2018 (9) TMI 1739 - Board - Insolvency and Bankruptcy

Misconduct insolvency professional - misleading the stakeholders of the insolvency and bankruptcy - Held that - An insolvency professional exercises the powers of Board of Directors of a corporate debtor during the period of CIRP. He conducts the entire CIRP and manages the operations of the corporate debtor during the CIRP period. His responsibilities during CIRP are detailed in the Code and relevant regulations. He has similar onerous responsibilities in liquidation of corporate debtors, and individual insolvencies and bankruptcies. These responsibilities require absolute integrity which inspire confidence and trust of the stakeholders. Mr. Goel mislead the stakeholders of the insolvency and bankruptcy by incorporating a LLP by name, IBBI Insolvency Practitioners LLP . It also misled the Board stating that name change has been approved. He has been procrastinating for the last eight months to change the name despite continuous follow up, including a show cause notice, from the Board. These actions of Mr. Goel are contravention of the provisions of clauses 1, 2, 10, 12, 14 and 24 of the Code of Conduct in the First Schedule to the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. ORDER - Mr. Goel has misled the stakeholders, the Board and the DC. His conduct is in violation of section 208 read with regulations 7(2)(a) and 7(2)(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 and clauses 1, 2, 10, 12, 14 and 24 of the Code of Conduct in the First Schedule for Insolvency Professionals under the said Regulations. Disciplinary Committee, in exercise of the powers conferred under section 220 (2) of the Code read with sub-regulations (7) and (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, hereby, issues the following directions (a) Mr. Goel shall not take up any new assignment till IBBI Insolvency Practitioners LLP is removed from the Company / LLP Master Data of the Ministry of Corporate Affairs; and (b) Mr. Goel s registration as an insolvency professional shall be suspended for three months from the date of issue of this order. This direction of suspension shall come into force on expiry of 30 days from the date of its issue.

Summary

Issues involved:
Violation of regulations by an insolvency professional regarding the use of abbreviation "IBBI" in the name of a LLP, misleading stakeholders and authorities, failure to rectify the name despite repeated requests, contravention of Code of Conduct for Insolvency Professionals, and appropriate disciplinary action.

Analysis:

1. Background:
The Board issued a show-cause notice to Mr. Kapil Goel, an Insolvency Professional, regarding the use of the abbreviation "IBBI" in the name of a Limited Liability Partnership (LLP) he incorporated. Despite repeated requests to rectify the name, Mr. Goel failed to do so, leading to disciplinary proceedings.

2. Show Cause Notice:
The notice highlighted that the use of "IBBI" in the LLP's name was misleading, indicating an association with the Board. Mr. Goel's defense of not intending to gain benefits was deemed unacceptable for a qualified professional. His failure to change the name despite advice raised doubts about his intentions and understanding of the law.

3. Submissions by Mr. Goel:
Mr. Goel defended his actions, stating no material benefit was gained, and he had applied to change the name of the LLP. However, the repeated incomplete submissions to the Registrar of Companies reflected delays and non-compliance.

4. Analysis and Findings:
The Disciplinary Committee found that using "IBBI" in the LLP's name without authorization was illegal and misleading. Mr. Goel's procrastination in rectifying the name, incomplete submissions, and attempts to mislead the authorities were considered serious violations of professional conduct and regulations.

5. Conclusion:
The responsibilities of an insolvency professional demand integrity and adherence to regulations to maintain stakeholders' trust. Mr. Goel's actions of misleading stakeholders and delaying name rectification were deemed violations of the Code of Conduct, warranting disciplinary action.

6. Order:
Considering the violations, the Disciplinary Committee suspended Mr. Goel's registration as an insolvency professional for three months and prohibited him from taking new assignments until the misleading name was rectified. Copies of the order were forwarded to relevant authorities for information and compliance.