The Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India(IBBI) held that if factual discrepancies were affecting the distribution of the resolution plan, Mr Pramod Kumar Sharma should have applied the NCLAT for rectification. The Committee advised Mr Sharma to exercise caution when representing matters before AA and NCLAT.
A Show Cause Notice (SCN) was issued to Mr Pramod Kumar Sharma Insolvency Professional under section 220 of the Insolvency and Bankruptcy Code, 2016 (Code) read with regulation 13 of the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 (Investigation Regulations).
Mr Pramod Kumar Sharma is a Professional Member of the Insolvency Professional Agency (IPA) of the ICSI Institute of Insolvency Professionals (ICSI-IIP) and an Insolvency Professional (IP) registered with the Insolvency and Bankruptcy Board of India (Board/IBBI).
The National Company Law Tribunal (NCLT), admitted the application under section 9 of the Code for initiating the Corporate Insolvency Resolution Process (CIRP) of M/s Uniworld Sugars Private Limited (CD) where Mr Pramod Kumar Sharma was appointed as the Interim Resolution Professional (IRP) and later he was confirmed as Resolution Professional (RP) by AA on 07.07.2018. The Committee of Creditors (CoC) in its 21st meeting held on 27.10.2020 approved the resolution plan by 100 % votes.
On appeal, the National Company Appellate Law Tribunal (NCLAT) set aside the order of AA dated 17.03.2021 and the resolution plan only to the extent it relates to the allocation of payments to the stakeholders and creditors and directed that revision of payments and subsequent approval of the revised resolution plan should be completed within two months.
It was evident that payment to various stakeholders has been proposed in the resolution plan as per the valuation conducted by the CoC to carry out its due diligence and hence the same could not have been a basis for distribution.
As per regulation 2(1)(k) of CIRP Regulations, the liquidation value means the estimated realizable value of the assets of the CD, if the CD were to be liquidated on the insolvency commencement date. It was Mr Pramod Kumar Sharma’s duty under section 30(2)(b) of the Code to ensure that the resolution plans submitted are by the law.
However, by allowing the liquidation value of the third valuation conducted by the CoC at its expense as the basis for the distribution of the plan amount among stakeholders, Mr Pramod Kumar Sharma has acted in violation of the definition of liquidation value provided under regulation 2(1)(k) of the CIRP Regulations and also shows your failure to conduct required due diligence of the resolution plan in terms of section 30(2) of the Code.
The Board prima facie view that Mr Pramod Kumar Sharma has contravened sections 25(2)(d), 30(2)(b), 208(2)(a) & (e) of the Code, regulation 2(1)(k), 27 and 35(1)(b) of the CIRP Regulations, regulation 7(2)(a) & (h) of the IP Regulations read with clauses 3, 5 and 14 of the Code of Conduct.
The DC held that “if there was any factual discrepancy and non-reliance on the same for distribution of the amount of the resolution plan, Mr Pramod Kumar Sharma should have applied Hon’ble NCLAT for the due rectification. Mr Sharma should have been more careful in taking up the matter before NCLAT. Given the foregoing discussion, the DC, in exercise of the powers conferred under Section 220 of the Code read with regulation 13 of the Investigation Regulations disposes of the SCN with caution to Mr. Sharma to be more careful in representing matter before AA and Hon’ble NCLAT.”
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