The Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India (IBBI) held that failure of the Insolvency Professional (IP) to represent the Corporate Debtor (CD) for conveying interest amounts to a violation of Section 25(2)(b) of the Insolvency and Bankruptcy Code (IBC).
Mr Ganga Ram Agarwal, the Insolvency Professional (IP). The National Company Law Tribunal, Allahabad Bench (AA) admitted the application under Section 9 of the Code for corporate insolvency resolution process (CIRP) of the Ramnath Developers Private Limited (Corporate Debtor / CD). Mr Ganga Ram Agarwal was appointed as Interim Resolution Professional and was later also confirmed as Resolution Professional for the CD.
The IBBI under Section 218 of the Code, read with Regulations 7(2) and 7(3) of the Insolvency and Bankruptcy Board of India (Inspection and Investigation), Regulations, 2017 (Inspection and Investigation Regulations), appointed an Investigating Authority (IA) to investigate the CIRP of the CD.
Based on the Investigation Report, the IBBI issued the SCN to Mr Agarwal alleging contraventions of several provisions of the Code and the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations). The SCN was referred to the Disciplinary Committee (DC) for disposal of the SCN. Mr Agarwal availed an opportunity for a personal hearing before the DC.
It was alleged that Mr Agarwal in his capacity as IRP and RP has failed to represent the interest of the CD in ongoing cases before the Debt Recovery Tribunal (DRT) filed by HUDCO, one of the financial creditors having the majority voting share for recovery of money due from the CD and interim application.
It was alleged that by not representing the interests of the CD before the DRT, Mr Agarwal has failed to maintain independence and act objectively by keeping the CD unrepresented before DRT. The Board was of the prima facie view that Mr Agarwal has inter alia violated Sections 25(2)(b) and 208(2)(a) of the Code and Regulation 7(2)(a) and (h), read with clause 1, 2, 3, 5 and 14 of the Code of Conduct, of the IP Regulations.
It was viewed that Section 25(2)(b) of the Code provides that the RP is to represent and act on behalf of the CD with third parties and exercise rights for the benefit of the CD in judicial, quasi-judicial or arbitration proceedings. It was the duty of the RP to represent the CD before the Courts/Tribunals and apprise the factual position of the CD.
The Disciplinary Committee (DC) comprising Ravi Mital, (Chairperson) disposed of the SCN with the advice to diligently perform his functions provided under the Code.
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