aside. In this context, reliance
was placed on judgment of the Supreme Court in the case of
Inspector Prem Chand vs. Government of NCT of Delhi & Ors.,
(2007) 4 SCC 566 and judgment of this Court in the case of Abdul
Rauf Mohammed Khaja vs. State of Maharashtra, through the
Secretary, Revenue Department & Ors., 2022 SCC OnLine Bom
3794.
16. It was further submitted that Regulation 11 of the
Investigation Regulations 2017 mandatorily requires the Board to
consider the inspection report and after consideration thereof, if it
forms a prima facie opinion that sufficient cause exists to take
action under Section 220(2) of the IBC, only then show cause
notice can be issued. It was submitted that the expression
‘consider’ has to be given its logical meaning. In this context,
reliance was placed on the judgment of the Supreme Court in the
case of Chairman, Life Insurance Corporation of India & Ors. vs.
A. Masilamani, (2013) 6 SCC 530, to emphasize that the word
‘consider’ would mean ‘to think over’, ‘to regard as’ or ‘deem to
be’. An attempt was also made on behalf of the petitioner-Jitender
Kumar Jain to claim that the entire proceeding was vitiated by
bias, as the respondent No.5 i.e. the Executive Director of the
respondent-Board was performing multiple functions in the
proceeding. It was submitted that in such a situation, the entire
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proceeding stood vitiated and hence, the impugned order deserved
to be set aside.
17. Mr. Palav, learned counsel appearing for the petitioner-
Edelweiss in Writ Petition (Lodging) No. 5263 of 2025, supported
the contentions raised on behalf of the petitioner-Jitender Kumar
Jain in Writ Petition (Lodging) No. 2817 of 2025. It was submitted
that the petitioner-Edelweiss being a member of the SCC had
raised no grievance, at any point in time, with regard to the
functioning of the petitioner-Jitender Kumar Jain, as the
liquidator. It was submitted that all the necessary steps under the
provisions of the IBC and the Regulations framed thereunder were
properly followed by the petitioner-Jitender Kumar Jain and as a
matter of fact, the promoters of the corporate debtor were
obstructing the entire process. We had put a question to the
learned counsel appearing for the petitioner-Edelweiss, as to how
could it be a party aggrieved in the context of the impugned order
which imposes penalty on the petitioner-Jitender Kumar Jain, who
was functioning as a liquidator, but the learned counsel for the
petitioner-Edelweiss was unable to give a satisfactory response. It
was indicated that since the petitioner-Edelweiss, as member of the
SCC, was interested in proper and efficient completion of the
process of the liquidation, it was entitled to approach this Court
for challenging the impugned order.
18. On the other hand, Mr. Vijayan, learned counsel appearing
for the respondent-Board submitted that this Court, while
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exercising writ jurisdiction to consider challenge to the impugned
order, necessarily exercises jurisdiction in a very narrow compass.
It was submitted that only aspects pertaining to the procedure
followed in the present case could be examined and that this
Court would not be able to test the merits of the findings rendered
in the impugned order.
19. On the question of the show cause notice being issued on
aspects that were not directly raised in the complaints filed by the
promoters of the corporate debtor, it was submitted that the filing
of a complaint opens the doors for investigation under Chapter VI
of the IBC, consisting of Sections 217 to 220 thereof. It was
submitted that once the doors of investigation stood opened, all
the material that came on record by way of such investigation
could be taken into consideration for issuing show cause notice to
the service provider like the petitioner-Jitender Kumar Jain, as per
Section 219 of the IBC. It was submitted that the words used in
Section 219 of the IBC as they stood at the relevant time before
the latest amendment, cannot be read in such a manner that would
denude the respondent-Board from exercising power to even suo
motu issue show cause notice. It was emphasized that the Board as
a regulator is a watchdog and one of its crucial functions is to
ensure that the service providers perform their duties in an
appropriate manner, maintaining the integrity of the process and
in line with the object of enactment of the IBC. On this basis, it
was submitted that the ground raised on behalf of the petitioner-
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Jitender Kumar Jain, to the effect that the show cause notice was
issued without jurisdiction, deserves to be rejected.
