IBBI suspends Resolution Professional for 3 years for violating CIRP regulations. The IBBI had reasonable grounds to believe that the Resolution Professional acted in contravention of the IBC and CIRP Regulations In pursuant to a report from the Disciplinary Committee against Resolution Professional, Mr. Partha Sarathy Sarkar, in relation to the Corporate Insolvency Resolution...
Access the exclusive LEGAL ERAStories,Editorial and Expert Opinion
IBBI suspends Resolution Professional for 3 years for violating CIRP regulations.
The IBBI had reasonable grounds to believe that the Resolution Professional acted in contravention of the IBC and CIRP Regulations
In pursuant to a report from the Disciplinary Committee against Resolution Professional, Mr. Partha Sarathy Sarkar, in relation to the Corporate Insolvency Resolution Process against Innovari Technologies Pvt. Ltd. (Corporate Debtor), the Resolution Professional has been suspended for three years for contravening the Insolvency and Bankruptcy Code, 2016 (IBC) and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations").
CIRP was initiated against the Corporate Debtor, in the NCLT, New Delhi Branch, under Section 9 of the IBC by one Mr. Anil Kheterpal, and Mr. Partha Sarathy Sarkar was appointed as the Insolvency Resolution Professional and eventually the Resolution Professional.
The Insolvency and Bankruptcy Board of India (IBBI) appointed an Inspecting Authority (IA) to inspect the CIRP process handled by the Resolution Professional. The IBBI had reasonable grounds to believe that the Resolution Professional acted in contravention of the IBC and CIRP Regulations. Accordingly, a notice was issued to the Resolution Professional thereby directing him to mail all the related documents concerning the CIRP process. However, the said notice was disputed by the Resolution Professional on the grounds that it was misleading, void, and defective.
A show-cause notice was issued to the Resolution Professional, based on the inspection report submitted by the IA, concerning the alleged contraventions of the aforementioned provisions.
However, the Resolution Professional failed to represent himself for the hearing, and the IBBI, on material grounds, concluded the following:
1. Contravention with regard to no corporation with IA:
The Resolution Professional failed to provide any crucial documents or information as sought by the IA, which was his duty under the CIRP Regulation. The Board was of the view that the notice and inspection reports detailed the reasons and findings of the IA, and therefore it was the duty of the Resolution Professional to furnish the requisite documents and information.
2. Contravention in regards to delay in making a public announcement.
The Disciplinary Committee noted that the Resolution Professional was appointed vide order of AA dated 21.08.2019 and the public announcement was ought to be made within three days from the date of his appointment. However, the Disciplinary Committee took into account the submission made by the Resolution Professional that the communication of the order dated 21 August 2019 was not received by him from the NCLT Registry till 26 September 2019. Therefore, the Resolution Professional's contention on this count was accepted by the Disciplinary Committee.
3. Contravention with regard to non-appointment of registered valuers
The was noted that the Resolution Professional was appointed by the Committee of Creditors in its first meeting, and therefore the responsibility of appointing registered valuers is of the Resolution Professional, not the CoC. The Resolution Professional failed to appoint two registered valuers within 7 days of his appointment.
It was further found that the Resolution Professional did not exhibit any intention of completing the CIRP process with the required diligence, neither he took any concrete steps to install confidence in the IP. The Resolution Professional's contention about the non-availability of funds to appoint registered valuers was found untenable. Therefore, it was found that there was willful non-compliance of the procedure by the Resolution Professional.
4. Contravention with regard to inconsistency in the insolvency commencement date
It was observed that there was inconsistency in the insolvency commencement date (ICD) in the documents filed before AA by the Resolution Professional. ICD is the public announcement and in an interlocutory application has been mentioned as September 26, 2019, while the progress report dated October 31, 2019, filed by him before the AA states that CIRP was admitted on August 21, 2019.
5. Contravention with regard to Timeline Violation of CIRP
It was noted that a CIRP must be completed within 180 days from the date of admission of the application to initiate CIRP and upon applying the AA to extend the period of CIRP beyond 180 days on the prior approval from CoC.
However, in the present case, the CIRP was continuing before the AA i.e., beyond the prescribed period of 180 days from the ICD i.e., 21.08.2019. The 180 days period calculated from the date of admission of application came to an end on 17.02.2020. Moreover, there was no extension of the period of CIRP by the AA and the period of 330 days provided in the proviso to Section 12 of the Code was also over in the matter.
6. Contravention with regard to non-compliance with regulations 21(3) and (4) of the CIRP Regulations
Regulation 21(3) and (4) of CIRP Regulations specifies that the notice of the meeting shall contain a list of matters to be discussed at the meeting, a list of issues to be voted at the meeting, copies of all relevant documents to be discussed and the issues to be voted upon at the meeting, the process and manner for voting by electronic means and schedule, including the time period during which the votes may be cast, the login ID and the details for generating a password, etc. It was noted from the notice of the 1st CoC meeting dated October 17, 2019, that the notice contained the only date, venue, and timings of the said meeting. Whereas mandatory details such as (i) a list of matters to be discussed at the meeting. (i) list of issues to be voted, (in) the process and manner for voting by electronic means, etc. were not mentioned as required in the notice dated October 17, 2019.
It was observed from the conduct of the Resolution Professional that he failed to follow the provisions of the Code and regulations and the contravention was wilful.
7. Contravention with regard to non-maintenance of list of creditors in terms of regulation 13 of CIRP Regulations
Regulation 13(1) of the CIRP Regulations requires an IP to maintain a list of creditors specifically including details such as the names of creditors, amount claimed by them, amount of claims admitted, and security interest, if any. The Disciplinary Committee observed from the report certifying the constitution of CoC filed before AA by the Resolution Professional that he had maintained the only name of creditor, the profile of the creditor, and the amount of operational debt but failed to include the amount claimed by the creditors, amount of claim admitted and security interest.
From the conduct of the Resolution Professional, it was observed that he failed to adhere to the obligations and compromised the provisions of the IBC and CIRP Regulations.
8. Contravention with regard to Control and custody of assets of the Corporate Debtor
It was observed that the Resolution Professional had not taken control and custody of the assets of the Corporate Debtor and "did not preserve and protect them", furthermore, the Resolution Professional did not take reasonable care and diligence while performing his duties of taking control and custody of assets of the Corporate Debtor.
9. Contravention with regard to non-filing of PUFE applications
The Disciplinary Committee opined that based on the findings of the Forensic Audit Report and after examination of such transactions, an application should have been made to the AA, however the same was not made.
In view of the Submissions made by the Resolution Professional and the evidence put on record, it was held that:
"the DC finds that the actions of Mr. Partha Sarathy Sarkar as the IRP of the CD are in violation of section 12(1), section 12(2), section 25(1), section 25(2)(a), section 25(2) (d), section 208(2)(a), 208(2) (e) of the Code, Regulation 13(1), Regulation 21(3) and (4), Regulation 27, Regulation 35A of the CIRP Regulations, Regulation 4(4), Regulation 4(7) of Inspection Regulation, Regulation 7(2)(a) and 7(2)(h) of IP Regulations read with Clause 2, 3, 5, 12, 13, 18, 19 of the Code of Conduct specified thereunder. The DC, hereby, considering contravention mentioned hereinabove, suspends the registration of Mr. Partha Sarathy Sarkar as Insolvency Professional, having Registration No. IBBI/IPA-002/IP-N00239/2017-2018/10690 for three years"
The Order shall come into force on the expiry of 30 days from the date of its issue.
It was further directed that the CoC may decide whether to continue the Resolution Professional's services or not. In case, CoC decide to discontinue his services, CoC may file an appropriate application before AA.