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2021 (2) TMI 871 - Board - Insolvency and BankruptcyProfessional misconduct - Validity of the assignment as the Liquidator in Liquidation process of M/s. Bansal Refineries (P.) Ltd. (CD) after 31st December, 2019 without holding a valid Authorisation for Assignment (AFA) from his IPA - Regulation 7A of IP regulations - HELD THAT - It is clear from the said Regulation that one of the essential conditions for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled. In other words, without AFA, an IP is not eligible to undertake assignments or conduct various processes thereof. Regulation 7A was inserted in the IP Regulations vide notification dated 23rd July 2019, much before 31st December, 2019. Adequate time was given to the professionals to obtain AFA from respective IPAs - The bye laws of ICSI Institute of Insolvency Professionals defines in para 4(1)(aa) the expression Authorisation for Assignment as an authorisation to undertake an assignment, issued by an insolvency professional agency to an insolvency professional, who is its professional member, in accordance with its bye-laws regulation. An application for grant of AFA can be made to the IPA under para 12A of said Bye laws. The credibility of the processes under the Code depends upon the observance of the Code of conduct by the IRP/RP during the process. Section 208(2) of the Code provides that every IP shall take reasonable care and diligence while performing his duties and to perform his functions in such manner and subject to such conditions as may be specified. Further, the Code of Conduct specified in the First Schedule of the IP regulations enumerates a list of code of conduct for insolvency professionals including maintaining of integrity and professional competence for rendering professional service, representation of correct facts and correcting misapprehension, not to conceal material information and not to act with malafide or with negligence - In the present matter, the CoC took a decision to liquidate the CD on 19th December, 2019 and thereafter, Mr. Sircar filed his written consent to act as Liquidator on 2nd January, 2020. The application for liquidation was considered by the AA and order for liquidation was passed on 17th January, 2020. The consent to act as a Liquidator has been given by Mr. Sircar on 2nd January, 2020 which is after 31st December, 2019. The DC notes that Mr. Sircar did not hold a valid AFA either on the date of consent to act as liquidator i.e. 2nd January, 2020 or on the date of passing of liquidation order i.e. 17th January, 2020. This is in violation of the provisions of regulation 7A of the IP Regulations. In view of the fact that ICSI Institute of Insolvency Professionals has already taken disciplinary action against the IP, Mr. Pinaki Sircar for accepting assignment as Liquidator after 31st December, 2019 without holding a valid AFA in the matter of M/s. Bansal Refineries (P.) Ltd., the DC, in exercise of the powers conferred under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, disposes of the SCN without any direction against Mr. Pinaki Sircar. SCN disposed off.
Issues:
Violation of Insolvency and Bankruptcy Code regulations by an Insolvency Professional regarding acceptance of assignment without valid authorization. Analysis: The Insolvency and Bankruptcy Board of India (IBBI) issued a Show Cause Notice (SCN) to an Insolvency Professional (IP) for accepting an assignment as the Liquidator without a valid Authorisation for Assignment (AFA) from his Insolvency Professional Agency (IPA) after 31st December, 2019. The IP was appointed as the resolution professional (RP) in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor (CD), and the decision for liquidation was made by the Committee of Creditors (CoC) on 19th December, 2019. The IP submitted a reply to the SCN and appeared for a personal e-hearing before the Disciplinary Committee (DC) of the IBBI. The IP argued that he had submitted the AFA application before the deadline but due to a technical error, it was not completed. However, the DC found his contention unjustified as he did not complete all the required steps in the AFA process, leading to negligence in fulfilling the basic requirement for the assignment. The DC analyzed the relevant regulations, including Regulation 7A of the Insolvency Professionals Regulations, which mandates that an IP must hold a valid AFA before undertaking any assignment after 31st December, 2019. The DC noted that the IP did not have a valid AFA when he consented to act as the Liquidator, which was after the specified date. The DC emphasized the importance of adhering to the Code of Conduct and regulations to maintain the credibility of insolvency processes. Additionally, the IP's failure to complete the AFA process as per the prescribed steps was considered a reflection of negligence towards professional responsibilities. The DC observed that the IPA had already taken disciplinary action against the IP for the same violation and imposed a penalty. Given the disciplinary action by the Insolvency Professional Agency, the DC, under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, disposed of the SCN without any further direction against the IP. The order was to be forwarded to the IPA and the National Company Law Tribunal for information. The show cause notice was consequently resolved, considering the disciplinary action already taken by the IPA against the IP.
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