Insolvency Professional Suspended Three Years for Forming CoC on Unverified Claims

1. Overview of the Disciplinary Proceedings

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI) passed Order No. IBBI/DC/314/2026 dated 30th March 2026 against Insolvency Professional Shri Dushyant C Dave, arising from his conduct during the Corporate Insolvency Resolution Process (CIRP) of M/s Altius Digital Private Limited.

The Committee examined:

  • Preliminary objections on procedural aspects (time limit for disposal of show cause notice and supply of investigation report), and
  • Substantive charges relating to:
    • Delayed and incomplete verification of claims
    • Constitution and reconstitution of the Committee of Creditors (CoC) based on unverified / nil-admitted claims
    • Premature admission of a financial creditor with 100% voting share without complete verification
    • Contradictory statements before the Adjudicating Authority (AA) and CoC
    • Breach of neutrality, objectivity and professional conduct under the Code of Conduct.

Ultimately, the Disciplinary Committee concluded that the CoC was improperly constituted in violation of the Insolvency and Bankruptcy Code, 2016 (Code) and the relevant Regulations, and ordered a three-year suspension of Shri Dave’s registration as an Insolvency Professional.

2. Background of the CIRP and Appellate History

2.1 Initiation of CIRP and Appointment of IRP

  • **Corporate Debtor (CD)😗* M/s Altius Digital Private Limited
  • CIRP Admission: By National Company Law Tribunal, Mumbai Bench (AA) on 19.12.2023
  • Section Invoked: Section 9 of the Insolvency and Bankruptcy Code, 2016
  • Applicant / Operational Creditor: Gospell Digital Technologies Company Limited
  • **Interim Resolution Professional (IRP)😗* Appointed as Shri Dushyant C Dave

2.2 Replacement of IRP and Adverse Findings in Appeal

  • On an application (IA/503/2024) by Gospell Digital Technologies Company Limited, the AA on 04.03.2024:

    • Replaced Shri Dushyant C Dave, and
    • Appointed Mr. Arun Kisanlal Bagadia as Resolution Professional (RP).

  • Shri Dave challenged this order before the National Company Law Appellate Tribunal (NCLAT), New Delhi in Appeal No. CA(AT)(Ins) 656/2024.

  • By order dated 27.09.2024, the NCLAT:

    • Affirmed the AA’s decision,
    • Recorded serious adverse comments on the neutrality and bona fides of Shri Dave’s conduct in the CIRP, and
    • Directed IBBI to investigate his role.

  • A further Civil Appeal No. 12222/2024 filed by Shri Dave before the Hon’ble Supreme Court was dismissed on 11.11.2024, with the Court observing that there was no reason to interfere with the NCLAT judgment.

2.3 Investigation by IBBI

Acting under Section 218 of the Code read with Regulations 7(2) and 7(3) of the IBBI (Inspection and Investigation) Regulations, 2017:

  1. IBBI appointed an Investigating Authority (IA) to examine the conduct of Shri Dave in the CIRP of the CD.
  2. Investigation notice under Regulation 8(1) was issued on 16.10.2024.
  3. Shri Dave submitted responses via emails dated 25.11.2024, 04.12.2024 and 31.01.2025.
  4. On the basis of material collected, the IA submitted an investigation report to the Board.

The Board, having formed a prima facie opinion that there were contraventions of the Code and Regulations, issued a Show Cause Notice (SCN) dated 19.05.2025.

Shri Dave replied to the SCN on 02.06.2025. The SCN and reply were placed before the Disciplinary Committee, and he was given multiple opportunities of personal hearing, which he ultimately availed on 03.11.2025, followed by additional written submissions on 07.11.2025.

3. Preliminary Objections and the Committee’s Rulings

3.1 Objection: Delay in Disposal of SCN

Shri Dave argued that:

  • Under directions issued by IBBI pursuant to Regulation 13(2) of the IBBI (Inspection and Investigation) Regulations, 2017 (as amended in August 2024), an SCN must be disposed of within 60 days from the due date of reply.
  • Because this time-frame was not met, the SCN should be closed without any action.
  • He also requested that no order, even if exonerating him, be published on the IBBI website due to alleged “stigma” and misuse by litigants.

Findings of the Disciplinary Committee:

  • Regulation 13(2) uses the expression that the Disciplinary Committee “shall endeavour” to dispose of the SCN within 60 days.
  • The Committee held that:
    • This is an internal procedural guideline, directory and not mandatory.
    • It does not create a substantive or enforceable right for an Insolvency Professional.
    • Non-compliance with this time-frame does not render the SCN or proceedings invalid.
  • Further, IBBI has a statutory obligation under Sections 196 and 220 of the Code to investigate and act on contraventions, which cannot be neutralised merely due to procedural delay.
  • On publication of orders:
    • Publication on the IBBI website is in line with Regulation 12(6) of the IBBI (Inspection and Investigation) Regulations, 2017.
    • The plea to avoid publication was rejected.

3.2 Objection: Non-supply of Investigation Report Before SCN

Shri Dave contended that:

  • The investigation report was not shared with him before issuance of the SCN.
  • Had it been supplied earlier, he could have addressed alleged errors and possibly prevented the SCN.
  • Hence, the proceedings deserved closure on this procedural ground as well.

Findings of the Disciplinary Committee:

  • Under Section 218(6) of the Code and Regulation 10 of the Investigation Regulations, the IA submits its report to the Board, which then examines it and may direct further investigation.
  • At that stage, there is no requirement in law to supply the investigation report to the Insolvency Professional.
  • As per Regulation 11 and Regulation 12(5), the report was considered by the Board and provided to Shri Dave along with the SCN.
  • Crucially, the SCN set out the allegations, and Shri Dave:
    • Filed written responses,
    • Was granted personal hearing, and
    • Filed additional written submissions thereafter.
  • Thus, principles of natural justice and the requirements of the Code and Regulations were satisfied.
  • The objection was rejected, and the Committee proceeded to examine the substantive contraventions.

4. Contravention I – Delay and Defect in Verification of Claims

Key provisions:

  • Regulation 12(1) of the CIRP Regulations, 2016:
    Creditors must submit claims with proof on or before the date specified in the public announcement. Late claims may be filed up to the later of:
    • the date of issue of the request for resolution plans under Regulation 36B, or
    • ninety days from insolvency commencement date.