Failure to Verify Claim of Financial Creditor: IBBI imposes penalty of One Lakh on Insolvency Professional [Read Order]

The Insolvency and Bankruptcy Board of India(IBBI) imposed a penalty of One Lakh on an Insolvency Professional for failure to verify the claim of a Financial Creditor. Mr. Dhaval Jitendrakumar Mistry, an Insolvency Professional, registered with the Insolvency and Bankruptcy Board of India (IBBI) and enrolled as a professional member with the Indian Institute of Insolvency Professionals of ICAI. The National Company Law Tribunal, Ahmedabad (AA) had admitted the application under section 7 of the Code for corporate insolvency resolution process (CIRP) of Polygold Pre-Cured Systems Limited (CD) whereby Mr Parag Sheth was appointed as Interim Resolution Professional (IRP). The CoC, in the first meeting resolved to replace the IRP, and thereafter the AA vide order allowed the application for replacement and Mr. Dhaval Jitendrakumar Mistry was appointed as RP. 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 for Insolvency Professionals as specified in the First Schedule of IBBI (Insolvency Professionals) Regulations, 2016. Mr Hardik Pradyumankumar Patel, Ms Jyotsnaben Pradyumankumar Patel and Mr Pradyumankumar Dwarkadas Patel, who had filed a section 7 application for initiation of CIRP, filed the claim as unsecured Financial Creditor for Rs.3,06,56,735 (Rupees three crore six lacks fifty-six thousand seven hundred thirty-five only) which had been admitted by the IRP Mr Parag Seth, however Mr Mistry, after being appointed as RP, revised and reduced the claim amount to Rs.2,83,12,283 (Rupees two crore eighty-three lacks twelve thousand two hundred eighty-three only). It was observed by the RP that the evidence and clarification on the interest part of the claim was called upon but no such evidence or clarification was given by the parties which could suffice the interest amount claimed by them. He further stated that as per regulation 14(2) of the CIRP Regulations, the claims of the parties were reduced thereby revising the amount of claim admitted, as the interest was claimed without any significant evidence. It is noted that due to this, it was evident that while he admitted interest on the claim amount for the period from 01.04.2017 to 31.01.2019 for the remaining period, he disallowed the same, thereby taking an inconsistent stand about the claim of the above-stated three unsecured financial creditors. It was found that admission of the application by the AA, does mean that an amount stated a specified threshold is due and default has been made in payment of the said amount but it does not mean that the whole claim amount has been verified by the AA. The Board was of the prima facie opinion that IP had, inter alia, contravened sections 18 and 208 of the Code, regulations 13 and 14 of CIRP Regulations and Clause 14 of the Code of Conduct specified in the First Schedule of the IBBI (Insolvency Professionals) Regulations, 2016 (Code of Conduct). The Disciplinary Committee (DC) noted that Mr Mistry took an inconsistent view while admitting the claim of the unsecured Financial Creditors. In the section 7 application filed, the FCs had claimed a debt of Rs. 2,83,12,283 (Rupees two crore eighty-three lakh twelve thousand two hundred eighty-three only) which included interest on the principal amount from 01.04.2017 to 31.01.2019 at the rate of 10%. The DC comprising Jayanti Prasad noted that Mr Dhaval Jitendrakumar Mistry has not acted diligently concerning verification and admission of the claim of the Financial Creditors and imposed a penalty of Rs. 1,00,000 (Rupees one lakh only). Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Failure to Verify Claim of Financial Creditor: IBBI imposes penalty of One Lakh on Insolvency Professional [Read Order]

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