Insolvency Resolution Professional barred from fresh assignments under Code for 6 monthsThe Insolvency & Bankruptcy Board of India found the Insolvency Resolution Professional to have violated sections 18, 20 and 25 of the Code and clauses 3 and 14 of the first schedule to the IBBI IP RegulationsThe Disciplinary Committee(DC) of the Insolvency and Bankruptcy Board of India (IBBI)...
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Insolvency Resolution Professional barred from fresh assignments under Code for 6 months
The Insolvency & Bankruptcy Board of India found the Insolvency Resolution Professional to have violated sections 18, 20 and 25 of the Code and clauses 3 and 14 of the first schedule to the IBBI IP Regulations
The Disciplinary Committee(DC) of the Insolvency and Bankruptcy Board of India (IBBI) has directed the Insolvency Resolution Professional(IRP/IP/RP) (Mr. Manmohan Jhawar), not to seek or accept any process or assignment or render any services under the Insolvency and Bankruptcy Code, 2016 (Code) for a period of six months from the date of coming into force of this order but he can continue to conduct and complete assignments / processes he has in hand as on date of this order.
The Inspecting Authority (IA) appointed by the IBBI conducted an inspection of the IRP and observed that he had violated sections 18, 20 and 25 of the Code and clauses 3 and 14 of the first schedule to the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations).
Later, the Adjudicating Authority(AA), in its order, observed that the IRP failed to make efforts toward effective control and custody of seven properties (agricultural lands) of the corporate debtor (CD) (M/s Hahnemann Housing and Development Private Limited) in respect of which title deeds were also handed over by the promoters.
It was observed in the Show Cause Notice that the promoters/ directors did not provide relevant documents to the IRP despite several reminders and were not even following the directions issued by the AA. The AA also qheld that the IRP failed to take any action under the relevant provisions of the Code even after the AA recommended that appropriate action under the Code may be initiated.
The IRP submitted that throughout the Corporate Insolvency Resolution Period (CIRP) period, he tried his best to take custody of the assets. He stated that despite his best efforts, he was unable to take physical possession and custody of about 180 tracts of agricultural land due to various reasons. Further, the ex-directors failed to cooperate with the IRP since the very beginning of the CIRP and despite repetitive initiatives from his side, they delayed and refused submission of various relevant documents and information.
He also mentioned that he was suffering from a serious illness since June, 2018 after admission of the CIRP of the said CD which might have caused delays in his actions during the CIRP period and the mistakes committed by him were bonafide with no malicious intent.
The DC has noted that Section 18 of the Code expressly provides that the IRP shall take control and custody of any asset over which the CD has ownership rights while section 20 mandates the IRP to make every endeavour to protect and preserve the value of the property of the CD. Similarly, under section 25 of the Code, it is the duty of the IRP to preserve and protect the assets of the CD, including the continued business operations of the CD. The DC also observed that in his submission, the IRP did not mention any concrete efforts being taken by him nor did he produce any evidence to prove that he did make an effort to take control and custody of the lands of the CD. In the present case, Mr. Jhawar should have approached the revenue authorities to inform them about his appointment as an IRP and his authority to take control of the assets of the CD.
He should have appointed surveyors for identification of the properties based on the 180 title deeds which were provided to him by the ex-directors. According to the DC, the IRP failed to take any action against the ex-directors for their non-cooperation despite directions by the AA in its order.
The DC also held that the IRP's contention that once resolution of liquidation is passed, the application with respect to non-cooperation can be initiated after the passing of liquidation order by the AA was untenable.
The DC concluded that the IRP's conduct, in not making material efforts to identify and take control of the assets of the CD as also not filing an application under section 19(2) for non-cooperation by the ex-directors, reflected his professional incompetence and negligence.
Further, he also did not make sincere efforts to take control and custody of the lands of the CD despite statutory duties under sections 18(1) and 25(1)(a) and failed to take control and custody of the property of the CD which frustrated the entire CIRP process and the CD was pushed into liquidation. This conduct of the IRP was held to be in contravention of sections 18(1)(f), 20(1), 25(2)(a), 208(2) (a) and (e) of the Code and regulation 7(2)(h) of the IP Regulations and clauses 10 and 14 of the Code of Conduct under the first Schedule of the IP Regulations.