Every IP should take reasonable care and diligence while performing his duties
A Show Cause Notice (SCN) had been issued to the Insolvency Professional (IP) for accepting the assignment as the Liquidator in Liquidation process of the Corporate Debtor (CD) – Advance Surfactants India Limited after 31st December 2019 without holding a valid Authorisation for Assignment (AFA) from his IPA (Insolvency Professional Agency).
As per IP Regulations, 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.
The Order of Liquidation was passed by the National Company Law Tribunal (NCLT), Principal Bench on 14th January 2020 due to the failure of the Corporate Insolvency Resolution Process (CIRP) of CD.
The SCN issued in the matter of Mr. Kishan Gopal Somani – IP under Regulation 11 of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016, was disposed of without any direction against the IP, by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI).
The IP in the present matter had contested the SCN by submitting that as per the decision of the CoC (Committee Of Creditors), he had given his Written Consent to the CoC in its meeting held on 22nd November 2019 to act as Liquidator in terms of section 34(4) of the Insolvency and Bankruptcy Code, 2016 (IBC) and accordingly the same was filed with NCLT on 28th November 2019 itself, much before the cut-off date of 31st December 2019.
The application seeking liquidation of CD along with IP's written consent was filed before Hon'ble NCLT before the cut-off date. Hence, it is not a new assignment and the bar under Regulation 7A of IP Regulations would not be applicable in this case.
He had also specifically mentioned that the SCN was issued to him in this regard and matter pending with the Disciplinary Committee of the IPA.
He also argued that the IPA is the authority for granting the AFA and so, the present proceedings cannot and should not continue. It was also stressed that he is a practicing IP and had passed the Limited Insolvency Examination at the age of 78 and till date he has conducted 10 assignments diligently and has unequivocally followed the Code and any rules and regulations made thereunder.
At present his age is more than 80 years and the subsequent ineligibility of IP above 70 years from obtaining AFA is arbitrary.
The Disciplinary Committee had very clearly affirmed that 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 bye-laws of Indian Institute of Insolvency Professionals of ICAI.
It was observed that the IP had given his written consent to CoC in its meeting held on 22nd November 2019 to act as Liquidator in terms of Section 34(4) and accordingly the same was filed with NCLT on 28th November 2019 prior to the requirement of AFA for accepting or undertaking assignment under Regulation 7A of the IP Regulations which came into effect from 1st January 2020, i.e., after 31st December 2019.
The Hon'ble NCLT, Principal Bench, had passed the Liquidation Order dated 14.01.2020 due to failure of CIRP in this matter.
Mr. Somani's appointment was confirmed as Liquidator based on his "Written Consent to act as Liquidator" and also on the recommendation of CoC. Moreover, an IP who is more than 70 years of age cannot make an application for the grant of AFA.
Therefore, he could not apply for obtaining grant of AFA and hence, could not hold AFA.
In the context of age bar under clause 12A (2) (e) of the Schedule to the IBBI (Model Bye-laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 and also the written consent being filed by Mr. Somani with the NCLT on 28th November 2019 prior to the coming into effect of the requirements of AFA, no lapse on the part of Mr. K.G. Somani had been found.