Established professional misconduct affirmed by superior courts precludes appellate interference with recommendations for investigation against insolvency professionals.

The Appellant, a registered Resolution Professional (RP) for M/s. Viceroy Hotels Limited, challenged a specific portion (para 53) of the order passed by the National Company Law Tribunal (NCLT), Hyderabad, dated 01.09.2021.

In the impugned order, the NCLT recommended that the Insolvency and Bankruptcy Board of India (IBBI) investigate the Appellant's conduct during the Corporate Insolvency Resolution Process (CIRP).

The NCLT observed that the RP and the Committee of Creditors (CoC) appeared to have "bulldozed" the process to favor an ineligible resolution applicant, M/s. CFM Asset Reconstruction Pvt. Ltd., by allowing a "backdoor entry" through an unauthorized co-applicant (M/s Tolaram Inc) and failing to ensure compliance with Section 29A of the Code.

The Appellant argued that these findings were made without giving him an opportunity to refute the allegations and were based on a previous NCLAT judgment dated 18.11.2019, which he contended had been reversed by the Supreme Court.

1. Whether the NCLT was justified in recommending an IBBI investigation into the Appellant’s professional conduct based on the findings of procedural irregularities and bias.

2. Whether the adverse remarks regarding professional misconduct in the impugned order were sustainable in light of the Appellant's prior disciplinary history and relevant judicial precedents.

The court primarily applied the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, specifically Regulations 7(2)(h) and the Code of Conduct (First Schedule), which mandate integrity, professional competence, and confidentiality.

It referenced Sections 217-220 of the Insolvency and Bankruptcy Code (IBC), 2016, governing investigations and disciplinary proceedings.

The court also applied Section 29A (eligibility criteria) and Section 30(2) of the IBC, read with Regulation 38(3)(e) of the CIRP Regulations, 2016, and Section 10(2) of the SARFAESI Act, which requires prior RBI approval for Asset Reconstruction Companies (ARCs) to act as resolution applicants.

The Tribunal found that the NCLT’s observations were not "malicious or perverse" but were grounded in the Appellant's failure to ensure the resolution plan met statutory conditions.

The Tribunal noted that the RP had permitted the induction of a co-applicant via an addendum without the CoC’s knowledge and ignored the requirement for RBI approval for the ARC bidder.

Regarding the Appellant’s claim that the 18.11.2019 NCLAT order (which criticized his conduct) was reversed, the Tribunal clarified that the Supreme Court had actually affirmed the order on 24.01.2020, merely adding a procedural requirement for the CoC to hear the RP before approaching the IBBI.

Crucially, the Tribunal highlighted that the IBBI Disciplinary Committee had already passed a final order (No. IBBI/DC/21/2020) on 20.04.2020, finding the Appellant guilty of a "casual attitude" and contravention of Section 208(2)(a) of the Code, resulting in a monetary penalty of Rs. 1,00,000.

Consequently, the Tribunal determined it could not interfere with the NCLT’s findings since the Appellant's professional misconduct had already been established in house and affirmed by the Apex Court.

The Tribunal held that since the allegations of misconduct were established through independent disciplinary proceedings and supported by judicial history, the recommendation for investigation in the impugned order was valid.

All pending interlocutory applications were closed.