9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (11) TMI 890 - Board - Insolvency and BankruptcyCorporate insolvency process - misconduct by Resolution Professional(RP) - appointment of Interim Resolution Professional (IRP) / Resolution Professional (RP) - IRP/RP conducted only one meeting of the CoC during the entire CIRP, particularly when many decisions are required to be taken with the approval of the CoC, including decision to approve a resolution plan or to liquidate the corporate debtor. - appointment as RP required approval of the CoC by 75% of voting share, while Mr. Gupta received only 73.42% of voting share of the CoC before the closure of e-voting window, thus he could not have been appointed as RP Held that - An IP has the responsibility to run the corporate debtor as a going concern and conduct the entire CIRP. He has responsibility to run the process and assist the CoC in making business decisions such as resolution and liquidation. It is the CoC only which can decide if and how insolvency of a corporate debtor is to be resolved or it must be liquidated. It is not the job of an IP to take a decision, directly or indirectly, or by omission or commission, for or on behalf of the CoC or substitute itself for CoC. In the instant case, Mr. Gupta deprived the CoC of its right to decide the fate of the corporate debtor and thereby pushed the corporate debtor into liquidation. Probably, Mr. Gupta does not know the full implications of what he did. It is difficult to appreciate the contention of Mr. Gupta that no law required him to have a certain number of meetings of the CoC and, therefore, he did not violate any law. It cannot be appreciated in the context of either the basic premise of the Code which provides a market mechanism for resolution of insolvency nor the role envisaged in the Code for an enlightened and empowered IP having the responsibility to run the corporate debtor as a going concern and conduct the entire CIRP. Mr. Gupta did not have a single meeting of the CoC in his term as the RP. How does one justify that the CoC has no role whatsoever in a CIRP? The Code envisages definite roles for different constituents. It is unimaginable that a constituent does not play its role or is not allowed to play its role or encroaches upon another s role. By not allowing and facilitating the CoC to play its rightful role, Mr. Gupta has dealt a fatal blow to the basic premise of the Code. He also failed to protect the interests of the corporate debtor and creditors and stepped into the shoes of the CoC. Therefore, Mr. Gupta has contravened provisions of sections 31(2) and 208(2)(a) of the Code read with regulation 7(2)(a) and 7(2)(g) of the IP regulations and clauses 9, 10, 12, 14, 15 of the Code of Conduct. Order - (i) imposes on Mr. Gupta a monetary penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRP of Stewarts & Lloyds of India Ltd. and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the Insolvency and Bankruptcy Board of India within 30 days of the issue of this order. The Board in turn shall deposit the penalty amount in the Consolidated Fund of India; and (ii) directs Mr. Gupta to undergo the pre-registration educational course specified under regulation 5(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 from his Insolvency Professional Agency to improve his understanding of the Code and the regulations made thereunder, before accepting any assignment under the Insolvency and Bankruptcy Code, 2016.
Issues Involved
1. Conduct of Mr. Gupta as Interim Resolution Professional (IRP) / Resolution Professional (RP). 2. Number of meetings of the Committee of Creditors (CoC) conducted. 3. Approval of Mr. Gupta as RP by the CoC. 4. Appointment of valuers and submission of valuation reports. 5. Non-receipt of resolution plans and communication with the CoC. 6. Allegations of misconduct and the role of the CoC in the Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis 1. Conduct of Mr. Gupta as Interim Resolution Professional (IRP) / Resolution Professional (RP) The Board reviewed the orders from the Adjudicating Authority (AA) and the National Company Law Appellate Tribunal (NCLAT) regarding Mr. Gupta's conduct during the CIRP of Stewarts and Lloyds of India Limited. The AA and NCLAT noted that Mr. Gupta failed to convene multiple meetings of the CoC and did not take appropriate steps to invite resolution plans, raising concerns about his performance. 2. Number of Meetings of the Committee of Creditors (CoC) Conducted Contravention: Mr. Gupta conducted only one meeting of the CoC during the entire CIRP. Submission: Mr. Gupta argued that neither the Code nor the CIRP Regulations mandate a specific number of CoC meetings. He aimed to save expenses and did not receive any requests for additional meetings from CoC members. Finding: The DC found it unacceptable that Mr. Gupta did not convene even one meeting of the CoC during his tenure as RP, especially when no resolution plan was received. His failure to seek the CoC's views on extending the CIRP or liquidation was seen as acting against the best interests of the corporate debtor and creditors. 3. Approval of Mr. Gupta as RP by the CoC Contravention: Mr. Gupta received only 73.42% of the voting share for his appointment as RP, below the required 75%. Submission: Mr. Gupta received additional votes via email after the voting window closed, raising the voting share to 78.93%. He cited similar cases where the AA approved appointments with less than 75% votes. Finding: The DC noted that Mr. Gupta did not hide any relevant information from the AA, which appointed him as RP after considering the voting details. Therefore, no irregularity in his appointment was found. 4. Appointment of Valuers and Submission of Valuation Reports Contravention: Mr. Gupta delayed appointing valuers and receiving valuation reports, impacting the submission of the information memorandum. Submission: Mr. Gupta admitted a two-day delay in appointing valuers, citing initial implementation challenges and the novelty of liquidation valuation. Finding: The DC considered the minor delay and initial challenges reasonable, finding the lapse explicable and not severe enough for penal action. 5. Non-receipt of Resolution Plans and Communication with the CoC Contravention: Mr. Gupta did not inform the CoC about the non-receipt of resolution plans and worked towards liquidation. Submission: Mr. Gupta claimed he made efforts to receive resolution plans and informed the AA about the non-receipt. Finding: The DC found that Mr. Gupta deprived the CoC of its right to decide the fate of the corporate debtor. His actions suggested he worked towards liquidation rather than resolution, undermining the CoC's role and the Code's premise. 6. Allegations of Misconduct and the Role of the CoC in CIRP Mr. Gupta argued that the NCLAT found no misconduct on his part. However, the DC noted that the NCLAT's observations did not preclude the specific allegations in the SCN. The DC emphasized the CoC's critical role in deciding the corporate debtor's fate and found Mr. Gupta's actions contrary to the Code's objectives. Order The Disciplinary Committee imposed a monetary penalty equal to 100% of the total fee payable to Mr. Gupta as IRP and RP, to be deposited within 30 days. Additionally, Mr. Gupta was directed to undergo a pre-registration educational course to improve his understanding of the Code and regulations before accepting any future assignments. The show cause notice was disposed of, and copies of the order were forwarded to relevant authorities for information.
|