20. It was further submitted that while exercising writ
jurisdiction, this Court cannot review the findings rendered in the
impugned order on merits, to arrive at independent findings on
the basis of the material on record. It was submitted that this
Court can also not go ino the question of proportionality of the
penalty imposed on the petitioner-Jitender Kumar Jain. Even
where the penalty is found to be shockingly disproportionate to
the nature of the misconduct, after setting aside the order of
penalty, as per settled law, the matter is to be left to the
disciplinary authority to take a decision afresh in the matter. In
this context, reliance was placed on judgments of the Supreme
Court in the cases of Union of India & Ors. vs. P. Gunasekaran ,
(2015) 2 SCC 610 and Lucknow K. Gramin Bank & Anr. vs.
Rajendra Singh, (2013) 12 SCC 372.
21. It was further submitted that although the petitioner-Jitender
Kumar Jain raised various grounds to claim that principles of
natural justice were violated in the present case, he failed to
demonstrate any prejudice caused to him to justify inteference by
this Court exercising writ jurisdiction. It was submitted that the
petitioner-Jitender Kumar Jain ought to have demonstrated that
the alleged violation of the principles of natural justice in the facts
of the present case caused any prejudice to him. Since he failed to
do so, the said ground of challenge raised on his behalf also
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deserves to be rejected. In support of the said proposition, reliance
was placed on the judgment of the Supreme Court in the case of
Chief Commercial Manager, South Central Railway, Secunderabad
& Ors. vs. G. Ratnam & Ors. , (2007) 8 SCC 212. Reliance was
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also placed on judgment and order dated 25 October 2024
passed by this Court in Writ Petition (Lodging) No. 5978 of 2024
( Naren Sheth vs. Union of India & Ors. ), wherein this Court
dismissed a petition filed by a similarly placed insolvency
professional. On this basis, it was submitted that the writ petition
deserved to be dismissed.
22. Having heard the learned counsel for the rival parties,
considering the challenge raised to the impugned show cause
notice and the consequential impugned order, the scope of
jurisdiction of this Court, while exercising writ jurisdiction, has to
be kept in mind. There can be no quarrel with the contention
raised on behalf of the respondent-Board that this Court in writ
jurisdiction would not sit in appeal over the findings rendered by
the Disciplinary Committee of the respondent-Board in the
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impugned order dated 18 December 2024. The examination to
be conducted by this Court would necessarily be limited to the
aspects concerning procedure followed by the respondent-Board
while passing the impugned order and as to whether the principles
of natural justice were properly followed while proceeding against
the petitioner-Jitender Kumar Jain. Although the rival parties have
relied upon judgements, concerning the nature of jurisdiction
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exercised by the Writ Court in the context of service matters, this
Court finds that the present case cannot be equated to an
employer - employee relationship between the respondent-Board
and the petitioner-Jitender Kumar Jain i.e. the insolvency
professional. But, the role of the respondent-Board as the
regulator under the provisions of the IBC and the Regulations
framed thereunder needs to be emphasized. There can be no doubt
that the respondent-Board, as the regulator, would be well within
its powers to ensure that service providers like the petitioner-
Jitender Kumar Jain perform their duties in line with the
provisions of the IBC and the Regulations framed thereunder. It is
in this backdrop that the rival contentions are being analyzed and
considered.
23. The action against the petitioner-Jitender Kumar Jain stood
triggered on the basis of complaints submitted by the promoter of
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the corporate debtor. While the first complaint dated 3 July 2023
was in the form prescribed in the Regulation, the further written
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document dated 10 August 2023 submitted by the promoter was
not in the said form and yet it was treated as a complaint. On the
basis of the said complaints, respondent No.5 i.e. the Executive
Director of the respondent-Board appointed respondent No.6 i.e.
the one of the Deputy General Managers, as an investigating
authority, to investigate into the allegations. The process is
governed by the Investigation Regulations 2017, particularly
Regulations 8 to 10 thereof. The aforesaid process undertaken as
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per the Investigation Regulations has to be read with Chapter VI
of the IBC. As per Section 219 of the IBC read with Regulation 11
of the Investigation Regulations 2017, the Board is to consider the
investigation report and upon forming a prima facie opinion that
sufficient cause exists to take action under Section 220 of the IBC
through the Disciplinary Committee, it can issue show cause
notice in the matter.
