Credibility of the processes under the I&B Code depends upon the observance of the Code of conduct by the IRP/RP during the process
The Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI), in the matter of Mr. Ajay Kumar, Insolvency Professional (IP), has disposed of the Show Cause Notice (SCN) without any direction against Mr. Ajay Kumar. In the present matter, the IBBI had issued the SCN to Mr. Ajay Kumar on 28th August, 2020, for accepting the assignment of the voluntary liquidation of Sambodhi Healthcare Private Limited and Modern Cold Storage Limited after 31st December, 2019 under the Code without holding a valid Authorization for Assignment (AFA) issued to him by his IPA (Insolvency Professional Agency).
The IP, through his written submissions, has contended that the promoters/suspended directors of the both the companies contacted the IP in November 2019 with the objective of initiation of voluntary liquidation.
However, it was only around first week of March, 2020 that the decision to voluntary liquidate was finalized.
He was under the impression that application for AFA has been made by his office and it was beyond his knowledge that due to some technical errors the submission of the application was not successful. Due to onset of COVID-19 lockdown, it was impossible to retrieve any documents from his office.
He has stated that his actions were unintentional and without any mala fide and has also confirmed that beyond public announcement he has not taken any further steps in the assignments and has not accepted any fee for the said assignments.
The DC (Disciplinary Committee) has very elaborately discussed the various provisions of the code and stated that Regulation 7A of IP regulations requires for any IP to have AFA before undertaking any assignment after 31st December 2019.
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.
Moreover, Section 208 of the Code also casts an obligation to abide by the code of conduct and comply with all requirements and terms and conditions specified in the byelaws of the insolvency professional agency of which he is a member.
With respect to this matter, the DC has mentioned that Mr. Kumar accepted the assignment of voluntary liquidation in matter of Sambodhi Healthcare Private Limited and Modern Cold Storage Limited without holding valid AFA after 31.12.2019 which is in express contravention of regulation 7A of IP Regulations, which is applicable to voluntary liquidation as well.
In consequence, he also contravened code of conduct under section 208(2)(a) and(e) of the Code and regulations 7(2)(a) and (h) of the 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 has also been noted that an order has been passed against Mr. Kumar on 7.09.2020 by the Disciplinary Committee of IPA and a penalty of Rs. 10,000/- has been imposed for contravention of regulation 7A of IP Regulations.
The DC has disposed of the SCN without any direction against Mr.Ajay Kumar keeping in view of the fact that ICSI Institute of Insolvency Professionals has already taken disciplinary action against the IP, Mr. Ajay Kumar, for accepting assignment as Voluntary Liquidator after 31st December, 2019 without holding a valid AFA in the matter of Sambodhi Healthcare Private Limited and Modern Cold Storage Limited.