IBBI suspends Registration of IP for negligent Conduct of e-Auction Process and Failure to perform Beneficial Liquidation [Read Order]

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI) has recently suspended the registration of an Insolvency Professional (IP) for the period of two years. The IBBI appointed an Investigating Authority (IA) to conduct investigation into the observations made by the AA in the matter of liquidation process of the CD. The IA served a notice of investigation to the IP on 23.06.2022. Pursuant to the said notice, Mr. Ramasamy Shanmuggam submitted his reply email. The IA submitted the Investigation Report to the IBBI. The IBBI issued a Show Cause Notice to Insolvency Professional Ramasamy Shanmuggam on 03.02.2023 based on findings in the Investigation Report in respect of his role as IRP of CD. He submitted his reply to the SCN. Response of the IP to the SCN and other material available on record referring to which the IBBI directed the Disciplinary Committee (DC) to dispose of the SCN in accordance with the Code and Regulations made thereunder. The IP availed the opportunity of personal hearing through virtual mode before the DC. He submitted that the contention of the applicant bank that in the rescheduled auction the upset price would have been fixed at around Rs. 1,55,55,550/- only fortified his action that the bidding done of over 15 crore rupees was an error by the bidder and that the said bidding was rightly called off. He submitted that any auction sale is advertised with a reserve price and such reserve price (conveniently stated in the application as upset price) can only be changed by issuing a fresh e-auction notice and not otherwise. He submitted that when the e-auction notice was not under challenge, the applicant bank could on no ground seek the quashing of the auction sale done upon the basis of the same which admittedly had fetched more than the reserve price. He further submitted that once an auction sale is canceled by any reasons, in the rescheduled auction the earlier participants cannot be compelled by the liquidator to join as a must. The Disciplinary Committee observed that his act of cancellation of auction dated 23.09.2020 and conducting auction on a very short notice on 25.09.2020 that too through limited participation of the eligible bidders of cancelled auction dated 23.09.2020, at best, aimed towards substantial loss to the liquidation estate/stakeholders. The Committee also noted that, “It is very disturbing to note that in the so called rescheduled e-auction held on 25.09.2020, Mr. Ramlingam, who only two days before wanted to bid for Rs. 1,56,55,550.00, submitted bid for Rs.1,07,55,550.00 only, and Mr. G Subramanian, who had submitted bid for Rs.1,55,55,550.00 on 23.09.2020, submitted bid for Rs.1,10,55,550.00, and became successful bidder. So within a span of two days, by reducing the bid amount by Rs.45,00,000.00, Mr. G Subramanian became the successful bidder.” “A similar pattern in downsizing of the bid amount around reserve price is nothing but deliberate attempt to game the process. This speaks volumes about the irrational approach adopted in the so called rescheduled auction on 25.09.2020. Taking note of this glaring malpractice, AA was pleased to cancel the said rescheduled auction held on 25.09.2020”, the DC further observed. Observing the downsizing and cancellation of bids by quoting inadvertent errors, the Disciplinary Committee found that the conduct of Ramasamy Shanmuggam contravenes section 208 (2)(a) of the Code, Regulation 33 of Liquidation Regulations read with clause 1(5) of Schedule I on Mode of Sale, Regulation 7(2)(h) of the IP Regulations and Clauses 3, 5 and 14 of the Code of Conduct as specified in the First Schedule of Insolvency Professional Regulations. As a result, the DC suspended the registration of the IP Ramasamy Shanmuggam for a period of two years. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

IBBI suspends Registration of IP for negligent Conduct of e-Auction Process and Failure to perform Beneficial Liquidation [Read Order]

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