Sashi Agarwal v. Union of India and Ors
Section 220 of the Insolvency and Bankruptcy Code requires the Disciplinary Committee to consist of whole-time members of the Board only, and the Chairperson belongs to a separate category under section 189(1)(a), so an order of the Chairperson alone is without jurisdiction and a nullity that cannot be cured by consent or participation; a show cause notice under section 219 follows an inspection or investigation under section 218 and cannot rest on the NCLAT's observations alone, particularly when an inspection report was favourable to the professional; and there is no estoppel against a statute, so the withdrawal of an appeal in the Supreme Court with liberty did not bar the objection.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-16
Sashi Agarwal, the interim resolution professional of INCAB Industries Limited, a company long in the BIFR, was held by the NCLAT to have formed the committee of creditors without verifying claims, admitted related parties and recommended liquidation. The IBBI then cancelled the registration, which the High Court set aside on jurisdiction and procedure.
What happened
INCAB Industries Limited was declared sick by the BIFR in 2000, its accounts were not audited after 1999 and no returns were filed. Kamala Mills and Fasqua Investments were financial creditors, and a director of those firms, Mr. Ramesh Gowani, had been nominated by the BIFR in 2009 until the Delhi High Court set that aside on 29 April 2013. The NCLT Kolkata admitted a CIRP on 7 August 2019 and appointed the petitioner interim resolution professional. Pegasus Assets Reconstruction objected to Kamala Mills and Fasqua in the third committee meeting on 18 October 2019, they were treated as related parties, and on 20 November 2019 the NCLT held that Mr. Gowani was not a director of the corporate debtor and the creditors were not related parties. The committee, with more than 80 per cent voting share, resolved at its fifth meeting on 5 December 2019 to liquidate, and the NCLT ordered liquidation on 7 February 2020. By order of 4 June 2021 the NCLAT set it aside and sent a direction to the IBBI to take action. The IBBI's Assistant General Manager issued a show cause notice on 10 September 2021. The Supreme Court on 3 December 2021 allowed the petitioner to withdraw his appeal, permitting him to raise all pleas before the IBBI. Meanwhile an inspection ordered on 6 August 2020 of all the petitioner's assignments produced a final report of 2 June 2021 noting nothing untoward. The Chairperson cancelled the registration on 13 May 2022 under section 220(2) and the 2016 Regulations. The IBBI said the claims were unverified, the Information Memorandum and valuers were missing, and that the Chairperson acts as delegate.
Questions before the court
- Could the Chairperson of the IBBI cancel an insolvency professional's registration under section 220 without a Disciplinary Committee of whole-time members and without an inspection or investigation under section 218?
Why the court ruled this way
Section 220 provides that the Disciplinary Committee shall consist of whole-time members only, and under section 189(1) and the IBBI (Salary, Allowances and Other Terms and Conditions of Service of Chairperson and Members) Rules, 2016 the Chairperson and whole-time members are separate categories, so a thing required to be done in a certain way must be done in that way or not at all, as Taylor v. Taylor, Nazir Ahmad v. King Emperor and Municipal Corporation of Greater Mumbai v. Abhilash Lal show (paragraphs 16 to 21). The Delegation of Powers and Functions General Order, 2017 delegates the issue of show cause notices to a Deputy General Manager and disposal and cancellation to the Disciplinary Committee, so even on delegation the Chairperson alone could not act, and a jurisdictional defect cannot be cured by consent or waiver, as Sushil Kumar Mehta v. Gobind Ram Bohra says (paragraphs 22 to 26). Section 218 requires an inspection or investigation by an investigating authority and section 219 a show cause notice after its report, but the notice was founded on the NCLAT's observations and ignored the favourable inspection report of 2 June 2021 and the Supreme Court's direction that the IBBI proceed independently (paragraphs 27 to 33). The IBBI did not consider that the company had no books since 1999, as the later NCLT orders of 18 April 2024 and 7 March 2025 confirm, and whether the inability to collate claims was genuine called for a deeper probe (paragraph 34). There is no estoppel against a statute (paragraph 35).
Controlling point
The order was without jurisdiction and procedurally flawed, and the show cause notice was invalid for want of an inspection or investigation.
Order and next steps
The impugned order and the show cause notice were set aside as a whole, with liberty to the IBBI to proceed in accordance with law on the same issue.
Practical implications
An insolvency professional facing disciplinary action can insist that the IBBI follow sections 218 to 220: a report of inspection or investigation, a show cause notice, and a decision by a Disciplinary Committee of whole-time members, not by the Chairperson alone.
Limits of this ruling
- The Court did not decide on the merits whether the petitioner had in fact violated the Code, left that for fresh proceedings, and addressed the writ court's limited scope of review.
Law and judgment source
- Insolvency and Bankruptcy Code, 2016, sections 19, 21, 29, 33(2), 189, 217, 218, 219 and 220
- IBBI (Insolvency Professionals) Regulations, 2016
- IBBI (Inspection and Investigation) Regulations, 2017
- Constitution of India, article 226
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Source checked: 2026-10-16 · Judgment paragraphs: paragraphs 1-37 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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