The Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI) has cancelled the registration of an Insolvency professional for deliberate, blatant, orchestrated and collusive contraventions of the provisions of the Insolvency and Bankruptcy Code, 2017.
There were numerous allegations against the Insolvency Professional that he failed to comply with certain legal requirements to complete certain tasks such as issue of public announcement, appointment of valuers, constitution of the CoC, first meeting of the Committee of Creditors (CoC), appointment of RP, etc., within prescribed number of days from the date of commencement of CIRP. It was also alleged that he compromised his independence and sided with the parties and vitiated the entire CIRP.
IRP was required under the law to complete certain tasks such as issue of public announcement, appointment of valuers, constitution of the CoC, first meeting of the Committee of Creditors (CoC), appointment of RP, etc., within prescribed number of days from the date of commencement of CIRP.
However, the accused IP failed to do so. It was also alleged that he compromised his independence and sided with the parties and vitiated the entire CIRP. The Disciplinary Committee found that as RP, he did nothing for the entire period of CIRP, except waiting for approval of OTS by bank. As the permissible time for conclusion of CIRP was approaching, he as RP, organised the first meeting of the CoC only to seek approval for extension of CIRP period and obtained extension by making false statements to the AA. Even after extension of CIRP period, he did nothing.
The DC found that the IP confirmed that the resolution plan submitted did not contravene any of the provisions of any law, even though he knew that the husband of the shareholder was ineligible under section 29A of the Code to submit resolution plan. As orchestrated, the CoC, which comprised only bank , approved it .
The DC found that the IP connived with the parties to allow an OTS in the garb of resolution plan and to allow an ineligible RA to submit the OTS and did absolutely nothing either to run the business of the CD or to run the CIRP.
The DC, in its order, further stated that an IRP or RP who appointed by the AA, is an officer of the Court. He is duty bound to (i) conduct CIRP with fairness and diligence, (ii) confirm that the resolution plan does not contravene any of the provisions of the law for the time being in force, (iii) maintain absolute independence in discharge of his statutory duties, and (iv) assist the AA with the correct perspective of the law, including provisions of section 29A of the Code.
The AA relies on the work of an IP, as an insolvency proceeding is mostly not adversarial in nature. When there is no opposite party, as in this matter, the IP has a greater responsibility.
Taking advantage of absence of an opposite party to the matter, Mr. Golla made misleading submission before the AA. The DC opined that by using the CIRP as a facade and in connivance with shareholders of the CD the IP (a) thwarted actions, liabilities and obligations under the SARFAESI and proceeding before the DRT, released the personal guarantors, and the secured properties, (b) made himself eligible to submit a resolution plan by misrepresentation, (c) passed on an OTS as resolution plan, and (d) used the resolution plan to wipe off claims of various creditors, including claim of Bank. He could not have done any of these the husband of the shareholder as an RP played by the rule book and did not “explore every possibility to address the issue (illegality)”.
Source: Tax Scan, November 19, 2018