Insolvency and Bankruptcy Board of India (IBBI) has issued a circular wherein it was clarified that the Disciplinary Committee of an Insolvency Professional Agency (IPA) may impose monetary penalty on its professional members under Clause 24(2)(d) of the Schedule to the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016.
The Central Government recently notified a new amendment to the the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 wherein the Insolvency Professional Agency can promptly realize the monetary penalties imposed by the disciplinary committee. The notification substitutes the existing rule in clause 24, for sub-clause (5) where “the Agency shall promptly realize the monetary penalty imposed by the Disciplinary Committee and credit the same to the Fund constituted under section 222 of the Code.”
As per Rule 24(5), the monetary penalty received by the Agency under the orders of the Disciplinary Committee shall be credited to the Insolvency and Bankruptcy Fund constituted under section 224 of the Code.
The Bankruptcy Law Reforms Committee, which conceptualized the Code, had envisaged: “IP agencies will have the flexibility to impose a graduated system of penalties, where minor non-compliances will result in monetary fines, and major violations will result in expulsion from the agency.”
The circular stated that “in the interest of objectivity and uniformity, it has been decided that an IPA shall amend its Bye-laws to provide for the maximum and minimum monetary penalty, where the Disciplinary Committee decides to impose such penalty on its professional members, under Clause 24(2)(d) of the Schedule to the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016.”
Various offences prescribed in the circular attracts penalties from Rs. 50,000 to Rs. 1 lakhs.
The circular further mandated the IPA to amend its Bye- Laws to incorporate Clause 24(5) of the Schedule to the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 as inserted by IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Third Amendment) Regulations, 2021.
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