24. It is crucial to note that Section 219 of the IBC, as it stood at
the relevant point in time, prior to the latest amendment, was as
follows:-
“ 219. Show cause notice to insolvency professional agency
or its member or information utility
The Board may, upon completion of an inspection or
investigation under section 218, issue a show cause notice
to such insolvency professional agency or insolvency
professional or information utility, and carry out inspection
of such insolvency professional agency or insolvency
professional or information utility in such manner, giving
such time for giving reply, as may be specified by
regulations. ”
25. It is also crucial to note that subsequently by recent
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amendment dated 6 April 2026, the words ‘or on the basis of
material available on record’ have been added to Section 219.
Thus, prior to the amendment, Section 219 empowered the Board
to issue show cause notice under Section 219 of the IBC upon
completion of the investigation under Section 218 thereof and
under Regulation 11 of the Investigation Regulations 2017, after
consideration of such report if the Board formed the prima facie
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opinion that sufficient cause existed, show cause notice could be
issued. This aspect is crucial in the facts of the present case.
26. It is an admitted position that in the present case, in
pursuance of the aforesaid two complaints lodged by the promoter
of the corporate debtor, investigation was initiated culminating in
the investigation report. We find substance in the contention
raised on behalf of the petitioner that the grievances raised in the
two complaints by the promoter of the corporate debtor were
vague, general and without specifications. It is to be appreciated
that the said complaints were lodged in the backdrop of the said
promoter and other promoters / ex-directors of the corporate
debtor taking a series of obstructionists steps during the process of
CIRP and liquidation, as also lodging a series of police complaints
against the petitioner-Jitender Kumar Jain i.e. the liquidator. In
respect of some of such steps taken by the promoters / ex-directors
of the corporate debtor in writ petitions filed before this Court,
certain observations have been made against such tactics adopted
by the promoters / ex-directors. Even the NCLT had dismissed one
such frivolous application filed by the promoter of the corporate
debtor with cost of Rs.1 lakh, wherein not only the petitioner-
Jitender Kumar Jain but the members of the SCC had highlighted
such conduct of the promoters / ex-directors.
27. It is also an admitted position on facts that the respondent-
Board did not find any substance in the allegations made in the
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complaint lodged by the promoter of the corporate debtor. Thus,
applying Section 219 of the IBC, as it then stood, read with
Regulation 11 of the Investigation Regulations 2017, upon
consideration of the investigation report, the respondent Board
did not find any material against the petitioner. Hence, the
impugned show cause notice dated 09.07.2024 was not at all
based on the investigation report as the findings therein were
admittedly not adverse to the petitioner. It is to be noted that after
the investigation was initiated, it took a long period of almost 8
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months for the respondent No.6 to serve notice dated 2 April
2024 on the petitioner-Jitender Kumar Jain under Regulation 8 of
the Investigation Regulations 2017 to respond to the allegations.
The petitioner submitted his detailed reply / response and
thereupon, the investigation report did not find any substance in
the allegations levelled by the promoter of the corporate debtor. In
such a situation, we find substance in the contention of the
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petitioner that the impugned show cause notice dated 9 July
2024 was based on material extraneous to the investigation report.
It is crucial to note that the respondent No.6 - Deputy General
Manager of the respondent Board categorically recorded in the
th
investigation report dated 10 May 2024 that there was no
actionable material found against the petitioner-Jitender Kumar
Jain.
28. In this backdrop, when the impugned show cause notice
th
dated 9 July 2024 is perused, it refers to the investigation report
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th
dated 10 May 2024 and annexes a copy thereof. Thereupon,
even though the investigation report categorically recorded that no
actionable material was found against the petitioner, the
respondent No.8, another Deputy General Manager of the
respondent Board, who signed the show cause notice, stated that
certain aspects in respect of the assignment of the petitioner-
Jitender Kumar Jain as liquidator were observed. Then the show
cause notice proceeded to highlight five issues to reach a
conclusion that prima facie certain contraventions of the
provisions of the IBC and its Regulations were found. The
petitioner-Jitender Kumar Jain was then called upon to respond to
the five issues.
