Non-availability of Funds is not a valid reason for Non-opening of Liquidation Bank Account: IBBI warns Insolvency Professional [Read Order]
Non-availability of Funds – Non-opening of Liquidation Bank Account – IBBI warns Insolvency Professional – Insolvency Professional – IBBI – Funds – Bank Account – taxscan
Non-availability of Funds – Non-opening of Liquidation Bank Account – IBBI warns Insolvency Professional – Insolvency Professional – IBBI – Funds – Bank Account – taxscan
The Insolvency and Bankruptcy Board of India (IBBI) has held that the non-availability of funds is not a valid reason for the non-opening of the liquidation bank account and warned the Insolvency Professional (IP).
Ms Sonu Jain, Insolvency Professional (IP) under Section 220 of the Insolvency and Bankruptcy Code, 2016 (Code) read with Regulation 11 of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016, and Regulation 13 of the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017.
The National Company Law Tribunal, Kolkata Bench, (NCLT) had admitted the application under section 9 of the Code for Corporate Insolvency Resolution Process (CIRP) of M/s Flower Dealcom Private Limited (CD) and Ms Sonu Jain was appointed as Interim Resolution Professional (IRP) vide the same order. The name of Ms Sonu Jain was confirmed as RP. The order for liquidation of the CD was passed on 14.11.2018 and Ms Sonu Jain was appointed as liquidator.
The IBBI appointed an Investigating Authority (IA) to conduct the investigation into the matter of the liquidation process of the CD. The IBBI issued the SCN to Ms Sonu Jain based on findings in the Investigation Report in respect of her role as Liquidator of the CD.
The Board has observed that the investments were made by the CD in five unlisted companies viz. (a) Eagle Vinimay Private Limited, (b) J.S. Trading & Finance Private Limited, (c) Jagmata Dealtrade Private Limited, (d) Poonam Resources Private Limited, and (e) S Rahul Rubber Manufacturing Private Limited. As per Liquidator’s reply to IA and as per the valuation report, the value of the investment in these companies was to the tune of Rs. 10 crores (approx.).
It was a primary duty cast upon the liquidator under section 35 (1)(d) of the Code to take such measures to protect and preserve the assets and properties of the CD as he/she considers necessary. Further alleged that the Liquidator failed to open a bank account of the CD as required under Regulation 41(1) of the Liquidation Regulations.
Regulation 41(1) of the Liquidation Regulations provides that the liquidator shall open a bank account in the name of the CD followed by the words ‘in liquidation’, in a scheduled bank, for the receipt of all payments due to the CD.
The IBBI observed that the requirements related to compliance are supposed to be known to the professional while taking the assignment. Therefore, one can’t shield behind the non-availability of funds as a valid reason for not opening the account.
It was held that IP was duty-bound to open the account and the Disciplinary Committee disposed of the SCN with a warning to Ms Sonu Jain to be more careful and vigilant in complying with the directions issued by AA in her existing as well as future assignments.
To Read the full text of the Order CLICK HERE
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