2019 (3) TMI 825 - Board - Insolvency and Bankruptcy

Default by Insolvency Professional (IP) - contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), the IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016 and the IBBI (Insolvency Professionals) Regulations, 2016 - Mr. Kejriwal is a professional member of the ICSI Institute of Insolvency Professionals and an Insolvency Professional (IP) - Mr. Kejriwal IP did not conduct CIRP as required under section 23 of the Code. He did not submit progress report to AA in time, make public announcement in time, appoint registered valuers, prepare and circulate information memorandum, invite resolution plans under section 25(2)(h) of the Code, convene the meetings of CoC with adequate notice, etc.. He did not run the CDs as a going concern, as required under section 20 of the Code and resigned as RP in both the CIRPs, without prior permission of the AA, though he consented to act as IRP and as RP in both cases HELD THAT - An IP is not just another professional. He is dealing with a CD in distress. He needs to go beyond the call of duty to address the distress. The DC unfortunately finds that Mr. Kejriwal did not discharge any of his statutory responsibilities as IRP or RP either to manage the operations of the two CDs as going concern under section 20 of the Code or to conduct the resolution processes of the two CDs under section 23 of the Code. He has, therefore, violated provisions of sections 18, 20, 23, 25(2)(g), 25(2)(h), 29, 208(2)(a), and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016, regulations 6(1), 19(1), 27 and 36 of the IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016 and regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 1, 2, 3, 5, 10, 12, 13, 14, and 25 of the Code of Conduct under the said Regulations. It, however, finds in his favour two mitigating factors, namely, (a) Mr. Kejriwal was not well for some time during the relevant period, and (b) the CDs were practically not going concerns to start with. Disciplinary Committee thus imposed monetary penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRPs of respective companies and directs him to deposit the penalty amount by a crossed demand draft and 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.

Summary

Issues Involved:

1. Non-compliance with statutory requirements in the CIRP of Upadan Commodities Private Limited.
2. Non-compliance with statutory requirements in the CIRP of Maa Tara Industrial Complex Pvt. Ltd.
3. Failure to manage the CDs as a going concern.
4. Resignation without prior permission from the Adjudicating Authority (AA).

Detailed Analysis:

1. Non-compliance with statutory requirements in the CIRP of Upadan Commodities Private Limited:

The AA admitted the CIRP application and appointed Mr. Kejriwal as IRP on 29th August, 2017, directing him to submit a progress report by 4th October, 2017. Mr. Kejriwal failed to file the progress report, leading the AA to order his presence and report submission by 16th October, 2017. He again failed to comply, prompting the AA to issue a notice. Mr. Kejriwal eventually filed a report on 25th October, 2017, citing illness as the reason for non-compliance. The AA noted his failure to publish the public announcement and hold the CoC meeting, directing compliance within 15 days. Despite subsequent filings, Mr. Kejriwal's actions, including his resignation on 18th December, 2017, without AA's permission, delayed the process, leading to the appointment of a new RP and eventual liquidation of the CD.

2. Non-compliance with statutory requirements in the CIRP of Maa Tara Industrial Complex Pvt. Ltd.:

The AA admitted the CIRP application and appointed Mr. Kejriwal as IRP on 8th September, 2017, directing him to submit a progress report by 10th October, 2017. Mr. Kejriwal failed to file the progress report, leading the AA to order its submission within ten days. He eventually filed a report on 25th October, 2017, citing illness as the reason for non-compliance. The AA noted his failure to publish the public announcement and hold the CoC meeting, directing compliance within 15 days. Despite subsequent filings, Mr. Kejriwal's actions, including his resignation on 18th December, 2017, without AA's permission, delayed the process, leading to the appointment of a new RP.

3. Failure to manage the CDs as a going concern:

Mr. Kejriwal did not take over the management of the CDs or seek AA's direction for non-cooperation from the CDs. He failed to run the CDs as a going concern, as required under section 20 of the Code. The DC found no evidence of his efforts to manage the CDs, noting that he wrote a few letters seeking documents but did not bring the issue to AA's notice under section 19 of the Code.

4. Resignation without prior permission from the Adjudicating Authority (AA):

Mr. Kejriwal resigned as RP in both CIRPs without prior permission from the AA, despite consenting to act as IRP and RP. He cited personal reasons for his resignation but later mentioned non-payment of fees and lack of cooperation from the CDs. The DC found his excuse for resignation without merit, as he volunteered to be appointed as RP despite knowing the circumstances.

Conclusion:

The DC concluded that Mr. Kejriwal violated several provisions of the Insolvency and Bankruptcy Code, 2016, and related regulations. He failed to discharge his responsibilities as IRP and RP, did not manage the CDs as going concerns, and resigned without AA's permission. The DC noted two mitigating factors: his illness during the relevant period and the CDs not being going concerns initially.

Order:

The DC imposed a monetary penalty equal to 100% of the total fee payable to Mr. Kejriwal as IRP and RP in the CIRPs of Upadan Commodities Private Limited and Maa Tara Industrial Complex Pvt. Ltd., to be deposited within 30 days. Additionally, Mr. Kejriwal was directed to undergo a pre-registration educational course to improve his understanding of the Code and regulations before accepting any assignment under the Insolvency and Bankruptcy Code, 2016. The order shall come into force 30 days from its issue, and copies were forwarded to relevant authorities for information.