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2018 (8) TMI 838 - Board - Insolvency and BankruptcyDisciplinary Processes against the Insolvency Professional who is a Professional Member of the ICSI - Corporate insolvency resolution process (CIRP) - corporate debtor in distress - Held that - The process aims to rescue the corporate debtor from distress. In the instant matter, Mr. Wadhwa, in connivance with the applicant-creditor and the corporate debtor and in contravention of several provisions of the law, subverted the CIRP of Ved Cellulose Limited and thereby attempted to scuttle the life of the corporate debtor itself and frustrate the objective of the Code. It was the timely intervention of the Hon ble Adjudicating Authority that the CIRP was rescued by rejection of the resolution plan submitted by Mr. Wadhwa and appointment of another IRP in his place. The infractions of Mr. Wadhwa call for no leniency. He has rendered himself a person not fit and proper to continue as an insolvency professional. - Registration of Mr. Wadhwa cancelled.
Issues Involved:
1. Continuation as Interim Resolution Professional (IRP) beyond the permissible term. 2. Convening the Committee of Creditors (CoC) meeting with insufficient notice. 3. Failure to appoint a Resolution Professional (RP) in the first CoC meeting. 4. Non-consideration and non-inclusion of Bank of India (BoI) in the CoC. 5. Approval of a resolution plan without following due process. Issue-wise Detailed Analysis: 1. Continuation as Interim Resolution Professional (IRP) beyond the permissible term: The IRP, Mr. Wadhwa, continued beyond the 30-day term stipulated under section 16(5) of the Insolvency and Bankruptcy Code, 2016 (Code). Despite receiving the Order dated 30th June 2017 on 5th July 2017, his term should have ended on 30th July 2017. However, Mr. Wadhwa continued to act as IRP, drafting minutes on 4th August 2017 and filing the resolution plan on 8th August 2017, breaching section 16(5) and clauses 10 and 13 of the Code of Conduct appended to the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations). 2. Convening the Committee of Creditors (CoC) meeting with insufficient notice: Mr. Wadhwa held the first CoC meeting on 3rd August 2017 with a notice dated 1st August 2017, violating regulation 19 of the CIRP Regulations which requires a minimum of 7 days’ notice. His justification that the term would have expired if he waited for 7 days is inadequate, as it deprived BoI from joining the CoC. This contravened section 208(2)(a) of the Code, regulation 19(1) of the CIRP Regulations, and clauses 1, 5, 10, and 13 of the Code of Conduct. 3. Failure to appoint a Resolution Professional (RP) in the first CoC meeting: Section 22 mandates the CoC to appoint an RP or replace the IRP. Instead, the CoC approved a resolution plan in its first meeting without appointing an RP. This subverted the statutory process, as Mr. Wadhwa, who was supposed to manage the CIRP, allowed the corporate debtor to submit a resolution plan, effectively acting as both IRP and resolution applicant. This breached sections 17, 18(1)(a) and (b), 22, 23, 24, 25(2)(h), 29, and 30 of the Code. 4. Non-consideration and non-inclusion of Bank of India (BoI) in the CoC: Mr. Wadhwa failed to admit BoI’s claim and include it in the CoC, violating section 21(2) of the Code and regulation 12(2) of the CIRP Regulations. Despite records indicating BoI as a financial creditor, its claim was not considered, and it was excluded from the CoC. This contravened sections 18(1)(a) and (b), 21(2), and 208(2)(a) of the Code, and regulations 12(2), 36, and 39 of the CIRP Regulations. 5. Approval of a resolution plan without following due process: The resolution plan, which was essentially a settlement between the corporate debtor and the applicant-creditor, was approved without following the due process. The IRP did not prepare a complete information memorandum or invite resolution plans as required under sections 25(2)(h) and 29 of the Code. The entire CIRP process was expedited in a manner that raised suspicions of complicity among the IRP, the corporate debtor, and the applicant-creditor. This subverted the objective of the Code, breaching regulation 7(2)(b) read with regulation 4(g) of the IP Regulations and clauses 1 and 5 of the Code of Conduct. Conclusion: Mr. Wadhwa's actions demonstrated a clear breach of multiple provisions of the Code and the IP Regulations. His conduct in connivance with the applicant-creditor and the corporate debtor subverted the CIRP process, compromising the integrity and objectives of the Code. The Disciplinary Committee concluded that Mr. Wadhwa is not fit and proper to continue as an insolvency professional, leading to the cancellation of his registration. Order: The Disciplinary Committee, exercising powers under section 220 (2) of the Code and relevant regulations, canceled Mr. Wadhwa’s registration as an Insolvency Professional. He is barred from accepting any assignments as IRP, RP, or Liquidator with immediate effect, and the Board will replace him in any ongoing processes.
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