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Bombay High Court Seeks Attorney General’s Response in Challenge to IBC Provisions on IRP Appointment

The Bombay High Court has issued a notice to Attorney General for India, R Venkataramani, in response to a petition challenging the constitutional validity of provisions within the Insolvency and Bankruptcy Code (IBC) that pertain to the appointment of insolvency resolution professionals (IRPs).

Suspension Without Hearing The petitioner, insolvency professional Poonam Basak, was suspended for three years by the Insolvency and Bankruptcy Board of India (IBBI), which rendered her ineligible for accepting new appointments as an IRP. Basak argued that this suspension effectively assumed the allegations against her were true until proven false, violating her fundamental rights under Articles 14, 19, and 21 of the constitution.

Challenged Sections The sections under challenge include 7(5), 9(5), 16(2), 16(3), 16(4), 27(5), 82(1), 89(3), 97(1), 98(3), 98(5), 125(1), and 145(5) of the IBC, which permit the suspension of an insolvency professional without a hearing upon issuance of a show cause notice.

Violation of Natural Justice The petition emphasized that such suspension without a hearing violates principles of natural justice and the presumption of innocence until proven guilty.

De Facto Whole Time Member Issue The petition also questioned whether the Chairperson of the IBBI is a de facto Whole Time Member of the Board with the authority to issue suspension orders. The Court found that the Chairperson’s appointment process differed from that of Whole Time Members, suggesting a lack of jurisdiction.

Court’s Decision In light of these issues, the Court temporarily stayed the operation of the suspension order and show cause notice against Basak.

Legal Representation Senior Advocate Sharan Jagtiani, along with Advocates Nirman Sharma, Ansh Karnawat, G Aniruth Purusothaman, and Parth Shah, represented Poonam Basak in the case.


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