IBBI Suspends Resolution Professional for One Year over Negligence and Unjustified Delay in Liquidation Process [Read Order]

The Insolvency and Bankruptcy Board of India (IBBI) recently suspended an Insolvency Resolution Professional (RP) for a period of one year, noting that they had been found negligent in liquidation, which led to an unjustified delay in conducting the process.

The disciplinary proceeding, initiated under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) stem from the Corporate Insolvency Resolution Process (CIRP) of Ila metals which was initiated by Somani Multibiz Private Limited - who was an operational creditor.

The present order pertained to the conduct of Shivkumar Madanlal Baser, a member of the Indian Institute of Insolvency Professionals of ICAI (IIIP-ICAI), who was appointed as the Interim Resolution Professional (IRP) and subsequently as the Resolution Professional (RP) by the NCLT Ahmedabad Bench on 8 February 2023.

Somani Multibiz Pvt. Ltd., being the sole creditor, formed a single-member Committee of Creditors (CoC). During the third meeting of the CoC, Somani Multibiz expressed its intent to directly proceed with the liquidation of Ila Metals due to Ila Metals’ lack of assets or operations.

However, despite clear directions from the CoC and repeated follow-ups, the liquidation process did not move forward as per the provisions of the Code.

The NCLT, Ahmedabad took note of the unprofessional conduct displayed by the RP in its order dated 8 July 2024. The IBBI examined the NCLT order which criticized the resolution professional's handling of the process and highlighted procedural lapses in the same.

The IBBI reviewed the findings of the NCLT and concluded that there existed a prima facie case of professional misconduct, thus issuing a Show Cause Notice to him on 27 February 2025.

The resolution professional contended that the failure to seek CIRP extension was a procedural oversight rather than an act of negligence or intentional disregard for the provisions of the Code.

He further asserted that the stakeholders suffered no financial loss as the company had no significant assets. Regarding the delay in liquidation, the RP argued that indecision by the CoC in proceedings with liquidation or dissolution of the company, non-payment of CIRP costs and other personal exigencies contributed to the delay.

The IBBI noted two key lapses in the conduct of the RP:

First, he failed to seek an extension of the CIRP within the mandatory 180-day period stipulated under Section 12 of the IBC, allowing the process to continue for over 300 days without seeking necessary approval from the CoC or the Adjudicating Authority.

Secondly, despite the CoC having made the decision to liquidate the company in May 2023, the RP had filed the liquidation application over a year later, on 10 June 2024. The NCLT, in its order dated 8 July 2024, observed that the delay was unjustified and that the RP could have approached the tribunal earlier if there were funding or procedural issues.

The Disciplinary Committee of Dr. Bhushan Kumar Sinha and Mr. Jayanti Prasad, Whole-Time Members of IBBI held that the RP failed to adhere to statutory timelines laid down within the IBC. The DC stated that continuing the CIRP beyond 180 days without formal extension and delaying liquidation despite clear CoC instructions reflected gross negligence and lack of professional diligence.

The Committee found violations of Sections 12, 33(2), and 208(2)(a) & (e) of the IBC, read with Regulations 7(2)(a) and (h) of the IBBI (Insolvency Professional) Regulations, 2016 and Clauses 13 and 14 of the Code of Conduct.

Consequently, the Disciplinary Committee ordered the suspension of Shivkumar Madanlal Baser’s registration for a period of one year, made effective 30 days from the date of issuance of the order. It was further directed that copies of the order be shared with all CoCs where Baser was engaged.

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