CIRP and Liquidation process are entirely separate and require separate consent from the Insolvency Professionals The Liquidator, in this case, was guilty of professional misconduct as he did not hold a valid Authorisation for Assignment. A penalty of Rs. 10,000 was imposed on him In view of the fact that the Disciplinary Committee of the Indian Institute of Insolvency Professional of...
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CIRP and Liquidation process are entirely separate and require separate consent from the Insolvency Professionals
The Liquidator, in this case, was guilty of professional misconduct as he did not hold a valid Authorisation for Assignment. A penalty of Rs. 10,000 was imposed on him
In view of the fact that the Disciplinary Committee of the Indian Institute of Insolvency Professional of ICAI had already passed the order in this matter, the Disciplinary Committee (DC) of the IBBI (Insolvency and Bankruptcy Board of India), has disposed of the SCN (Show Cause Notice) issued to Venkata Siva Kumar, who is a Professional Member of the Indian Institute of Insolvency Professionals of ICAI (IPA) and an IP registered with the IBBI, without any direction.
Herein, the IBBI had issued SCN to Mr Siva Kumar for accepting the assignment as the Liquidator in the Corporate Insolvency Resolution Process (CIRP) of M/s The Jeypore Sugar Company Limited (CD) after 31 December 2019 without holding a valid Authorisation for Assignment (AFA) from his IPA.
The SCN issued by IBBI alleged contraventions of sections 208(2)(a) & (e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a) & (h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the First Schedule of the IP Regulations
It was submitted on behalf of Mr Siva Kumar that he was the Resolution Professional (RP) in the CIRP of the CD and was appointed as the Liquidator by the Hon'ble National Company Law Tribunal, Chennai Bench (AA) vide order dated 29 May 2020. The provisions of AFA did not apply to this present matter since no new assignment was taken up by him.
It was also submitted that he continued with the same assignment wherein he was the RP and now had been appointed as the Liquidator. Therefore, the provisions of Regulation 7A of the IP Regulations were not applicable. He had also applied for AFA before the IPA, however, the same had been rejected.
The DC observed that one of the essential conditions for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled. In other words, without AFA, an IP is not eligible to undertake any assignments or conduct various processes thereof. Regulation 7A was inserted in the IP Regulations vide notification dated 23 July 2019.
An application for grant of AFA can be made by the IPs to the IPA under para 12A of said bye-laws. An IP who is more than 70 years of age is ineligible to make an application for AFA under para 12A (2)(e) of the said bye-laws.
It was also noted that the certificate of registration granted to an IP is subject to the condition that he should follow at all times the provisions of the Code and Regulations and the bye-laws of Insolvency Professional Agency of which the IP is a member and also follow the Code of Conduct specified in the First Schedule to the IP Regulations.
It was opined by the DC that Mr Siva Kumar was appointed as Liquidator of the CD vide order of the AA dated 29 May 2020. The date of Public Announcement of the Liquidation was 29 May 2020. The notification published on 23 July 2019, inter alia, amended the IP Regulations and holding of AFA has been made one of the essentials for conducting various processes under the Code, to be effective from 1 January 2020.
Thus, adequate time was given to the Insolvency Professionals to obtain AFA. The DC noted that Mr Siva Kumar did not hold valid AFA even after more than four months from the date of enforcement of the provisions. The submission of Mr Siva Kumar that liquidation of the CD is not a new assignment was not tenable as the order for liquidation was separately passed under section 33 of the Code and liquidator was appointed subject to his consent as per section 34 of the Code.
The CIRP and Liquidation process are entirely separate and require separate consent from the Insolvency Professionals. The public announcements with regard to both the processes are published separately. Further, similar to CIRP, in the Liquidation process, under section 34 (2) of the Code, the powers of the Board of Directors, Key Managerial Persons etc., are vested in the Liquidator.
Mr. Siva Kumar had applied for AFA on 31 December 2019. However, the same had not been granted. The DC found that Mr. Siva Kumar had contravened Regulation 7A of the IP Regulations by accepting the assignment as Liquidator of the CD after 31 December 2019 without holding a valid AFA.
The DC also found that an order had been passed against Mr. Siva Kumar on 1 December 2020 by the Disciplinary Committee of IPA for accepting assignment as Liquidator after 31 December 2019 without holding a valid AFA in the CIRP of the CD and it had been decided that he was guilty of Professional Misconduct and a penalty of Rs 10,000 had been imposed. Hence, the SCN was disposed of without any directions.