29. We find substance in the contention raised on behalf of the
petitioner that the show cause notice was based on material
extraneous to the investigation report. The petitioner-Jitender
nd
Kumar Jain had specifically responded to the notice dated 2 April
2024 issued during the course of investigation and he had given
his detailed response to allegations made against him. The
investigating officer was satisfied with the responses and no
actionable material was found against the said petitioner. Yet, the
impugned show cause notice was issued on aspects completely
foreign to the complaints and the allegations that triggered the
investigation. This is found to be a procedural irregularity
committed by the respondent-Board and its officials while
proceeding against the said petitioner as a service provider. Once
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the statutory provisions under the IBC and the Regulations framed
thereunder prescribe a particular procedure, it ought to be
followed.
30. In this context, it becomes crucial that Section 219, as it
then stood, did not use the words ‘or on the basis of material
available on record’, which have been added by way of
th
amendment dated 6 April 2026. In other words, the procedure,
as it then stood, provided for complaints to be lodged by any
aggrieved person against the service providers like the petitioner
under Section 217 of the IBC, which could lead to an investigation
under Section 218 thereof and if the Board was satisfied upon
completion of the investigation under Section 218 that prima facie
sufficient cause existed to take action, a show cause notice could
be issued.
31. In the present case, the impugned show cause notice dated
th
9 July 2024 has not been issued in pursuance of the said
procedure. It has been issued on material extraneous to the
investigation. In order to respond to the said contention raised on
behalf of the said petitioner, the respondent-Board contended that
it always has suo motu power, as a regulator, to issue such show
cause notice on any material that comes to its notice and which in
its opinion, warrants action against the service provider like the
said petitioner. If the role of the Board as the regulator under the
IBC and the Regulations framed thereunder is appreciated in the
correct perspective, there can be no doubt that the Board would
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be well within its powers to take action against the service
providers when it is warranted. But, before exercising such
inherent power, the Board would certainly be required to allude to
the material that led to its prima facie conclusion about necessity
to take action against the service provider.
32. In the present case, the material that came to the fore in the
form of the investigation report was admittedly in favour of the
said petitioner as a service provider and yet, the Board chose to
issue show cause notice purportedly under Section 219 of the IBC
as it then stood. We are of the opinion that the said procedure
adopted by the respondent Board was procedurally irregular and
to that extent, the show cause notice stood vitiated. The said
petitioner was at least entitled to being provided the material on
the basis of which the show cause notice was issued.
32. Since this Court, while exercising writ jurisdiction, has the
th
power to interfere with the impugned order dated 18 December
2024 in a narrow compass, being conscious of the said position,
the impugned order is being examined.
33. A perusal of the impugned order shows that although the
aforementioned issues were raised against the petitioner-Jitender
Kumar Jain for having contravened the provisions of the IBC and
the Regulations framed thereunder, he was found guilty of only
three contraventions. Firstly, it was found that the said petitioner,
as the liquidator and the service provider, had irregularly
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constituted the SCC. Secondly, it was found that the said
petitioner had failed to present liquidation costs before the SCC in
th th th
the 4 , 5 and 6 meetings; and thirdly, that the said petitioner
had caused delay in issuing notices for conducting the first and
second auctions.
34. A perusal of the impugned order shows that, while arriving
at findings with regard to the aforementioned three issues, the
Disciplinary Committee of the respondent-Board stated the issues
in brief, then the response of the said petitioner and eventually the
analysis and findings thereon. At first blush, it does appear that the
respondent-Board, through its Disciplinary Committee, while
passing the impugned order, considered the material on record
while reaching its findings. But, a closer analysis shows that while
the said petitioner in his reply to the show cause notice and also in
his written submissions tendered after personal hearing, had raised
a number of concerns and issues, the respondent-Board does not
appear to have considered the same in the proper perspective. In
this regard, it would be appropriate to refer to the detailed reply
to the show cause notice submitted by the said petitioner. A
perusal of the same shows the manner in which the said petitioner
stated the chronology of events from the point in time when
liquidation was initiated in respect of the corporate debtor. The
conduct of the promoters / ex-directors including the promoter,
who had submitted the said complaints, was highlighted and in
that context, reference was made to their fraudulent conduct. The
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obstructionist attitude of the promoters / ex-directors of the
corporate debtor was also placed on record, due to which a
number of applications had to be filed before the adjudicatory
authority i.e. the NCLT and even writ petitions had to be filed
before this Court.
