IBBI Disciplinary Committee orders Resolution Professional to disclose Voting pattern and File Relationship disclosure [Read Order]

IBBI Disciplinary Committee - IBBI - Taxscan

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI) ordered the Resolution Professional (RP) to disclose voting patterns and file relationship disclosure.

Mr. Pramod Kumar Sharma was appointed as an interim resolution professional (IRP) for the corporate insolvency resolution process (CIRP) in the matter of International Recreation and Amusement Limited, Corporate Debtor (CD) vide order of the National Company Law Tribunal, Principal Bench, New Delhi dated 10.08.2018 which admitted an application for CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code). The IRP was confirmed as the Resolution Professional (RP) by the NCLT via its order dated 05.10.2018.

It has been observed that in the 2nd CoC meeting held on 06.11.2018, Mr. Pramod Kumar Sharma proposed to CoC to rent out the Oyster Water Park on the highest bid basis. The agenda to sublease the park was put to e-voting held from 18.11.2018 to 19.11.2018 and the agenda was defeated. The same issue was again deliberated in the 3rd CoC meeting held on 17.12.2018, wherein it was again dropped with observations, “A detailed discussion ensued on the same and it was deliberated that since the Oyster Park can be considered as a Crown Jewel of the assets of the Corporate Debtor the same should be left vacant for attracting any prospective resolution applicant. Accordingly, the proposal of renting out the Oyster Park was dropped.”

Mr. Pramod Kumar Sharma, in his reply submitted that the approval of the CoC is required only when material contracts contrary to the ordinary course of business are being executed by the CD. He submitted that the issue of leasing out the oyster water park beach involved transfer of substantial rights of the CD to a third party in accordance with Section 108 of Transfer of Property Act, 1882 and therefore, the said resolution was placed for the consideration of the CoC wherein the same was rejected. The basis of the rejection of the resolution by the CoC was that the oyster park is a crown jewel of the assets of the CD, the same should be left vacant for attracting any prospective resolution applicant i.e. no third party right be created in the oyster water park beach.

The whole time member of the Disciplinary Committee Dr. Mukulita Vijayawargiya observed that Regulation 26(4) of the CIRP Regulations makes it mandatory for the RP to make disclosure about the voting pattern, the objective being to ensure transparency in the process and boost confidence among the CoC members. As per the regulation 26(4) of CIRP Regulations, Mr. Pramod Kumar Sharma was to disclose the names of the members of CoC who voted against the decision or abstained from voting. The DC notes that Mr. Pramod Kumar Sharma did not share the names of the members of CoC who voted for or against the decision or abstained from voting in the e-voting results for the 1st, 2nd, 3rd, 6th, 8thand 9th CoC meetings for maintaining safety and security of the members of CoC owing to the rivalry between different group of investors but the same were shared with the AA. The Disciplinary Committee therefore, takes a lenient view.

The Disciplinary Committee observes that Circular No. IP/005/2018 dated 16.01.2018 requires filing of relationship disclosures by IP. The DC notes that Mr. Pramod Kumar Sharma did not file the relationship disclosure timely with respect to one M/s BDO India LLP which was to carry out a forensic audit of the CD. The disclosure was delayed and made on 09.07.2020. Mr. Pramod Kumar Sharma has admitted that there was a delay in filing the relationship disclosure. The DC therefore, finds that Mr. Pramod Kumar Sharma complied with requirements of Circular No. IP/005/2018 dated 16.01.2018 by filing the relationship disclosure form on 09.07.2020.

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