The Insolvency and Bankruptcy Code, 2016 (Code) envisages that an insolvency professional may be appointed as interim resolution professional, resolution professional, liquidator, or a bankruptcy trustee if no disciplinary proceeding is pending against him. Some of these provisions are extracted at Annexure A.
2. The Code, however, does not define ‘disciplinary proceeding’. Section 219 envisages issue of show cause notice following an inspection or investigation and section 220 envisages constitution of a disciplinary committee for consideration of the inspection or investigation report. Various regulations made under the Code envisage issue of show cause notice based on findings of an inspection or investigation or on material otherwise available on record. They also envisage constitution of disciplinary committee for disposal of show cause notice.
3. A show cause notice is issued after application of mind to the material available on record or on consideration of the inspection or investigation report. The disciplinary committee disposes of the show cause notice by a reasoned order in adherence to principles of natural justice. The reasoned order carries the determination of contravention, if any, of the provisions of the Code, the rules and regulations, or guidelines, directions or orders issued by the Insolvency and Bankruptcy Board of India. Thus, a disciplinary proceeding commences with the issue of show cause notice and concludes with the disposal of show cause notice by a reasoned order.
4. It is, therefore, clarified that-
(i) a disciplinary proceeding is considered as pending against an insolvency professional from the time he has been issued a show cause notice by the Insolvency and Bankruptcy Board of India till its disposal by the disciplinary committee; and
(ii) an insolvency professional who has been issued a show cause notice shall not accept any fresh assignment as interim resolution professional, resolution professional, liquidator, or a bankruptcy trustee under the Code.
5. This Circular is issued in exercise of the powers under section 196 read with section 208 of the Insolvency and Bankruptcy Code, 2016.
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