35. One such Writ Petition No.10244 of 2023 had to be filed by
the said petitioner seeking directions to the police to provide
assistance to clear the illegal occupation by the said promoters /
ex-directors and third parties in the premises owned by the
corporate debtor. This Court, in its order passed in the said writ
petition, recorded that the liquidator i.e. the petitioner-Jitender
Kumar Jain was being browbeaten and threatened by the
promoters and ex-directors of the corporate debtor in a most
illegal manner and that, bogus and frivolous complaints were also
being lodged against him. The said petitioner brought on record
material as to the manner in which the promoters / ex-directors
were causing news-items to be published in the print media,
levelling wild and baseless allegations against the said petitioner. It
is to be noted that the corporate debtor, itself, was a newspaper
house run by the said promoters / ex-directors.
36. Thereupon, the said petitioner responded to each of the
issues flagged by the Board in the said show cause notice. We are
of the opinion that the entire background placed by the said
petitioner before the respondent Board in response to the show
cause notice with supporting material ought to have been taken
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into consideration while analyzing the response to individual
issues raised in the show cause notice and that the analysis thereof
could not have been dehors such background and material. We
find that the impugned order is bereft of any such examination
and analysis. In other words, we find that relevant material placed
on record by the said petitioner was ignored by the respondent-
Board while passing the impugned order. This amounts to
violation of the principles of natural justice and a serious
procedural infirmity that goes to the root of the matter.
37. We also find substance in the contention raised on behalf of
the petitioner that the defences raised on his behalf, inter alia ,
concerned interpretation of the relevant Regulations framed under
the IBC, particularly the Insolvency and Bankruptcy Board of
India (Liquidation Process) Regulations 2016 (hereinafter referred
to as ‘Liquidation Regulations 2016’). We are of the opinion that if
more than one interpretation of the relevant regulations was
reasonably possible and the petitioner, as the liquidator, had
adopted one such interpretation, it could not be said that there
was serious contravention or infarction of the provisions of the
IBC and the Regulations framed thereunder. In this context, it
would be appropriate to consider the findings rendered by the
respondent-Board in the impugned order.
38. The first issue on which the respondent-Board found against
the petitioner in the impugned order pertained to alleged irregular
constitution of the SCC. Regulation 31A(1) of the Liquidation
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Regulations 2016 pertains to the SCC and it requires the regulator
to constitute the committee within 60 days of the liquidation
commencement date. Clause (3) of the aforesaid Regulation 31A
stipulates that the liquidator may facilitate the stakeholders of each
class i.e. the classes of financial creditors, workmen, employees
etc. to nominate their representatives for participation in the
consultation committee. The allegation against the said petitioner
is that, he treated only SBI as the sole representative of the
financial creditors in the SCC while there were other financial
creditors also. The said petitioner explained that as per his
interpretation of Regulation 31A(3) of the Liquidation Regulations
2016, since SBI and the other two financial creditors i.e. Bank of
Baroda and the petitioner-Edelweiss belonged to one class of
financial creditors i.e. secured creditors having relinquished their
security interest, he treated all three as a class with SBI
representing the said class. In his reply, the said petitioner had
enumerated the various classes of creditors that he took into
consideration such as secured financial creditors, unsecured
financial creditors, operational creditors (workmen), operational
creditors (government dues) etc. We find that the interpretation
placed by the said petitioner on Regulation 31A(3) of the
Liquidation Regulations 2016 is certainly an interpretation, which
qualifies to be a possible interpretation. This aspect was
completely ignored by the respondent-Board in the impugned
order while holding against the said petitioner on the first issue.
