Appointment of Process Advisor to Assist IP in performance of Function of Code not Amount to Outsourcing of Duty: IBBI
Appointment – Assist – IP – Function – of – Code – Amount – Duty – IBBI – TAXSCAN
Appointment – Assist – IP – Function – of – Code – Amount – Duty – IBBI – TAXSCAN
The Insolvency and Bankruptcy Board of India (IBBI) has held that appointment of a Process Advisor to assist Insolvency Professional (IP) in the performance of the function of code does not amount to outsourcing of duty.
Mr Vivek Raheja, (IP) who is a Professional Member of the Indian Institute of Insolvency Professionals of ICAI and an Insolvency Professional registered with the Insolvency and Bankruptcy Board of India (IBBI/Board) applied.
In respect of Trading Engineers (International) Limited, the National Company Law Tribunal, New Delhi Bench (AA) vide its Order dated 04th July 2019, admitted the application under Section 9 of the Code for corporate insolvency resolution process (CIRP) of the CD-1 and appointed Mr Vivek Raheja as Interim Resolution Professional. He was later confirmed as Resolution Professional also.
The IBBI in the exercise of its powers under Section 218(1) of the Insolvency and Bankruptcy Code, 2016 (Code), read with Regulation 3(2) and (3) of the IBBI (Inspection and Investigation) Regulations, 2017 (Inspection Regulations), appointed the Inspecting Authority (IA) to conduct an inspection of the records about CIRP of aforesaid Corporate Debtors (referred to as CDs).
The IBBI had issued the SCN to Mr Raheja, based on findings in the inspection report in respect of his role as IRP/RP in the CIRP of the above-mentioned CDs. The SCN alleged contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 (CIRP Regulations), the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and the Code of Conduct under regulation 7(2) thereof. The reply of Mr Raheja on the SCN was received by the Board on 07th November 2022.
Regulation 7(2)(bb) of the IP Regulations, 2016 bars an Insolvency Professional from outsourcing any of his duties and responsibilities under the Code, except those specifically permitted by the Board. The Board Circular No. IP/003/2018 dated 03-01-2018, too, states that an insolvency resolution professional shall not outsource any of his duties and responsibilities under the Code.
In the CIRP of Trading Engineers (International) Limited, the IP had appointed a Process Advisor at a monthly fee of Rs. 2.5 lakh and a success fee of 0.75% of the resolution amount subject to a maximum of Rs. 37.50 Lakhs. In the matter of CIRP of M/s VeekayPolycoats Limited also, the IP had appointed the process advisor at a monthly fee of Rupees Two lakhs and a success fee of one per cent of the resolution amount subject to a maximum of Rs. 45 Lakhs.
These activities are primarily the responsibilities of the resolution professional. The IP is alleged to have outsourced his responsibilities as a resolution professional in the CIRPs. The Board argued that the IP had, inter alia, violated sections 208(2)(a) of the Code, Regulation 7(2)(bb) of the IP Regulations, 2016, Clause 1, 3 and 5 of the Code of Conduct and Circular No. IP/003/2018 dated 03-01-2018 issued by the Board.
The Code casts important duties on a resolution professional to carry on the business of the corporate debtor during the insolvency resolution process and to resolve the corporate debtor by the provisions of the Code. The Resolution Professional can also appoint such professionals as he deems necessary for this purpose.
The IBBI observed that the IP had appointed the same process advisor in both the CIRPs. The fee for the process advisor in both these CIRPs was fixed similarly. The engagement letter between the IP and the process advisor states that the appointment of the process advisor was to assist the IP in the performance of his functions under the Code.
The DC noted that the appointment of process advisors in both the CIRPs was approved by the CoC. Further, there is no material on record to specifically point out instances of outsourcing of duty by the IP and thereby disposed of the SCN, without any directions.
To Read the full text of the Order CLICK HERE
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