IBBI rejects IP registration application for pending criminal proceedings

IBBI rejects IP registration application for pending criminal proceedings as it impacts the reputation making applicant not a fit and proper person

ABCAUS Case Law Citation:
ABCAUS 2383 (2018) 06 IBBI

The applicant who was a professional member of the ICSI Institute of Insolvency Professionals (ICSI IIP) submitted an application under regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (IP Regulations) seeking a certificate of registration as an Insolvency Professional (IP).

The application carried the recommendation of ICSI IIP for registration of the applicant as an IP.

As per the application there was one pending criminal proceedings against the applicant wherein he was the main accused before the various judicial and quasi-judicial forums. The applicant however claimed that he was maliciously dragged into the dispute

In support of the application, the ICSI IIP submitted a legal opinion in his support.

IBBI observed that as per regulation 4(g) of the IP Regulations, an individual is not eligible to be registered as an IP if he is not a fit and proper person. Among others, integrity, reputation and character are taken into account to determine if an individual is a fit and proper person.

After seeking further clarification on the pending criminal proceeding, the Board formed a prima facie opinion that the applicant was not a fit and proper person for registration as an IP. The prima facie opinion was communicated to show cause as to why his application should not be rejected.

The Board observed that the reputation, character and competence of the applicant are of material consideration. What is material is what others feel about the applicant who has been charge-sheeted for offences such as rioting, criminal trespass, house-trespass after preparation for hurt, assault or wrongful restraint and criminal intimidation which attract imprisonment up to seven years. Does such a person inspire confidence of the stakeholders who can entrust him with property of lakhs of crores for management under corporate insolvency resolution process? Pendency of serious criminal proceedings against the applicant adversely impacts his reputation and makes him not a person fit and proper to become an IP.

The Board opined that pendency of serious criminal proceeding, against an applicant adversely impacts his reputation and makes him not a person fit and proper for registration as an IP. Therefore, the application was rejected.

However, the Board expressed its displeasure over the conduct of the ICSI IIP, which is a front-line regulator as it had supported and recommended the registration of the applicant with a legal opinion which had held that the applicant is a fit and proper person, after explicitly recording that the charge sheet had not been filed against him. The fact was that a charge sheet had been filed against the applicant. Probably, the legal opinion would have been different if full and correct facts were placed before the learned legal Counsel.

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