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39. Another relevant aspect concerning the first issue is that
when the said petitioner as the liquidator considered SBI as the
representative of all financial creditors, no other financial creditor
ever raised any grievance in that regard. The documents and
material pertaining to meetings of the SCC show that while SBI
was treated as the representative of all financial creditors, the
other two financial creditors in the same class i.e. secured creditors
having relinquished their security interest, being Bank of Baroda
and the petitioner-Edelweisse also attended all meetings of the
SCC. This is a relevant circumstance ignored by the Disciplinary
Committee of the respondent-Board while passing the impugned
order and holding against the petitioner on the said issue. In other
words, on the said issue, relevant considerations were ignored and
this amounts to procedural irregularity resulting in violation of
principles of natural justice.
40. As regards the second issue pertaining to the failure of the
said petitioner acting as the liquidator in presenting liquidation
costs in SCC meetings, at the outset, we find that the Disciplinary
Committee of the respondent-Board, in the impugned order,
th th
wrongly took into consideration the proceedings of the 7 , 8 and
th
9 meetings of the SCC, because the show cause notice raising the
th th th
said issue concerned only the 4 , 5 and 6 meetings of the SCC.
Thus, the consideration of the said issue was necessarily limited to
th th th
the 4 , 5 and 6 meetings of the SCC. This is found to be an
error in the impugned order.
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41. As regards the allegations contained in the said issue, the
impugned order analyzes the response of the said petitioner on the
touchstone of interpretation of Regulations 5 and 31A of the
Liquidation Regulations 2016. It appears that the said petitioner
proceeded on the basis that the necessity of the liquidator
presenting the liquidation cost to the SCC under Regulation
31A(6B) of the Liquidation Regulations was to be read with
Regulation 5(3)(c) thereof. On that basis, the said petitioner, while
performing his role as the liquidator, called for submission of
confidentiality undertakings. It is also an admitted position that
Regulation 31A(6B) was introduced in the Liquidation Regulations
th th
2016 with effect from 12 February 2024. The notice for the 4
th
meeting of the SCC was already issued on 10 February 2024, for
th
the meeting slated for 15 February 2024. Thus, at the point in
th
time when the notice for the 4 meeting was issued, Regulation
31A(6B) of the Liquidation Regulations 2016 was yet to come into
existence.
42. In the face of such facts, we find it surprising that the
Disciplinary Committee of the respondent-Board in the impugned
order held that the said petitioner while functioning as the
liquidator had shown 'contemptuous attitude' towards the
involvement of the stakeholders in the liquidation process. It was
also recorded in the impugned order that the stand taken by the
said petitioner in his defence was based on a misinterpretation of
the provisions. We are of the opinion that if it was a case of
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interpretation of provisions and the Disciplinary Committee of the
respondent-Board was of the opinion that the interpretation
applied by the said petitioner was incorrect, it would still lead to a
situation of two views with regard to a particular set of provisions.
Apart from this, it is an admitted position that none of the
stakeholders ever raised any grievance in that regard. We are of
the opinion that in such circumstances, the approach adopted by
the Disciplinary Committee of the respondent-Board in the
impugned order on the said issue was excessively stringent, leading
to adverse finding being rendered against the petitioner. It is to be
noted that in the operative portion of the impugned order, the
respondent-Board itself recorded that there were technical
violations of the Liquidation Regulations 2016. This is also a
factor to be taken into consideration.
43. As regards the third issue pertaining to delayed issuance of
notices for the first and second auction, the material on record, to
which the impugned order also briefly refers, shows that the
promoters of the corporate debtor had left no stone unturned to
obstruct the process from the very beginning. Their misdeeds had
created serious issues regarding parking etc. in the immovable
properties and all the issues were required to be sorted out before
the first notice for auction could be issued. The members of the
SCC were throughout aware of the same and in the meetings,
there were deliberations regarding the said issues. After a
semblance of regularity was brought about by the efforts of the
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said petitioner functioning as the liquidator along with the
members of the SCC, that the first notice for auction could be
issued.
44. Even with regard to the second notice for auction, ample
material was placed on record by the said petitioner to explain
why the same could not be undertaken within 15 days on the
failure of the first auction. Although the Disciplinary Committee
of the respondent-Board does refer to such material, the effect of
the same has not been taken into consideration. But the most
crucial factor is that the said petitioner had placed on record the
fact that such delays were all condoned by the adjudicatory
authority i.e. the NCLT. The impugned order proceeds on the
basis that such condonation of delay by the adjudicating authority,
which has an overarching role in such circumstances, was not a
relevant factor at all. This is another illustration of a crucial factor
being ignored while holding against the said petitioner on the issue
pertaining to delays in issuing the auction notices.
