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2019 (3) TMI 307 - Board - Insolvency and BankruptcyDefault by insolvency professional(IP) - Disciplinary proceedings - HELD THAT - IP continued to indulge in similar conduct even after 22nd November, 2017 for several CIRPs, as if there is no law in the land and in utter disregard of the strictures of the Hon ble Adjudicating Authority. She continued on a consent spree with objectionable terms in at least seven CIRPs (at Sl. Nos. 1, 2, 4, 6, 12, 13 and 14 in table under Para 2.2 above) after 22nd November, 2017. DC notes, as rightly stated by Ms. Ruia, that her registration as an insolvency professional was suspended vide order dated 3rd May, 2018 for contravention in CIRP of Madhucon Projects Ltd. She has repeated the same contravention in CIRPs of 15 CDs covered in the SCN in conspiracy with her husband and has seriously compromised her independence, impartiality and integrity. She consented to take up 15 assignment simultaneously, much beyond her capacity, putting the life of 15 CDs at risk. She has, therefore, contravened provisions of sections 17, 20, 23 and 208(2)(a) and (e) of the Code, regulations 7(2)(a), (b) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016 and clauses 1, 2, 3, 5, 9, 10, 11, 12, 14, 22, 25, and 27 of the Code of Conduct specified thereunder. The DC finds that, by her deliberate and collusive conduct, Ms. Ruia has rendered herself a person not a fit and proper person to continue as an IP. In view of the above, the 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 cancels registration of Ms. Bhavna Sanjay Ruia, Insolvency Professional Registration No. IBBI/IPA-002/IP-N00371/2017-2018/11065 and debars her from seeking fresh registration as an insolvency professional or providing any service under the Insolvency and Bankruptcy Code, 2016 for ten years. This Order shall come into force on expiry of 30 days from the date of its issue.
Issues Involved:
1. Independence, Integrity, and Impartiality of the Insolvency Professional (IP) 2. Capacity and Experience of the IP 3. Exorbitant Fees and Unauthorized Contracts 4. Repeated Contraventions and Disciplinary Actions Issue-wise Detailed Analysis: 1. Independence, Integrity, and Impartiality of the Insolvency Professional (IP): The Board noted that Ms. Ruia, an insolvency professional, consented to act as Interim Resolution Professional (IRP) for 15 Corporate Insolvency Resolution Processes (CIRPs) initiated by her husband, Mr. Ruia. This raised concerns about her independence, integrity, and impartiality. The Hon’ble Adjudicating Authority highlighted the potential conflict of interest, questioning whether a relative's appointment contravenes the Code of Conduct under the IBBI (Insolvency Professionals) Regulations, 2016, particularly clauses 5 and 6 under "Independence and Impartiality." The Disciplinary Committee (DC) concluded that the assignments from one source to Ms. Ruia, who had no prior experience, indicated a conspiracy to exploit the corporate debtors (CDs) for personal gain, thereby compromising her independence and impartiality. 2. Capacity and Experience of the IP: The Board found that Ms. Ruia consented to act as IRP for 15 CIRPs simultaneously, despite having no prior experience. The DC emphasized that managing the affairs of multiple CDs is a serious responsibility that requires substantial expertise and capacity. Ms. Ruia's claim that she would withdraw her consent if she received multiple assignments was deemed mischievous and impractical. The DC noted that such conduct could harm the insolvency regime and cause hardships to the CDs and their stakeholders. 3. Exorbitant Fees and Unauthorized Contracts: Ms. Ruia contracted to act as IRP/RP for exorbitant fees, such as ?5 crore for one month as IRP and ?3 crore per month as RP, which were deemed unreasonable. Additionally, she entered into contracts with applicants who were not legally competent to appoint her as RP, thereby pre-empting the Committee of Creditors (CoC) from selecting an IP and fixing the fees. The DC found that this conduct denuded the CoC of its legitimate rights and was part of a conspiracy to exploit the CDs. 4. Repeated Contraventions and Disciplinary Actions: Ms. Ruia argued that she could not be held liable twice for the same mistake, referencing a previous suspension for similar contraventions. However, the DC clarified that each CIRP constituted a separate cause of action. Despite the Hon’ble Adjudicating Authority's concerns and a previous disciplinary action, Ms. Ruia continued her misconduct in multiple CIRPs. The DC noted that her repeated contraventions demonstrated a disregard for the rule of law and the strictures of the Hon’ble Adjudicating Authority. Findings and Order: The DC found that Ms. Ruia's conduct violated several provisions of the Insolvency and Bankruptcy Code, 2016, and the IBBI (Insolvency Professionals) Regulations, 2016. It concluded that she was not a fit and proper person to continue as an IP. Consequently, the DC canceled her registration and debarred her from seeking fresh registration or providing any service under the Insolvency and Bankruptcy Code, 2016, for ten years. This order would come into force 30 days from its issue, and copies were forwarded to relevant authorities for information.
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