NCLAT Finds IBBI’s Cancellation of Insolvency Professional’s Registration Disproportionate

The NCLAT has directed IBBI to reconsider the cancellation of insolvency professional Deepak Kumar Goyal’s registration.

The National Company Law Appellate Tribunal (NCLAT) upheld two regulatory violations against Goyal but ruled that cancellation of his registration was disproportionate. The tribunal directed the Insolvency and Bankruptcy Board of India (IBBI) to reconsider the penalty within 30 days of receiving its order.

Why Was Goyal’s Registration Cancelled?

Goyal was appointed on July 4, 2024, as the authorised representative of homebuyers in the corporate insolvency resolution process of Revital Realty Private Limited. The group expanded from approximately 573 to 1,428 homebuyers and controlled nearly 91% of the committee of creditors’ voting share.

On August 20, 2026, IBBI’s Disciplinary Committee cancelled his registration after finding that he had failed to maintain proper consultation records and had agreed to extensions for revised resolution plans without obtaining prior instructions from the creditors. Goyal challenged both findings and the penalty before the appellate tribunal.

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What Record-Keeping Violations Were Established?

NCLAT held that Regulation 16A(10)(i) requires authorised representatives to record consultation proceedings and prepare meeting minutes.

Goyal argued that emails and other communications documented homebuyers’ concerns. The tribunal acknowledged that these records indicated consultations had occurred but found that they did not consistently identify the number or representative character of participating homebuyers. It upheld the violation, describing it as incomplete documentation rather than an absence of consultation or deliberate concealment.

Why Were Prior Instructions Necessary?

The second violation concerned Goyal’s agreement to extensions on March 17 and March 19, 2026, for submitting revised resolution plans. NCLAT held that Section 25A(3) of the Insolvency and Bankruptcy Code requires authorised representatives to follow prior instructions from the financial creditors they represent.

The tribunal rejected the argument that procedural matters were exempt from this obligation. However, it acknowledged that the extensions were administrative steps, with the later extension linked to an Employees’ Provident Fund Organisation claim. No evidence established that these decisions favoured a resolution applicant or adversely affected homebuyers.

Why Did NCLAT Reject the Cancellation Penalty?

The tribunal found no allegation or finding of fraud, dishonesty, personal financial gain, collusion or conflict of interest. It also noted Goyal’s otherwise clean disciplinary record, the absence of identified prejudice to creditors and the fact that this was his first assignment as an authorised representative.

Considering these circumstances, NCLAT concluded that cancellation, the most severe available disciplinary measure, was disproportionate to the established misconduct. The tribunal did not impose an alternative penalty, leaving that determination to IBBI.

What Happens After the Tribunal’s Order?

In its October 14, 2026 judgment, NCLAT directed IBBI to reconsider the appropriate penalty within 30 days of receiving the order. The cancellation will remain inoperative until IBBI issues fresh findings. Goyal has undertaken not to accept new assignments during this period, while his existing authorised representative assignment will remain subject to the replacement resolution passed by the committee of creditors.

The420 Insight: The ruling distinguishes regulatory non-compliance from misconduct warranting the harshest professional sanction. It reinforces the importance of verifiable creditor consultations and prior instructions while requiring disciplinary penalties to reflect the seriousness and consequences of established violations.