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2024 (6) TMI 19 - HC - Insolvency and BankruptcySuspension of registration of the Petitioner herein for a period of two years - influencing registered valuers to change the value of the assets - prescribing non-refundable participation fee on prospective bidders for participating in the auction process at the time of submission of Expression of Interests (EOI) - Appointment of BDO Restructuring Advisory LLP - Paying excess fee to a support service called BRAL, in which the Petitioner was a partner. Prescribing non-refundable participation fee on prospective bidders for participating in the auction process at the time of submission of Expression of Interests - HELD THAT - This Court is inclined to accept the contention of the learned Counsel for the Petitioner inasmuch as the Petitioner has not acted in violation of any express contravention of any Regulations or Clauses. Material on record indicates that proviso to Schedule I-(1) (3) of the Regulations was not in force when the auction took place and the proviso to Schedule I-(1) (3) was issued in the year 2021 which is two years after the auction. Since the proviso prohibiting payment of fee for participation in the auction process was brought out only on 30.09.2021, the Petitioner cannot be found guilty of imposing non-refundable participation fee on prospective bidders more so when the reserve price of the assets which were to be sold was much more higher than the participation fee imposed on the prospective bidders for participating in the auction process - this Court is not inclined to accept the view taken by the Board that the Petitioner has violated any Code of Conduct under IP regulations. Charge against the Petitioner for appointing unregistered valuers - HELD THAT - This Court is of the opinion that though what the Petitioner has done is not in strict confirmation of the regulations, but this Court finds that the two persons, i.e. Mr. Manish Kaneria and Mr. Rakesh Narula, are registered valuers in their individual capacity - It is not the case of the Respondents that the valuation report given Mr. Manish Kaneria and Mr. Rakesh Narula in the name of their firm has not been accepted or that it has been questioned anywhere. It is also not the case that the valuers to whom Mr. Manish Kaneria and Mr. Rakesh Narula have further outsourced the work, are not registered valuers. No extra fees in the name of outsourcing the work and hiring additional valuers has been paid by the Board. The total fees which have been paid to the registered valuers includes all the work done for valuing the assets of the Corporate Debtor. This Court, therefore, does not find any serious infirmity in the decision taken by the Petitioner which would amount to gross misconduct on the part of the Petitioner. Appointing BDO Restructuring Advisory LLP - HELD THAT - A perusal of the records reveals that the Petitioner appointed BRAL for providing support services in the liquidation process of the Corporate Debtor. Undisputedly, the Petitioner is a partner in BRAL. The fee payable to the Liquidator is prescribed under Regulation 4 of the Liquidation Regulations. The facts of the case reveal that appointing BRAL, in which the Petitioner is a partner, is a calculated attempt on the part of the Petitioner to get more fees. The finding of the Disciplinary Committee that the Petitioner has not stated any criteria or basis for calculating fees of BRAL cannot be found fault with. The terms of appointment of BRAL are vague and there is no criterion for fixing its fees. The fact that the fees of BRAL, which was appointed by the Petitioner to provide support services to the Liquidator, exceeds the fees of the Liquidator is sufficient to show misconduct on the part of the Petitioner - The act of the Petitioner is contrary to the intent of the liquidation process. The facts of the case cries aloud that BRAL has not only been engaged to provide support services. The actual motive of the Petitioner behind appointing BRAL was to increase his own fee by circumventing Regulation 4 of the Liquidation Regulations. The fact that fees bill of BRAL has not been cleared does not absolve the Petitioner of the charge of misconduct and contravention of Liquidation Regulations - In view of the above, this Court is of the opinion that the finding of the Disciplinary Committee of the IBBI with respect to the charge of appointment of BRAL, in which the Petitioner himself is a partner, and paying more fees to it than what was paid to the Petitioner himself as the Liquidator of the Corporate Debtor, does not require interference. This Court is of the opinion that the findings arrived at by the Board that the Petitioner is guilty of the last charge does warrant any interference, and therefore, this Court is not inclined to set aside the Order of suspension of the registration of the Petitioner. However, in view of the fact that out of 24 months of suspension, the Petitioner has already undergone 20 months of suspension, this Court is inclined to modify the punishment of suspension from a period of two years to the period already undergone. The petition is disposed off.
Issues Involved:
1. Influencing Registered Valuer to change valuation of assets. 2. Prescribing non-refundable participation fee. 3. Appointment of unregistered valuers. 4. Paying excess fee to a support service called BRAL, in which the Petitioner was a partner. Summary: 1. Influencing Registered Valuer to change valuation of assets: The IBBI took a lenient view and did not proceed further with the contravention, closing the charge against the Petitioner with a word of caution. 2. Prescribing non-refundable participation fee: The IBBI held that seeking non-refundable participation fees from prospective bidders defeats the spirit of the IBC, which aims at maximization of value of assets of the Corporate Debtor. The Board found that such conditions dissuade prospective bidders, thus contravening regulation 36A (4) (d) and regulation 36B (4) of the CIRP Regulations and clauses 13 and 14 of the Code of Conduct for Insolvency Professionals Regulations. However, the Court accepted the Petitioner's contention that the proviso to Schedule I-(1) (3) of the Liquidation Regulations, which prohibits non-refundable fees, was not in force during the auction process. Therefore, the Petitioner was not found guilty of this charge. 3. Appointment of unregistered valuers: The IBBI found that the Petitioner appointed two registered valuers, but the bills were made in the name of RBSA Valuation Advisors LLP, which was not a registered valuer at that time. The Petitioner was found in contravention of IBBI Circular No. IBBI/RV/019/2018 and Regulation 7 (1) read with Regulation 35 (2) of Liquidation Regulations. The Court, however, noted that the valuation reports were signed by registered valuers and no extra fees were paid for outsourcing. Thus, the Court did not find any serious misconduct by the Petitioner. 4. Paying excess fee to BRAL: The IBBI found that the Petitioner, being a partner in BRAL, engaged the firm for support services and paid it more fees than what was paid to the Petitioner as Liquidator. This was seen as a calculated attempt to circumvent Regulation 4 of the Liquidation Regulations. The Court upheld the IBBI's finding of misconduct, noting that the terms of appointment of BRAL were vague and the fees exceeded that of the Liquidator, which is contrary to the intent of the liquidation process. Conclusion: The Court upheld the IBBI's decision to suspend the Petitioner's registration but modified the suspension period from two years to the period already undergone, noting that the Petitioner had already undergone 20 months of suspension. The Writ Petition was disposed of accordingly.
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