2021 (2) TMI 1000 - Board - Insolvency and Bankruptcy

Professional Misconduct - Validity of accepting the assignment as the Interim Resolution Professional (IRP) in the Corporate Insolvency Resolution Process (CIRP) without holding a valid Authorisation for Assignment (AFA) from his IPA - contraventions of sections 208(2)(a) (e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a) (h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the First Schedule - HELD THAT - It is clear from the Regulation that one of the essential condition 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 any assignments or conduct various processes thereof. Regulation 7A was inserted in the IP Regulations vide notification dated 23rd July 2019. The bye-laws of Indian Institute of Insolvency Professionals of ICAI 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 by the IPs to the IPA under para 12A of said bye-laws. An IP who is more than 70 years of age is ineligible to make an application for AFA under para 12A (2)(e) of the said bye-laws. 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 - DC finds that an order by the Disciplinary Committee of the IPA dated 1st December 2020 has been passed disposing the SCN issued by IPA dated 31st August 2020 to Mr. Samson, on the issue of accepting assignment as IRP after 31st December, 2019 without holding a valid AFA in the CIRP of the CD, wherein Mr. Samson was not held guilty of Professional Misconduct as Mr. Samson had given his consent on 4th April, 2019 and appointment of IRP was confirmed by the AA based on his written consent. The Disciplinary Committee of the Indian Institute of Insolvency Professional of ICAI has already passed order in this matter, 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 - SCN disposed off.

Summary

Issues:
Violation of regulations by Insolvency Professional Mr. Rajesh Samson for accepting an assignment without a valid Authorization for Assignment (AFA) after a specified date.

Analysis:
The Insolvency and Bankruptcy Board of India (IBBI) issued a Show Cause Notice (SCN) to Mr. Rajesh Samson for contravening sections of the Insolvency and Bankruptcy Code, 2016 and related regulations by accepting an assignment without a valid AFA after a specific date. Mr. Samson responded to the SCN, and the matter was referred to the Disciplinary Committee (DC) for review. The DC considered the relevant provisions of the Code, rules, and regulations before making its findings.

Mr. Samson's submissions included details of his consent to act as the Interim Resolution Professional (IRP) before the specified date and the subsequent application for the Corporate Insolvency Resolution Process (CIRP). The DC noted that Regulation 7A of the IP regulations mandates Insolvency Professionals (IPs) to hold a valid AFA before undertaking any assignment after a particular date. It was highlighted that the AFA application by Mr. Samson was submitted after the specified date, but his appointment as IRP was confirmed based on his earlier consent.

The DC emphasized that IPs must comply with the Code of Conduct, regulations, and guidelines specified by the Insolvency Professional Agency. It was noted that Mr. Samson's registration was subject to these conditions, including the requirement to follow the Code of Conduct listed in the regulations. The DC found that Mr. Samson's actions did not amount to Professional Misconduct based on the earlier consent provided and subsequent confirmation of his appointment by the relevant authorities.

In light of the Disciplinary Committee's previous order on the matter and the absence of any direction required, the DC disposed of the SCN without further action. The order was forwarded to the relevant authorities for information, and the show cause notice was officially closed.