IBBI punishes Insolvency Professional for violation of Code, Directs to Undergo Pre-registration Educational Course [Read Order]

IBBI - Insolvency Professional

The Insolvency and Bankruptcy Board of India ( IBBI ) has imposed a penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRPs on an Insolvency Professional for the violation of the Insolvency and Bankruptcy Code.

The Board also directed the Professional to undergo the pre-registration educational course specified under regulation 5(b) of the IBBI (Insolvency Professionals) Regulations, 2016 from his Insolvency Professional Agency to improve his understanding of the Code and the regulations.

A complaint was initiated against the Professional for the alleged conduct as Interim Resolution Professional (IRP), and subsequently as Resolution Professional (RP) in corporate insolvency resolution processes (CIRPs) of two corporate debtors (CDs), namely, (a) Upadan Commodities Private Limited, and (b) Maa Tara Industrial Complex Pvt. Ltd.

It was alleged that he did not conduct CIRP as required under section 23 of the Code. He did not submit the progress report to AA in time, make a public announcement in time, appoint registered valuers, prepare and circulate information memorandum, invite resolution plans under section 25(2)(h) of the Code, convene the meetings of CoC with adequate notice, etc. Rather, he invited resolution plan only from the sole member of the CoC, without providing information memorandum, asking him to submit a resolution plan in four days. It was also alleged that he resigned as RP in both the CIRPs, without prior permission of the AA, though he consented to act as IRP and as RP in both cases. After he offered himself for appointment as RP in both the CIRPs, the CoC appointed him as RP.

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The Disciplinary Committee found that Mr. Kejriwal has displayed an utter misunderstanding of the provisions of the Code and regulations.

“For example, the regulations required that the IRP shall appoint two values within seven days of his appointment. To the allegation that he did not appoint valuers, he has explained that the CoC would not approve the resolution process cost, which includes the fees of values. The regulations required the IRP to appoint valuers much before the constitution of the CoC. Therefore, the apprehension that CoC would not approve the fee of valuers is misplaced. Similarly, Mr. Kejriwal claims that he resigned because the CD did not co-operate. It is difficult to appreciate that Mr. Kejriwal was having non-co-operation from CDs for the preceding three months before volunteering to be appointed as RP. In fact, it is unimaginable that an IRP, who is in control of the CD for the last four months, suddenly finds that the CD did not co-operate and he had to resign even without using section 19 of the Code. It is preposterous that Mr. Kejriwal invited resolution plans from only one operational creditor and allowed it only four days to submit resolution plan, as against the statutory requirement of the invitation of resolution plans form prospective lenders and investors,” the order said.