The Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India (IBBI) imposed Rs. 2 lakh penalty on Insolvency Professionals (IP) for compromising the independence of the Insolvency Resolution Process (IRP).
Mr Kanwal Goyal was appointed as interim resolution professional (IRP)/ resolution professional/liquidator. The IBBI appointed an Inspecting Authority (IA) to inspect Mr Kanwal Goyal. Based on the inspection report, the IBBI issued the SCN in respect of his role as an IRP/RP in the CIRP of CD-1, CD-2 and CD-3 and material available on record. Mr Kanwal Goyal submitted his reply to SCN vide email dated 09.11.2022.
The IBBI referred the SCN, the response of Mr Kanwal Goyal to the SCN and other material available on record to the DC for disposal of the SCN by the Code and Regulations.
On perusal of the minutes of 1st meeting of the Committee of Creditors (CoC) held on 12.06.2018 the Board noted that terms of engagement of IRP/RP in the CIRP of CD-1 had been negotiated with Oriental Bank of Commerce (OBC), the sole financial creditor, by AAA Insolvency Professional LLP (AAA).
It was evident that it is not Mr Kanwal Goel who appointed or engaged AAA for providing support services but it is the AAA who negotiated his appointment thereby undermining the independence in a professional relationship in which an IP is supposed to conduct the process independently of external influences.
The distribution of fees between AAA and Mr Kanwal Goyal in the ratio of 70:30 further reinforces the point that he undermined the independence as an IRP/RP in the process. This distribution does not present a reasonable reflection of the work undertaken by him as he has proposed more than double his fees for support services without any defined scope of work.
The Board held the prima facie view that he hasviolated section 208(2)(a) and (e) of the Code and clauses 1, 2, 3, 5 and 25 of the Code of Conduct. Clause 5 of the Code of Conduct mandates an IP to maintain complete independence in his professional relationships and should conduct the insolvency resolution, liquidation or bankruptcy process, as the case may be, independent of external influences.
The DC found that the efforts of Mr. Kanwal Goyal in obtaining information from the management of CD-1 including the filing of an application under section 19 of the Code. Mr Kanwal Goyal admits that ex-management of the CD-1 has provided the information available in their possession which he in turn forwarded to Mr Thakral for the audit.
The DC finds that Mr Kanwal Goyal has compromised the independence of IRP and surrendered the same to IPE. The DC further noted that Mr Goyal neither has a valid AFA nor he is entitled to get a fresh AFA due to his age.
The DC imposed a penalty of Rupees two lakh and directed to deposit the penalty amount directly to the Consolidated Fund of India (CFI) under the head of “penalty imposed by IBBI” on https://bharatkosh.gov.in within 45 days.
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