IBBI Suspension of Resolution Professional: NCLAT Upholds CoC Autonomy and Principles of Natural Justice

In an important ruling vide order dated July 17, 2026, in Sachin Naveen Sinha v. The Insolvency & Bankruptcy Board of India [I.A. No. 4537 of 2026 in Company Appeal (AT) (Ins.) No. 1165 of 2026], the Hon’ble National Company Law Appellate Tribunal (NCLAT), Principal Bench, has stayed the operation of the Insolvency and Bankruptcy Board of India’s (IBBI) disciplinary order dated June 8, 2026, insofar as it prevented the appellant Resolution Professional (RP) from continuing in Corporate Insolvency Resolution Process (CIRP) other than the assignment in which the disciplinary proceedings originated.

The appeal arises from the IBBI’s order suspending the RP’s registration for three years, following disciplinary proceedings initiated pursuant to the NCLT, Jaipur Bench’s order dated September 26, 2025, in I.A. No. 382/2025 in C.P. (IB) No. 63/9/JPR/2020, whereby the RP was removed from a CIRP, directed to refund Rs. 2 lakhs and recommended for disciplinary action. The refund direction is already under interim stay in separate appellate proceedings.

A notable feature of the case is that it constitutes one of the first appeals under the newly inserted Section 220(7) of the Insolvency and Bankruptcy Code, 2016 (IBC), introduced by the Insolvency & Bankruptcy Code (Amendment) Act, 2026 with effect from May 22, 2026, conferring appellate jurisdiction upon the NCLAT against orders of the IBBI’s Disciplinary Committee.

The principal issue before the Tribunal was whether the IBBI’s power under Sections 217–220 of the Code permits suspension of the RP across all ongoing assignments, notwithstanding the statutory role of the Committee of Creditors (CoC) under Sections 22 and 27 in appointing and replacing the RP. The Tribunal also examined the interplay with Regulation 13(7) of the IBBI (Inspection and Investigation) Regulations, 2017, which requires the Board to communicate disciplinary orders to the CoCs of other assignments rather than automatically displacing the RP. The Tribunal examined the IBBI’s disciplinary powers to override the statutory autonomy of the CoC in circumstances where the RP’s conduct in other CIRPs remained unchallenged.

The NCLAT observed that while the IBBI possesses disciplinary powers, their exercise must remain proportionate and consistent with principles of audi alteram partem. The Tribunal considered that a finding of misconduct of RP in one CIRP, without affording a hearing concerning the conduct in other respective assignments, could not justify a blanket prohibition from acting as RP across all CIRPs. Holding that the appellant had established a strong prima facie case, the Tribunal suspended the disciplinary order to the limited extent that it affected the appellant’s other assignments, while permitting the IBBI to intimate the respective CoCs, leaving the decision on continuation of the RP to respective CoCs.

The order is significant for its preliminary observations on the breadth of NCLAT’s appellate jurisdiction under Section 220(7) and on the limits of the IBBI’s disciplinary powers vis-à-vis the statutory autonomy of the CoC. The final adjudication is likely to shape the contours of disciplinary oversight and appellate review under the amended IBC framework.

 

– Authored by Mr. Aashish G. Darne