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2019 (4) TMI 1206 - Board - Insolvency and BankruptcyInterim resolution professional (IRP) and / or resolution professional (RP) - contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), the IBBI (Insolvency Professionals) Regulations, 2016 (IPR) and the Code of Conduct under regulation 7(2) thereof, and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. HELD THAT - The DC finds that Mr. Ruia has contravened the provisions of sections 20, 22, 23, 208(2)(a) and (e) of the Insolvency and Bankruptcy Code, 2016, regulations 33 and 34 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and regulations 7(2)(a), (b) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 1, 2, 5, 9, 10, 12, 14, 16, 18, 19, 24, 25 and 27 of the Code of Conduct thereof. The registration of Mr. Sanjay Ruia as an Insolvency Professional, having Registration No. IBBI/IPA-001/IP-P00353/2017-2018/10654, shall be suspended for two year - Mr. Ruia shall not seek or accept any process or assignment or render any services under the Code during the period of suspension. He shall, however, continue to conduct and complete the assignments / processes he has in hand as on date of this order - Mr. Ruia shall (i) 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, and (ii) work for at least six months as an intern with a senior insolvency professional, at any time during the period of suspension, to improve his understanding of the Code and the regulations made thereunder.
Issues Involved:
1. Fee for Services as IRP/RP 2. Appointment as RP 3. Non-Cooperation 4. Appointment of IRP 5. Misrepresentation 6. Liquidation 7. Other Allegations Detailed Analysis: 1. Fee for Services as IRP/RP: - In the CIRP of Sanjay Strips Private Ltd.: - Allegations: The initial term sheet signed by Mr. Ruia suggested an unreasonably high fee for his services as IRP/RP, which was later revised after the Hon’ble Adjudicating Authority (AA) expressed concerns. Mr. Ruia then sought higher fees from the Committee of Creditors (CoC) after his appointment. - Findings: The Board found the initial fee unreasonable, reflecting poor professional competence for using outdated financial information. Mr. Ruia’s conduct was deemed malafide for attempting to increase his fee post-appointment, and his claim of discretion in charging fees was found unconvincing. The DC concluded that Mr. Ruia contravened sections 208(2)(a) and (e) of the Code, regulation 33 of the CIRPR, and regulations 7(2)(a) and (h) of the IPR. - In the CIRP of S. N. Plumbing Private Ltd.: - Allegations: Mr. Ruia contracted a professional fee of ?50 lakh with the applicant, who had a claim of ?13.76 lakh, suggesting an intention to inflate expenses. - Findings: The DC applied the same analysis as for Sanjay Strips Private Ltd., finding Mr. Ruia in contravention of sections 20, 208(2)(a) and (e) of the Code, regulation 33 of the CIRPR, and regulations 7(2)(a) and (h) of the IPR. 2. Appointment as RP: - In the CIRP of Sanjay Strips Private Ltd.: - Allegations: Mr. Ruia signed a term sheet with the applicant, attempting to lock in his appointment as RP, which is the prerogative of the CoC. - Findings: The DC found that Mr. Ruia’s actions compromised professional independence and contravened sections 22, 208(2)(a) and (e) of the Code, regulations 33 and 34 of the CIRPR, and regulations 7(2)(a) and (h) of the IPR. - In the CIRP of S. N. Plumbing Private Ltd.: - Findings: The DC reiterated its findings from Sanjay Strips Private Ltd., confirming similar contraventions. - In the CIRP of Global Proserv Ltd.: - Allegations: Mr. Ruia did not provide the term sheet to the Inspection Authority. - Findings: The DC found similar contraventions as in the other two CIRPs. 3. Non-Cooperation: - In the CIRP of Global Proserv Ltd.: - Allegations: Mr. Ruia failed to provide the term sheet when requested by the Inspecting Authority. - Findings: The DC found that Mr. Ruia’s failure to provide the term sheet and subsequent submission of an incomplete term sheet indicated non-cooperation and fabrication of documents, contravening sections 208(2)(a) and (e) of the Code, regulations 33 and 34 of the CIRPR, and regulations 7(2)(a) and (h) of the IPR. 4. Appointment of IRP: - Allegations: Mr. Ruia proposed his spouse as IRP for multiple CIRPs, raising concerns about conflict of interest and professional independence. - Findings: The DC found that assigning 15 assignments to his spouse, who had no prior experience, indicated a conspiracy to benefit the Ruia family, contravening sections 20, 23, 208(2)(a) and (e) of the Code, regulations 7(2)(a) and (h) of the IPR, and clauses 1, 2, 3, 5, 9, 10, 12, 14, 25, and 27 of the Code of Conduct. 5. Misrepresentation: - Allegations: Mr. Ruia misrepresented the CoC’s decision to the AA in the CIRP of S. N. Plumbing Private Ltd. - Findings: The DC found it difficult to accept Mr. Ruia’s defense of oversight, noting a pattern of pretexts and concluding that he contravened sections 208(2)(a) and (e) of the Code, regulations 7(2)(a), (b), and (h) of the IPR, and clauses 1, 2, 10, 12, 14, and 16 of the Code of Conduct. 6. Liquidation: - Allegations: Mr. Ruia suggested liquidation in the first CoC meeting of Sanjay Strips Ltd., allegedly without attempting resolution. - Findings: The DC found no merit in the allegation, as the decision for liquidation was influenced by the largest financial creditor. 7. Other Allegations: - Allegations: Various deficiencies in services such as public announcement, appointment of valuers, preparation of information memorandum, etc. - Findings: The DC attributed these deficiencies to inexperience and took a lenient view. Order: - Suspension: Mr. Ruia’s registration as an Insolvency Professional is suspended for two years. - Restrictions: Mr. Ruia shall not seek or accept any process or assignment under the Code during the suspension period but may complete ongoing assignments. - Further Requirements: Mr. Ruia must undergo a pre-registration educational course and work as an intern with a senior insolvency professional for at least six months during the suspension period. Implementation: - The order will come into force 30 days from the date of issue and copies will be forwarded to relevant authorities for monitoring and information.
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