2020 (6) TMI 499 - Board - Insolvency and Bankruptcy

Disciplinary Action against the liquidator / IP professional - Voluntary Liquidation of a company - delay of 18 months while making public announcement in newspapers - contravention of Section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The DC is conscious of the fact that the profession of IP is in a stage in which IPs are striving to learn. However, it is incumbent upon the IPs to perform their duties diligently and act strictly in accordance with the provisions of the Code and the regulations made thereunder. They must endeavor to build and safeguard the reputation of the profession which should enjoy the trust of the society and inspire confidence of all the stakeholders - DC is also aware of the fact that the IP himself came forward and sought permission to make public announcement belatedly though there is no such provision. Further, non-compliance of law is not tolerable, however, coming forward at his own deserves some leniency. The DC hereby imposes on Mr. Tarun Jaggi a monetary penalty of ₹ 1,00,000/- and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the 'Insolvency and Bankruptcy Board of India'. The Board in turn shall deposit the penalty amount in the Consolidated Fund of India - Mr. Tarun Jaggi shall not accept any new assignment as an IP till he deposits the monetary penalty of ₹ 1,00,000/- (Rs. One Lakh only) with the Board and produces evidence to the Board of such deposit.

Issues Involved:
1. Delay in public announcement in the voluntary liquidation process of Viber Media India Pvt. Ltd.
2. Delay in public announcement in the voluntary liquidation process of MGI Group India Pvt. Ltd.
3. Engagement of Deloitte Haskins & Sells as auditors during the liquidation process of MGI Group India Pvt. Ltd.

Detailed Analysis:

1. Delay in Public Announcement for Viber Media India Pvt. Ltd.:
Contravention: The voluntary liquidation commenced on 15.1.2018, but the public announcement was made in newspapers on 27.6.2019, after a delay of approximately 18 months. Regulation 14(1) read with Regulation 14(3)(a) of the IBBI (Voluntary Liquidation Process) Regulation 2017 mandates that the liquidator must make a public announcement within five days of his appointment. The delay violated section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 14(1) and 14(3)(a) of Voluntary Liquidation Process Regulations, and regulation 7(2)(a) and (h) of IP Regulations read with clauses 10, 13, and 14 of the Code of Conduct.

Submission: The liquidator, Mr. Tarun Jaggi, admitted the delay, explaining that the announcement was made on the IBBI website on time but was inadvertently missed in newspapers. He requested permission for delayed publication, which was granted, and the announcement was made on 27.6.2019.

Analysis: Regulation 14 mandates timely public announcements to inform stakeholders. The liquidator's failure to publish in newspapers within the prescribed time was due to either lack of knowledge or negligence. Compliance after the stipulated time does not equate to proper compliance.

Findings: The liquidator's negligence in adhering to the prescribed timelines contravened section 208(2)(a) of the Code, regulations 14(1) and 14(3)(a) of Voluntary Liquidation Process Regulations, and regulation 7(2)(a) and 7(2)(h) of IP Regulations read with clauses 10, 13, and 14 of the Code of Conduct.

2. Delay in Public Announcement for MGI Group India Pvt. Ltd.:
Contravention: The voluntary liquidation commenced on 8.5.2018, but the public announcement was made in newspapers on 10.1.2019, after a delay of approximately 8 months. This delay violated the same provisions as in the case of Viber Media India Pvt. Ltd.

Submission: Similar to the previous case, the liquidator admitted the delay, stating that the announcement was made on the IBBI website on time but missed in newspapers. He sought permission for delayed publication, which was subsequently made on 10.1.2019.

Analysis: The analysis mirrored that of the Viber Media case, emphasizing the importance of timely public announcements to inform stakeholders and the liquidator's failure to comply with the prescribed timelines.

Findings: The liquidator's actions again contravened section 208(2)(a) of the Code, regulations 14(1) and 14(3)(a) of Voluntary Liquidation Process Regulations, and regulation 7(2)(a) and 7(2)(h) of IP Regulations read with clauses 10, 13, and 14 of the Code of Conduct.

3. Engagement of Deloitte Haskins & Sells as Auditors:
Contravention: The liquidator appointed Deloitte Haskins & Sells for auditing the books of MGI Group India Pvt. Ltd. during liquidation, despite them being the statutory auditors prior to liquidation. Regulation 11(2) of the IBBI (Voluntary Liquidation Process) Regulation 2017 prohibits engaging a professional who served as an auditor to the corporate person within the five years preceding the liquidation commencement date.

Submission: The liquidator justified the appointment by stating that the members decided to continue with the existing auditors due to trust and group affiliation.

Analysis: Regulation 11(2) ensures the independence of professionals engaged during liquidation. The liquidator's decision to continue with Deloitte Haskins & Sells, influenced by the members, compromised this independence and contravened the regulation.

Findings: The liquidator's actions contravened section 208(2)(a) of the Code, regulation 11(2) of Voluntary Liquidation Process Regulations, and regulation 7(2)(a) and 7(2)(h) of IP Regulations read with clauses 3, 10, and 14 of the Code of Conduct.

Conclusion:
The liquidator, Mr. Tarun Jaggi, displayed a negligent attitude and misunderstanding of the Code and Regulations. He contravened sections 208(2)(a) of the Code, Regulation 11(2), Regulation 14(1), and Regulation 14(3)(a) of the IBBI (Voluntary Liquidation Process) Regulation 2017, and Regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 3, 10, 13, and 14 of the Code of Conduct.

Order:
The Disciplinary Committee (DC) imposed a monetary penalty of ?1,00,000 on Mr. Tarun Jaggi and barred him from accepting new assignments as an IP until the penalty is paid. The order will come into force 30 days from the issue date. Copies of the order were forwarded to relevant authorities for information and implementation.

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