IP Submits Compliance Certificate Despite SRA being ‘related party’ and Ineligible under section 29A of IBC : IBBI Cancels Registration of IP

The Insolvency Bankruptcy Board of India's (IBBI) Disciplinary Committee (DC) revoked the registration of Mr. Ananda Rao Korada as an Insolvency Professional (IP) for multiple reasons, including the submission of a compliance certificate despite the fact that Regus Impex, the SRA, was a related party and ineligible under Section 29A of the Insolvency Bankruptcy Code (IBC). The IBBI, in exercise of its powers under section 218 of the Code read with regulation 7(1) and 7(2) of the IBBI (Inspection and Investigation) Regulations, 2017 (Investigation Regulations) appointed an Investigating Authority (IA) to conduct investigation in the matter of CD in respect of Mr. Ananda Rao Korada’s role as IRP and RP. The Board has taken note of the fact that Mr. Korada signed an affidavit under section 30(1) in conjunction with section 29A, which was supposed to be submitted by the authorized representative of Regus Impex, SRA. Furthermore, it was observed that despite the SRA being classified as a "related party" and ineligible under section 29A of the Code, Mr. Korada issued a compliance certificate in their favour, deeming them eligible to submit a resolution plan. Affixing his signature on behalf of the SRA and also attesting the SRA is not a ‘related party’ even when they are ineligible under section 29A of the Code shows a malafide intent as well as lack of objectivity and a bias towards the promoters of CD and SRA. In view of the above, the Board is of the prima facie view that Mr. Ananda Rao Korada has inter alia violated Sections 29A, 30(1) and 208(2)(a) and (e) of the Code and Regulations 36A (8) and 39(1)(a) of the CIRP Regulations and Regulation 7(2)(h) of IP Regulations read with Clauses 1, 2, 5 and 14 of the Code of Conduct. The IP Ananda Rao Korada submitted that the affidavit was however only titled as “Affidavit”. He had asked the PRA to submit the affidavit again and only style it differently by having a heading “Affidavit under section 30(1) of the Insolvency and Bankruptcy Code, 2016 read with section 29A of the Insolvency and Bankruptcy Code, 2016”. It was also submitted that Regus had provided him with an unsigned or non-notarized copy of the affidavit for his approval. However, in the interim, the resolution plan was approved by the Committee of Creditors (CoC) on December 16, 2019. The unsigned or non-notarized document sent by Regus Impex was inadvertently left in his office, and during the process of filing the application for plan approval on December 19, 2019, he mistakenly signed the document sent by Regus Impex as well. It was a genuine oversight, and there was no intention of wrongdoing. It is important to note that there was already a properly signed affidavit under section 29A, duly signed by the director of SRA. Upon analysis, the board concluded that it is the responsibility of the Resolution Professional (RP) to carry out their duties diligently and ensure that all necessary documents, including the affidavit for eligibility under section 29A, are received for the consideration of the resolution plan. Following a thorough examination of these records, the board observed that it is the duty of the RP to submit them before the Adjudicating Authority (AA). Considering the critical importance of such an affidavit under the Code, the explanation provided by Mr. Korada that it was signed mistakenly due to inadvertence cannot be accepted. The other allegations against the IP were the Constitution of CoC without verification of claims, Non-compliance of AA’s order for submission of proof of claims of CoC members, Inclusion of related parties of CD into CoC, Failure to obtain claim from workers of the CD. The DC found that Despite the SRA being a ‘related party’ and ineligible under section 29A of the Code, Mr. Korada submitted a compliance certificate signed by himself, in their favour finding them eligible for submission of the resolution plan. Thus, the board cancelled the registration of the IP. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

IP Submits Compliance Certificate Despite SRA being ‘related party’ and Ineligible under section 29A of IBC : IBBI Cancels Registration of IP

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