45. This brings us back to the fact that in the reply to the show
cause notice, the petitioner was at pains to point out the manner
in which the promoters and ex-directors of the corporate debtor,
at every stage, were adopting malicious and obstructive tactics,
judicial notice of which, was taken by the adjudicatory authority
i.e. the NCLT and even this Court in writ petitions, which the said
petitioner was constrained to file. When the adjudicatory authority
and even this Court in writ jurisdiction had to pass orders to assist
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the said petitioner, functioning as the liquidator, to ensure that the
integrity of the process under the IBC was maintained, it was
certainly a relevant factor. But, the same was ignored by the
Disciplinary Committee of the respondent-Board while holding
against the petitioner on the said issue.
46. In the light of the settled position of law, this Court, while
exercising writ jurisdiction in this case, has not analyzed the
findings rendered by the Disciplinary Committee of the
respondent-Board as if sitting in appeal. Instead, the findings have
been scrutinized by considering as to whether relevant material
was ignored and irrelevant factors were taken into consideration
while passing the impugned order. We are of the opinion that the
impugned order is vitiated on the touchstone of the said scrutiny
and this indicates procedural irregularity and violation of the
principles of natural justice. On these grounds, we are inclined to
exercise writ jurisdiction to interfere with the impugned order.
47. The aforesaid petitioner has relied upon judgements in the
cases of Inspector Prem Chand vs. Government of NCT of Delhi
& Ors. (supra) , Abdul Rauf Mohammed Khaja vs. State of
Maharashtra, through the Secretary, Revenue Department & Ors.
(supra) and Union of India Vs. K. K. Dhawan , 1993 (2) SCC 56 ,
for the proposition that mere negligence or carelessness would not
amount to misconduct. We are of the opinion that the said
judgements were rendered in the context of service jurisprudence
wherein the employer proceeded against the employee on the
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ground of misconduct. In the present case, the situation is
different, for the reason that the said petitioner, while functioning
as a liquidator, is not an employee of the respondent-Board, but,
he functions under the supervision of the Board, which is the
regulator of the process of insolvency and liquidation under the
provisions of the IBC. Therefore, strictly speaking, the said
judgements may not apply to the facts of the present case.
48. We find substance in reliance placed on behalf of the said
petitioner on the judgement of the Supreme Court in the case of
Chairman, Life Insurance Corporation of India & Ors. vs. A.
Masilamani (supra) , wherein the Supreme Court has given an
analysis of the word 'consider'. In the context of Regulation 11 of
the Investigation Regulations 2017, the said position of law
assumes significance, because the respondent-Board is required to
'consider' the inspection report to reach a prima facie opinion that
sufficient cause exists to take action under Section 220(2) of the
IBC for issuing show cause notice. In the present case, the
inspection report categorically concluded that no actionable
material was available. As per the said position of law, the
respondent-Board was required to 'think over' and form an
opinion on the investigation report to reach a prima facie opinion
that action against the said petitioner was warranted. We find that
th
the impugned show cause notice dated 9 July 2024 refers to the
inspection report, but obviously does not consider the findings
therein and proceeds to invoke Section 220(2) of the IBC. We
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have already noted that this aspect of the matter vitiated the show
cause notice itself.
49. There can be no quarrel with the propositions laid down by
the Supreme Court in the judgements of Union of India & Ors. vs.
P. Gunasekaran (supra) and Chief Commercial Manager, South
Central Railway, Secunderabad & Ors. vs. G. Ratnam & Ors.
(supra) with regard to the limited jurisdiction that can be exercised
by the Writ Court while considering the correctness or otherwise
of an order in the nature of the order impugned herein. The said
judgements were relied upon by the learned counsel appearing for
the respondent-Board. We have exercised our jurisdiction in this
case within the narrow compass available as per the settled
position of law and we have reached the conclusions hereinabove,
which indicate that the petitions deserve to be allowed. We also
find that reliance placed on behalf of the respondent-Board on
judgement of this Court in the case of Naren Sheth vs. Union of
India & Ors. (supra) is misplaced, because in that case, the Court
was convinced on facts about the allegations against the service
provider.
