IBBI Flags Insolvency Professional for Operating CIRP Account After Liquidation, Rejects Procedural Objections
Disciplinary Committee stresses strict compliance with IBC rules
Case highlights accountability of insolvency professionals
By Legal Correspondent
New Delhi: March 03, 2026:
The Insolvency and Bankruptcy Board of India (IBBI) has taken strong disciplinary action against an insolvency professional (IP) for continuing to operate a Corporate Insolvency Resolution Process (CIRP) account even after liquidation was ordered. The case, involving Gemus Engineering Limited, has drawn attention to the responsibilities of resolution professionals and the importance of adhering to the Insolvency and Bankruptcy Code (IBC), 2016.
The IBBI’s Disciplinary Committee (DC) rejected preliminary objections raised by the IP and clarified that procedural technicalities cannot override substantive violations of the Code.
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Background of the Case
- CIRP Commencement: The insolvency process for Gemus Engineering Limited began on 30 April 2024.
- Liquidation Ordered: On 17 December 2024, the Kolkata Bench of the National Company Law Tribunal (NCLT) ordered liquidation and appointed a liquidator.
- Complaint Filed: A complaint was lodged alleging that the former Resolution Professional continued to operate the CIRP account even after liquidation, which is prohibited.
- Show Cause Notice: The IBBI issued a Show Cause Notice (SCN) in September 2025, initiating disciplinary proceedings.
Tribunal’s Observations
- Violation of IBC: Once liquidation is ordered, the resolution professional’s role ends, and the liquidator assumes charge. Continuing to operate the CIRP account amounts to a violation of the Code.
- Rejection of Objections: The IP argued that Regulation 10A of the Inspection and Investigation Regulations was invalid and that complaint processing could not substitute for a formal investigation. The DC rejected these objections.
- Accountability: The Committee stressed that insolvency professionals must act strictly within the scope of their authority and ensure smooth transition to the liquidator.
- Suspension: The IP was suspended for two years, marking one of the stronger disciplinary actions in recent months.
Why This Matters
- Strengthening Oversight: The ruling reinforces IBBI’s role in ensuring strict compliance with insolvency regulations.
- Professional Accountability: Insolvency professionals are reminded that their conduct is subject to scrutiny even after their tenure ends.
- Investor Confidence: By penalizing violations, IBBI seeks to maintain trust in India’s insolvency framework, which is crucial for creditors and investors.
Reactions and Implications
- Legal Experts: Many welcomed the ruling, noting that it sets a precedent for strict enforcement of professional conduct standards.
- Corporate Sector: Companies undergoing insolvency proceedings see this as a reminder that professionals must adhere to timelines and responsibilities.
- Insolvency Professionals: The case has sparked discussions about the need for clearer guidelines on transitions between resolution and liquidation stages.
Wider Context
- The Insolvency and Bankruptcy Code, 2016, was designed to streamline resolution of distressed companies.
- Insolvency professionals play a critical role in managing assets, creditors, and compliance during CIRP.
- Once liquidation is ordered, the liquidator assumes full responsibility, and the resolution professional must step aside.
- IBBI has been tightening oversight, issuing circulars and disciplinary orders to ensure accountability.
Conclusion
The IBBI’s decision to flag and suspend an insolvency professional for operating a CIRP account post‑liquidation underscores the importance of strict compliance with the Insolvency and Bankruptcy Code. By rejecting procedural objections and focusing on substantive violations, the Disciplinary Committee has sent a clear message: insolvency professionals must act within their authority, and any deviation will attract serious consequences.
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