The Insolvency and Bankruptcy Board of India ( IBBI ) has suspended an Insolvency Professional for one year on ground of charging exorbitant fee from an operational creditor for her services as IRP/RP.
In the instant case, Ms. Ruia contracted a professional fee of Rs.13.75 crore comprising IRP fee of Rs.5 crore for the first one month and RP fee @ Rs.1.75 crore for five subsequent months. As per the term sheet and also the provisions of regulation 33 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, that the amount of fee ratified by the CoC shall be considered as the IRPC.
The amount is exclusive of (a) Government taxes, as applicable, (b) professional fee for Valuers, Advocates, Solicitors, Forensic Auditors, Consultants and Advisers, (c) fee for representation before the NCLT, (d) expenses on public announcement and (e) all out of pocket expenses. The Board found professional fee of such magnitude for her services as IRP / RP exorbitant.
Before the disciplinary committee, Ms. Ruia submitted that the fee of IRP / RP, which is all inclusive, is not comparable with the salary and allowances of executives, who enjoy good amount of allowances and perquisites. It was submitted that the legislature has not limited the fee payable to an IRP / RP. Her responsibilities as IRP / RP would require adequate amount of help of professional personnel as part of her team. The fees and remuneration for the services provided by her team shall be borne from her fees.
After hearing the submissions, the disciplinary committee noted that the amount of fee not ratified by CoC would not form part of IRPC. This does not alter the amount of professional fee payable to Ms. Ruia as IRP / RP.
“An IP, as IRP / RP, exercises the powers of Board of Directors of a corporate debtor undergoing CIRP. He manages the affairs of the corporate debtor as a going concern. He is the custodian of the property of the corporate debtor and protects and preserves the value of such property. He conducts the entire CIRP and manages the operations of the corporate debtor during the CIRP period. His responsibilities during CIRP are detailed in the Code and relevant regulations. He has similar onerous responsibilities in liquidation of corporate debtors, and individual insolvencies and bankruptcies. These responsibilities require highest level of standing, calibre and integrity which inspire confidence and trust of the society and the stakeholders. In sync with the role of IPs under the Code, the regulations provide for their capability and conduct and requires an individual to be a fit and proper person for continuation of his registration as an IP,” the DC observed.
It was therefore, found that Ms. Ruia has engaged in acts that have brought disrepute to the noble profession of IP and severely compromised her status as a fit and proper person.
“The overall conduct of Ms. Ruia, as detailed above, is not unbecoming of an IP, the order said.
The DC, accordingly, concluded that Ms. Ruia has contravened the provisions of clauses 1, 2, 5, 10, 12, 24, 25 and 27 of the Code of Conduct for Insolvency Professionals under the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 read with regulation 7(2)(b) of the said Regulations and section 20 of the Code.
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