IBBI Disciplinary Committee Refers Mr. Rajan Garg's Conduct for Detailed Investigation: Issues of CoC Constitution, Financial Debt Classification, and Stakeholder Representation

Overview

The Insolvency and Bankruptcy Board of India's Disciplinary Committee (DC) has disposed of a Show Cause Notice (SCN) issued against Mr. Rajan Garg, a registered Insolvency Professional (IP), concerning alleged irregularities in the conduct of the Corporate Insolvency Resolution Process (CIRP) of M/s Truly Creative Developers Private Limited. Rather than imposing a direct penalty, the DC referred the matter to the Board for a comprehensive independent investigation, citing prima facie concerns about the wrongful constitution of the Committee of Creditors (CoC), inadequate due diligence in claim admission, and the manner in which litigation affecting the corporate debtor's assets was handled.

Order Reference: IBBI/DC/308/2026 | Date: 30th March 2026
SCN Reference: IBBI/C/2024/01121/913/1029 dated 11.12.2024

Background and Initiation of Proceedings

M/s Truly Creative Developers Private Limited (the Corporate Debtor/CD) was admitted into CIRP pursuant to an order dated 11.11.2022 passed by the National Company Law Tribunal, Mumbai Bench, on a Section 9 application filed by Amit Steels. Mr. Rajan Garg was appointed as the Interim Resolution Professional (IRP) and subsequently confirmed as the Resolution Professional (RP).

A complaint dated 22.04.2024 was received by the Board alleging wrongful constitution of the CoC. Following an exchange of correspondence and examination of the material on record, the Board formed a prima facie view that Mr. Rajan Garg had contravened provisions of the Insolvency and Bankruptcy Code, 2016 (the Code) and the regulations framed thereunder. Accordingly, the SCN was issued on 11.12.2024.

Mr. Rajan Garg submitted an interim reply dated 25.12.2024, a final reply dated 04.01.2025, and additional written submissions dated 15.10.2025 and 16.10.2025. He also availed the opportunity of a virtual personal hearing on 01.08.2025, appearing with his legal counsel Mr. Ankur Khandelwal.

Core Allegation: Wrongful Constitution of the CoC

The Position of Western Habitat in the CoC

As per the list of creditors published on 03.12.2022, six creditors had been classified as unsecured financial creditors and one as a secured financial creditor. Among these, M/s Western Habitat Partnership Firm (Western Habitat) was classified as an unsecured financial creditor and was admitted to the CoC with 24.60% voting rights.

However, as per the updated list of claims published on 06.02.2024, Western Habitat was removed entirely from the list of creditors. This removal was also reflected in the minutes of the 6th CoC meeting dated 13.06.2024. Crucially, Western Habitat had already participated in the 1st through 5th CoC meetings, during which the following significant resolutions were passed:

  • 1st CoC Meeting: Confirmation of the IRP's appointment as RP
  • 2nd CoC Meeting: Ratification of CIRP costs, including the RP's professional fees
  • 3rd CoC Meeting: Discussion and approval of the draft Expression of Interest (EoI) for submission of resolution plans
  • 4th CoC Meeting: Extension of timelines for inviting EoIs
  • 5th CoC Meeting: Approval of an architect's appointment to complete the CD's ongoing real estate projects

The Board observed that although Mr. Rajan Garg had admitted the claim based on available documentation, his repeated requests to Western Habitat to furnish evidence substantiating its claim of Rs. 1.80 crores as financial debt indicated that admission had been made without adequate justification. This was alleged to constitute a violation of Sections 21(2), 208(2)(a) and (e) of the Code, Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), and Regulation 7(2)(a) and (h) of the IP Regulations read with Clause 14 of the Code of Conduct.

Submissions of Mr. Rajan Garg

Claim Admission and Verification Process

Mr. Rajan Garg submitted that he received a total claim of Rs. 4,39,26,027/- from Western Habitat prior to the last date for submission specified in the public announcement. This comprised a principal amount of Rs. 1,80,00,000/- and an interest component of Rs. 2,59,26,027/-. The principal amount was admitted based on documents available at that time, while the interest component was placed under further verification.

He relied upon Regulation 14 of the CIRP Regulations, which provides for determination of claim amounts based on best estimates, and contended that initial admission was consistent with available information and documentation.

Constraints Faced During CIRP

Mr. Rajan Garg highlighted that CIRP proceedings had been disrupted almost immediately after commencement. The suspended director of the CD, Mr. Rajendra Barde, filed an appeal before the NCLAT and obtained an interim stay on 14.12.2022. The stay was vacated only on 19.04.2023, following which the matter was taken to the Supreme Court on 26.04.2023, which dismissed the appeal on 15.05.2023. During this period, claim verification could not be actively pursued.