Insolvency and Bankruptcy Board of India v. Rishi Prakash Vats (2019)

The Code's institutional design separates three functions: the Adjudicating Authority decides cases, the committee of creditors exercises commercial judgment, and the Board regulates the profession. Unit 4 is largely about keeping those three apart. This decision does it at the point where the Tribunal and the Board meet — discipline of an insolvency professional — and holds that once the Board has taken up a disciplinary matter, the Tribunal cannot take it back.

Disciplinary proceedings were initiated by the Board against an insolvency professional on the basis of evidence on record. The Adjudicating Authority interfered with those proceedings. The Board appealed.

Once a disciplinary proceeding is initiated by the Board on the basis of evidence on record, it is for the Board, as the disciplinary authority, to close the proceedings or pass appropriate orders in accordance with law. Such power having been vested in the Board, and in the absence of such power being vested in the Adjudicating Authority, the Adjudicating Authority cannot quash the disciplinary proceedings initiated by the Board — and cannot do so even where the proceeding was begun at the instance of, or on a recommendation made by, the Adjudicating Authority.

The reasoning is the one that runs through the whole of Unit 4: a tribunal exercising statutory jurisdiction has the powers the statute gives it and no others. The Code establishes the Board and confers on it the functions of registering and regulating professionals, agencies and information utilities, of monitoring their performance, and of constituting a disciplinary committee and having a matter investigated. It confers no power of supervision over the Board's disciplinary process on the Adjudicating Authority. Where a statute vests a function in one body and is silent as to another, the silence is the answer.

The point about a proceeding begun on the Tribunal's own recommendation is the practically important one. A tribunal that notices misconduct may refer the matter to the Board, and a referral has been treated as the proper course where the conduct or the remuneration of a professional gives cause for concern. But referral is not retained control: once referred, the matter is the Board's, and the Tribunal cannot direct its outcome.

The same allocation appears in the surrounding decisions. Allegations of mala fides, corruption or professional misconduct against a resolution professional are to be adjudicated by the Board, and the Adjudicating Authority acts on the Board's orders; the Board is the only authority to inquire into allegations against a liquidator acting in the discharge of his duty; and while the Board is competent to constitute a disciplinary committee and have a matter investigated, if after investigation it finds that a criminal case is made out it must file a complaint in respect of the offences committed.

1. On the functions of the Board, use this case to show that its disciplinary jurisdiction is exclusive, and pair it with the proposition that the Board cannot, under s. 196, directly or indirectly regulate the exercise of commercial wisdom by financial creditors.
2. State the division of labour in one sentence: the Tribunal adjudicates the insolvency, the committee decides the commerce, the Board disciplines the professional — and none may do another's work.
3. Note the appeal position. An appeal lies against an order of the Adjudicating Authority; it has been held that no appeal is maintainable against an order passed by the Board, including its disciplinary committee. Where a question asks about a remedy against the Board, that is the point to make, and to note that the ordinary route against a regulator's order is judicial review rather than appeal.
4. What it does not decide. It does not decide the merits of any disciplinary charge, nor the standard of proof before a disciplinary committee.

Section 196(1) has since been amended so that the Board's functions are expressed in terms of service providers in place of the enumeration of insolvency professionals, insolvency professional agencies and information utilities. A new clause empowers the Board to specify standards of conduct for the committee of creditors and its members, including timelines within which the committee is to take decisions under Part II and Part III, and an Explanation clarifies that the Board's power to levy fees includes fees in relation to the processes under the Code. Sections 217, 218, 220 and 224 have also been amended. The allocation of disciplinary authority described here is unchanged, but the regulatory vocabulary has moved, so use the current expression when stating the Board's functions.