2021 (3) TMI 248 - Board - Insolvency and Bankruptcy

Validity of accepting the assignment as a liquidator in voluntary liquidation process of Buffalogrid Project (P.) Ltd. without holding a valid Authorization for Assignment (AFA) issued to him by his IPA - contraventions of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a), 7(2)(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 of the IP Regulations - HELD THAT - It is clear from Regulation 7A 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 the cut-off date, i.e., 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 Authorization for Assignment as an authorization 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 - Further, Section 208 of the Code also casts an obligation to abide by the code of conduct and comply with all requirements and terms and conditions specified in the bye-laws of the insolvency professional agency of which he is a member. The credibility of the processes under the Code hinges upon the conduct and competence of the IP. 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 mala fide or with negligence. The DC finds that an order has been passed by the Disciplinary Committee of IPA against Mr. Kapur on 7th September, 2020 wherein it has been mentioned that the Mr. Kapur accepted the assignment on 4th September, 2019. However, on examination of the documents placed on record, the DC finds that the date of acceptance is 28th August, 2019 while the order of Disciplinary Committee of IPA mentions the date of acceptance as 4th September, 2019, which appears to be incorrect - The Disciplinary Committee of IPA vide aforementioned order issued warning to Mr. Kapur to be extremely careful and diligent and that he should act strictly as per law and similar action should not be repeated. IPA further directed that Mr. Kapur shall not accept any new assignment without obtaining Authorisation for Assignment. SCN disposed off.

Summary

Issues:
- Alleged contraventions of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016, and regulations 7(2)(a), 7(2)(h), and 7A of the IBBI (Insolvency Professionals) Regulations, 2016.
- Interpretation of Regulation 7A of the IP regulations regarding the requirement for Insolvency Professionals to hold a valid Authorization for Assignment (AFA).
- Compliance with the Code of Conduct specified in the First Schedule of the IP Regulations by the Insolvency Professional.
- Examination of the actions and submissions of Mr. Satinder Kapur in response to the Show-Cause Notice issued by the Insolvency and Bankruptcy Board of India (IBBI).
- Consideration of the disciplinary action taken by the ICSI Institute of Insolvency Professionals against Mr. Satinder Kapur.

Analysis:

1. The Show-Cause Notice (SCN) was issued to Mr. Satinder Kapur by the IBBI for accepting an assignment as a liquidator without a valid Authorization for Assignment (AFA) after 31st December 2019. Mr. Kapur defended his actions by stating that he accepted the assignment before the cut-off date and was under the belief that AFA was not required at the time.

2. The allegations against Mr. Kapur included contraventions of specific sections of the Insolvency and Bankruptcy Code and regulations related to accepting assignments without the necessary authorization. Mr. Kapur's submissions highlighted his unintentional error due to a misunderstanding of the regulations.

3. The Disciplinary Committee (DC) considered the provisions of the Code, rules, and regulations in their analysis. Regulation 7A clearly mandates that an Insolvency Professional must hold a valid AFA before undertaking any assignment after 31st December 2019. The DC emphasized the importance of compliance with the regulations and the Code of Conduct.

4. The DC noted that the credibility of insolvency processes relies on the conduct and competence of the Insolvency Professional. Mr. Kapur's acceptance of the assignment before the regulatory deadline was a key factor in the decision. The DC also highlighted the obligations of IPs to follow the Code, regulations, and bye-laws of their professional agency.

5. Despite discrepancies in dates mentioned in the disciplinary actions taken by the IPA, the DC found that Mr. Kapur had already faced disciplinary measures from the ICSI Institute of Insolvency Professionals. Considering this, the DC disposed of the Show-Cause Notice without imposing any further directions against Mr. Kapur.

6. The final order forwarded a copy to the ICSI Institute of Insolvency Professionals and the Registrar of the National Company Law Tribunal, New Delhi, for information. The Show-Cause Notice was officially disposed of based on the disciplinary action already taken against Mr. Satinder Kapur.