50. Although the impugned order imposes the penalty of
suspending the registration of the petitioner-Jitender Kumar Jain
for a period of three months, it cannot be ignored that by
operation of clause 23A of the Model Bye-Laws, the moment the
th
show cause notice dated 9 July 2024 was issued, the
authorization for assignment of the said petitioner stood
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suspended. In effect, the petitioner suffered suspension for a
longer period of time. A Division Bench of this Court in the case
of Amit Gupta Vs. Insolvency and Bankruptcy Board of India ,
2024 SCC OnLine Bom. 989 has commented upon such a drastic
consequence in the following manner:-
“81. Before we part with the matter, we would be remiss if
we did not highlight to the IBBI that it must examine the
serious effect of the issuance of a show cause notice to any
IP. The very issuance of a show cause notice has the effect
of stopping the IP from taking up new work by reason of
Bye-Law 23A in the Model Bye-Laws that are statutorily
specified in the Schedule to the Insolvency and Bankruptcy
Board of India (Model Bye-Laws and Governing Board of
Insolvency Professional Agencies) Regulations, 2016, which
provides as follows:-
"The authorisation for assignment shall stand suspended
upon initiation of disciplinary proceedings by the Agency
or by the Board, as the case may be."
82. While the aforesaid provision is not under challenge
before us, we take judicial notice of the serious
repercussions on insolvency professionals when the
Insolvency and Bankruptcy Board of India issues a show
cause notice. The moment disciplinary proceedings are
initiated, the insolvency professional's authorisation to
conduct his assignments stands suspended. Such a position
enabled by subordinate law can have serious implications
for insolvency professionals. This position may also have
the effect making the Insolvency and Bankruptcy Board of
India reticent to issue show cause notices, considering the
debilitating impact it can have on any insolvency
professional. This situation deserves to be reviewed by the
Insolvency and Bankruptcy Board of India.
51. Thus, we find that the respondent-Board needs to be more
circumspect while issuing show cause notices to insolvency
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professionals like the petitioner herein and in that backdrop, the
necessity of proper consideration of the material under Regulation
11 of the Investigation Regulations 2017 assumes even more
significance.
52. Although we find that the petitioner-Edelweiss could not
have had a grievance to challenge the impugned order, but the
very fact that it chose to challenge the impugned order
demonstrates that as a member of the SCC, it was more than
happy with the manner in which the petitioner-Jitender Kumar
Jain was functioning as the liquidator. As a matter of fact, the
petitioner-Edelweiss is at pains to point out that the petitioner-
Jitender Kumar Jain took all necessary steps to ensure the integrity
of the process undertaken as per the provisions of the IBC and the
Regulations framed thereunder and the manner in which the
promoters and ex-directors were hell bent upon derailing the same
and in the process, targeted the liquidator himself. To that extent,
the petition filed by the petitioner-Edelweiss deserves
consideration.
53. In view of the above, the writ petitions are allowed. The
th
impugned order dated 18 December 2024 passed by the
Disciplinary Committee of the respondent-Board is quashed and
set aside. As regards prayer of the petitioner-Jitender Kumar Jain
for direction to the respondent No.1-Union of India to consider
putting in place an appellate body, the recent amendment of the
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IBC, adding sub-section (7) to Section 220 sufficiently satisfies the
said grievance of the petitioner. By the said amendment, an avenue
of appeal is provided to a person aggrieved by an order of the
Disciplinary Committee of the respondent-Board by preferring an
appeal before the National Company Law Appellate Tribunal.
54. As regards declaration that Regulation 13(3ba) of the
Investigation Regulations 2017 is unconstitutional, serious
arguments were not advanced by the parties, and therefore, the
said question is not dealt with and it is kept open.
55. In view of the above, both the writ petitions are disposed of.
Pending applications, if any, also stand disposed of.
(SHREERAM V. SHIRSAT, J.) (MANISH PITALE, J.)
Bipin / Minal
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