2018 (7) TMI 1632 - Tri - Insolvency and Bankruptcy

Insolvency Resolution Professional (IRP) - plea of the IRP seeking for his discharge - Held that - It is evident from the representations of the OC, CD as well as Financial Creditors who are before us that there is prime need for the CIRP Process to commence, as envisaged under the provisions of IBC, 2016 and in consonance with the order of admission of CIRP as initiated against the CD by this Tribunal. From the submissions made by the stakeholders who were before us, it is clear that the management of the CD is willing to act in accordance with IBC, 2016 and cooperate with the IRP. However, the unprofessional action of IRP has virtually made the CIRP process initiated by this Tribunal by way of admission of Company Petition as a non-starter. The delay on the part of IRP ascribing, however, of a procedural nature in the application about receipt of the order of this Tribunal dated 28.02.2018 even though fairly conceded by Ld.Counsel appearing for the IRP/Applicant that the IRP appointed by this Tribunal was put on notice through telephone about the order of appointment immediately after the order shows that there was a delay on the part of IRP/Applicant who has failed to recognize the importance of his unique position in the entire scheme of IBC, 2016, particularly in relation to CIRP of the CD. Ld. Counsel for the Applicant/IRP represented before this Tribunal that with great efforts after passing the qualifying exam a certificate of registration has been granted to him to act as a Resolution Professional. It is also pertinent to note that consent has been given to IBBI as rightly pointed out in the affidavit filed by IBBI by the Applicant/RP herein to be included for a period of 6 months commencing from 01.01.2018 to 30.06.2018 and Which panel list was forwarded to this Tribunal and also from which panel list this Tribunal had chosen and appointed the Applicant as the IRP of the CD and hence the stand taken by the Ld. Counsel for the Applicant/IRP before us that declaration in Form 2 has not been filed the same being a pre-condition and subject to which the IRP assumes charge as per the orders of this Tribunal is too technical and cannot be accepted as it does not hold much water. The reasons given in the application does not in any way mention that in relation to CD and its affairs he cannot act independently and hence filing Form-2 is only a mere formality and that cannot be made a ground that his appointment has not been accepted and he is not an IRP, more so when consent to act as an IRP has already been given to IBBI based on which panel list has been forwarded and from which it is sought to be withdrawn. Thus it can be seen that the act of the IRP is totally unprofessional and instances of similar nature on the part of IRPs is being evidenced in some of the matters before this Tribunal and also seems to be not uncommon, before other Benches of NCLT as well. This practice of IRP s appointed by NCLTs based on panel list provided by IBBI and subsequently trying to resile from their consent earlier given and that too upon appointment by Adjudicating Authority (AA) is strongly required to be eschewed and is to be nipped in the bud at the earliest opportunity. In this connection, the role of the Insolvency Professionals on the one hand and on the other that of AA and their interplay has been succinctly brought in the Report of the Bankruptcy Law Reforms Committee Volume I, Rational and Design, 2015 and at Chapter 4.4 dealing with the Insolvency Professionals after elucidating the role of IPs in the process of Insolvency and Bankruptcy and while stressing the importance of IPs concludes Taking into consideration all of the above, we are not in a position to entertain the plea of the IRP seeking for his discharge. In the circumstances, this Application stands dismissed with costs of ₹ 50,000/- payable to Insolvency and Bankruptcy Fund as envisaged under Section 224 of IBC, 2016 and in case of absence of the fund to the credit of Prime Minister s Relief Fund. Further the IRP is directed to commence the performance of his duties forth with not later than 3 days from the date of this order in the interest of all the stakeholders concerned and facilitate the convening of the 1st Committee of Creditors meeting. Further, the unprofessional attitude of the Resolution Professional/Applicant cannot also be looked away as well and in the circumstances, this Tribunal directs the following to IBBI, being the Regulator of IRP (i.e.) to initiate such actions as contemplated under several of the Regulations as framed by it in relation to IPs and Insolvency Professionals Agencies empanelled with it

Summary

Issues Involved:
1. Application for discharge by the Insolvency Resolution Professional (IRP).
2. Duties and responsibilities of an IRP under the Insolvency and Bankruptcy Code, 2016 (IBC, 2016).
3. Guidelines and regulations by Insolvency and Bankruptcy Board of India (IBBI) regarding IRP appointments.
4. Conduct and unprofessional behavior of the IRP.
5. Response and involvement of IBBI in the discharge application.
6. Additional applications by the Operational Creditor (OC) for new IRP appointment.

Issue-wise Detailed Analysis:

1. Application for Discharge by the IRP:
The IRP sought discharge from the Corporate Insolvency Resolution Process (CIRP) due to delays in receiving the Tribunal's order and subsequent inability to continue as IRP. The IRP claimed non-receipt of the order dated 28.2.2018 until 14.3.2018 and cited unavoidable circumstances for withdrawal of consent.

2. Duties and Responsibilities of an IRP under IBC, 2016:
The Tribunal emphasized the critical role of the IRP, highlighting Section 16 of IBC, 2016, which mandates the appointment of an IRP within fourteen days from the insolvency commencement date. The IRP's duties include managing the Corporate Debtor's (CD) affairs, constituting a Committee of Creditors (CoC), and ensuring financial institutions act per IRP instructions. The IRP's term should not exceed thirty days from the date of appointment.

3. Guidelines and Regulations by IBBI Regarding IRP Appointments:
The Tribunal referred to the guidelines issued by IBBI for appointing IRPs, including the May 2017 and December 2017 guidelines, which outline the preparation of a panel of IPs for appointment. The IRP's inclusion in the panel was based on his expression of interest and eligibility criteria, including no pending disciplinary proceedings and not being convicted in the last three years.

4. Conduct and Unprofessional Behavior of the IRP:
The Tribunal criticized the IRP's unprofessional behavior for seeking discharge without assuming charge and discharging duties. The IRP's contradictory reasons for discharge, citing inability to devote adequate time after expressing interest to be included in the panel, were deemed unprofessional. The Tribunal highlighted the importance of IRPs in the CIRP process and the negative impact of the IRP's inaction on stakeholders.

5. Response and Involvement of IBBI in the Discharge Application:
IBBI, impleaded as a party, filed a detailed reply stating the IRP's application lacked merit and was based on an incorrect understanding of the law. IBBI emphasized the importance of every assignment under the Code and the IRP's duty to perform his role diligently. The Tribunal noted IBBI's regulations governing IPs and IPAs, highlighting the IRP's obligations and the need for regulatory oversight.

6. Additional Applications by the Operational Creditor (OC) for New IRP Appointment:
The OC filed applications seeking directions for the IRP to commence duties or appoint a new IRP. The Tribunal acknowledged the stakeholders' need for the CIRP process to commence and noted the management's willingness to cooperate with the IRP. The Tribunal dismissed the IRP's application for discharge and directed the IRP to commence duties within three days.

Conclusion:
The Tribunal dismissed the IRP's application for discharge, imposed a cost of ?50,000, and directed the IRP to commence duties immediately. The Tribunal also instructed IBBI to consider the application as a complaint and initiate appropriate actions against the IRP for unprofessional conduct. The OC's application for appointing a new IRP was also dismissed without costs.