Failure to Issue Fresh Form G for substantial assets or a new line of business Discovered: IBBI Suspends authorisation of RP

The Insolvency and Bankruptcy Board of India suspended the authorisation of Resolution Professional (RP) for three months on finding the failure to issue fresh Form G for the substantial assets or a new line of business discovered against Corporate Debtor( CD).

The Financial Creditor M/s Pragati Impex Pvt. Ltd. filed application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code), for initiating the CIRP of Vistar Constructions Private Limited (Corporate Debtor/ CD) the NCLT, New Delhi Bench (Adjudicating Authority/ AA) vide its order dated 05.08.2022 admitted the application and Mr. Amit Agrawal was appointed as the Interim Resolution Professional (IRP) to conduct the CIRP. Later, vide order dated 08.09.2022 of the AA, Mr. Amit Agrawal was appointed as the Resolution Professional (RP).

The Board in the exercise of its powers under Section 218 of the Code, read with Regulations 7(1) and 7(2) of Insolvency and Bankruptcy Board of India (Inspection and Investigation), Regulations, 2017 (Inspection and Investigation Regulations), appointed an Investigating Authority (IA) to investigate the conduct of Mr. Amit Agrawal in the CIRP of the CD. Notice was served upon Mr. Amit Agrawal on 05.10.2023 as per Regulation 8(1) of the Inspection and Investigation Regulations.

On perusal of the said investigation report, the Board formed a prima facie view that Mr. Amit Agrawal contravened the provisions of the Code and Regulations made thereunder and issued the SCN to Mr. Amit Agrawal on 05.04.2024. The SCN alleged contraventions of several provisions of the Code, the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 (CIRP Regulations) and the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations). The reply of Mr. Amit Agrawal to SCN was received by the Board on 19.04.2024.

The SCN and the response of Mr. Amit Agrawal, to the SCN was referred to the Disciplinary Committee (DC) for disposal of SCN. Mr. Amit Agrawal availed an opportunity of a personal hearing before DC on 24.10.2024 wherein he appeared with Advocate Mr. Pankaj Agrawal.

It was observed that Mr. Amit Agrawal had discovered some assets of the CD, when the second Form-G had already been issued, wherein the last date for submission of Expression of Interest was 21.01.2023. It was noted that 9 Prospective Resolution Applicants (PRAs) had evinced interest in the submission of the resolution plan and only 2 PRAs had subsequently submitted the resolution plans.

It was further noted that the issue of discovery of assets was informed to the CoC during the 4th CoC meeting held on 04.03.2023. Mr. Amit Agrawal submitted that PRAs were provided with all the details pertaining to the newly discovered assets. However, Mr. Amit Agrawal should have issued the fresh Form-G to provide a level playing field to all the prospective bidders instead of providing this information to the PRAs only as it could have also led to more market participation and maximizing the value of assets of the CD.

In view of the above, the Board was of the prima facie view that Mr. Amit Agrawal contravened the Sections 208(2)(a) and (e) of the Code, Regulations 7(2)(a) and 7(2)(h) of the Insolvency Professionals Regulations read with Clauses 3 and 14 of the Code of Conduct as specified in the First Schedule of the IP Regulations.

The Disciplinary Committee ( DC ) noted that Mr. Amit Agrawal was appointed as the IRP of the CD on 05.08.2022 and was later confirmed as the RP on 08.09.2022. As part of the CIRP, the first Form-G inviting EOIs was issued on 07.10.2022, pursuant to which four EOIs were received by 16.12.2022 and were put before the CoC in the 3rd CoC Meeting held on 03.01.2023.

However, in the absence of any resolution plan submissions, a second Form-G was published on 06.01.2023, resulting in the receipt of five additional EOIs, bringing the total number of Prospective Resolution Applicants (PRAs) to nine. Mr. Amit Agrawal submitted that after the deadline for submission of EOIs under the second Form-G, he became aware of an arbitral award in favour of the CD, which led to the recognition of the CD’s ownership over four units at Hotel Radisson Blu, Dwarka.

The DC noted that the submission made by Mr. Amit Agrawal that he became aware about the arbitration award in favour of the CD, after publication of the 2nd Form G, does not appear to be correct. In the minutes of the 3rd CoC meeting held on 03.01.2023 it was recorded that “In response of the EOI received by the office of the RP, the RP has issued and supplied the Information Memorandum (I.M.), Request for Resolution Plan (RFRP) and Evaluation Criteria on 16.11.2022, to all 4 PRA's.”

The authority viewed that where substantial assets or a new line of business is discovered that goes beyond the capacity of the PRAs or where the existing PRAs will not be able to provide value for the same, fresh Form G may be required. This decision needs to be taken on the facts of the case. In this case, it appears from the reply of the IP that he was inclined to issue fresh Form G but did not take that action as the CIRP period was getting over and CoC was completely unwilling for grant of further extension.

However, no such evidence has been brought before the DC. Hence, IP has not been able to establish that IP would have issued form G but for unwillingness of CoC. Hence, the DC holds the contravention to the extent that the discussion regarding issue of fresh ‘Form G’ as brought out by him is not substantiated by any evidence though he had provided the information to all PRAs.

The DC in exercise of the powers conferred under Section 220 of the Code read with Regulation 13 of the Inspection and Investigation Regulations and Regulation 11 of the IP Regulations hereby suspends the Authorisation for Assignment of RP for a period of three months.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates