IBBI Penalises Insolvency Professional for Failing to Protect Corporate Debtor’s Assets During CIRP [Read Notification]
IBBI penalised an insolvency professional for failing to take custody and control of the corporate debtor’s assets, holding that such lapses violate duties under Section 25 of the IBC
![IBBI Penalises Insolvency Professional for Failing to Protect Corporate Debtor’s Assets During CIRP [Read Notification]](https://images.taxscan.in/h-upload/2025/08/04/2072869-ibbi-penalises-taxscan.webp "IBBI Penalises Insolvency Professional for Failing to Protect Corporate Debtor’s Assets During CIRP [Read Notification]")
The Insolvency and Bankruptcy Board of India (IBBI) has imposed a financial penalty on insolvency professional Mr. Pankaj Ramandas Majithia for multiple lapses during his tenure as the Resolution Professional (RP) in the insolvency of Shree Ram Urban Infrastructure Pvt. Ltd. The action stems from his failure to safeguard the corporate debtor’s assets and his inability to ensure...
The Insolvency and Bankruptcy Board of India (IBBI) has imposed a financial penalty on insolvency professional Mr. Pankaj Ramandas Majithia for multiple lapses during his tenure as the Resolution Professional (RP) in the insolvency of Shree Ram Urban Infrastructure Pvt. Ltd. The action stems from his failure to safeguard the corporate debtor’s assets and his inability to ensure proper process in the auction of scrap material.
The case centers around a plot of land that had been under dispute between the corporate debtor and Kalpataru Properties Pvt. Ltd., based on a 2004 Memorandum of Understanding. Following multiple court orders, including those from the Supreme Court, the RP was eventually directed to hand over the plot to Kalpataru after the latter paid the balance consideration of ₹75.30 crore.
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While the RP complied with the court order and executed the conveyance deed, the disciplinary issue arose from how he handled the construction scrap lying on the site. The materials, were partly shifted to adjoining plots owned by the corporate debtor. The remaining scrap was auctioned by Kalpataru with the RP’s knowledge, and the proceeds (₹39.24 lakh) were deposited in the CD’s account.
The IBBI after much observation of the facts, held that the RP did not properly inventory or secure materials belonging to the corporate debtor. The Board observed that his inaction led to the assets being auctioned by a third party without clear oversight or valuation.
It was held that even though the CoC was under a stay, the RP should have approached the Adjudicating Authority (NCLT) under Section 60(5) of the Code to seek directions for handling the scrap. His failure to do so was considered a serious lapse, especially since the auction took place nine months after the handover, during which adequate time was available to take corrective legal steps.
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Mr. Majithia argued that the costs of shifting and storing the scrap would have exceeded its value and that the materials had been lying exposed since 2015–16, already in deteriorated condition. He also stated that no objections were raised by the CoC and that the auction proceeds were duly credited to the CD’s account. The Disciplinary Committee rejected these arguments, stating that mere inaction or logistical difficulty cannot override statutory duties.
The DC also took note of the fact that the RP did not highlight the urgency of the auction issue in any formal application before the NCLAT or NCLT, weakening his case that he was legally constrained from acting.
Taking into account Mr. Majithia’s age (70 years) and the factual matrix of the case, the IBBI refrained from debarment but imposed a monetary penalty. He is required to deposit 30% of his total fees from the assignment to the government and furnish proof of payment within 45 days for received amounts and 7 days post-receipt for pending dues.
The IBBI has also directed that a copy of the order be shared with the CoCs of all assignments where Mr. Majithia is currently serving as RP. The respective committees will decide whether he should continue. The order has also been shared with the NCLT Mumbai Bench and the ICAI’s insolvency wing (IIIPI) for further action and record.
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