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2021 (1) TMI 809 - Board - Insolvency and BankruptcyContraventions of section 208(2)(a) and (e) of the Insolvency and Bankruptcy Code, 2016 (Code), Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2017 (CIRP Regulations) and Regulation 7(2)(a) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and clause 1, 2, 3, 10 and 14 of the Code of Conduct under regulation 7(2) thereof. Mr. Kamalesh Kumar Singhania replied to the SCN vide letter dated 15thJune, 2020. Claims and admission of PNB's revised claim by Mr. Singhania during CIRP - HELD THAT - The DC notes that one of the core duties of the IP is to receive, collate and verify claims. His conduct have a substantial bearing on his performance and outcome of the processes under the Code, i.e., in resolution or liquidation. He, therefore, is expected to function with diligence - The DC notes the submission of Mr. Singhania that for claim after the commencement of CIRP, he relied upon the proviso to section 29A of the Code and that under the Code applicable at that time, guarantors had the option to submit the resolution plan after making payment of overdues and interest thereon. However, DC is of the opinion that this submission of Mr. Singhania still does not explain the rationale behind accepting the interest post CIRP commencement period as revised claim. Claims can be accepted only as on insolvency commencement date. Allegation of providing amount of ₹ 10.38 crore to PNB as against the revised claim of ₹ 1.27 crore - HELD THAT - The DC noted that the revised claim was a new claim for the interest amount from 1st June, 2017 to 10th April, 2018. However, Mr. Singhania did not give extra voting rights to PNB on account of new claim. Therefore, DC finds that acceptance of claim in respect of the interest for the period from 1st June, 2017 to 20th September, 2017 is as per Regulation 13 of the CIRP regulations. However, acceptance of any claim for the post CIRP period i.e. 21st September, 2017 to 10th April, 2018 is in violation of Regulation 13 of the CIRP Regulation. Deferment of publication of EoI by Mr. Singhania - HELD THAT - The DC notes that the provisions of section 208(2), Regulations made under the Code require an IP to follow, at all times, the provisions of the Code and Regulations and the bye-laws of Agency of which the IP is a member - In the present matter, the DC notes that the submission of Mr. Singhania in his reply that in the 4th CoC meeting dated 9th February, 2018, it was proposed by him that the advertisement inviting EOI be published in the newspapers by 13th February, 2018 and the last date of submission be kept at 28th February, 2018. During this meeting, CD/Mr. Mintri has submitted a proposal to Punjab National Bank to settle and pay outstanding dues of the Bank, Mr. Mintri has requested to defer the date of publication - In the meeting, it was decided that if Mr. Mintri's proposal for OTS is not accepted by the Bank within 20th February, 2018, the advertisement shall be published on 23rd February, 2018 and the last date of submission of EoI shall be 10th March, 2018. DC further notes the submissions of Mr. Singhania that the decision to defer publication of EoI after 23rd February, 2018 was taken at the 4th meeting by CoC and not by Mr. Singhania and that too in the context of limited purpose of the outcome of settlement proposal submitted by the promoter of the CD. Therefore, regarding deferring of the publication of EoI in that context, the DC is of the opinion that lenient view may be taken. Incorrect statements made by Mr. Singhania in the Information Memorandum - HELD THAT - The Code has clearly outlined the duties which must be performed by RP during the insolvency resolution process. One of the key functions of RP with respect to conduct of CIRP include preparation of IM. An IM is a very crucial document and provides a financial position about the Corporate Debtor. Section 25(2)(g) of the Code clearly provides that the resolution professional shall prepare the information memorandum in accordance with section 29. Section 29 of the Code provides that the resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a resolution plan - It is RP's duty to provide an updated and verified IM to all resolution applicants. In this regard, DC takes on record the submission of Mr. Singhania that he had not suppressed any material information and that the error in the date mentioned in page no. 17 as on 20th September, 2017 is an inadvertent typographical error. He acted in the interest of the CD to save it from going into liquidation. The DC notes that the non-cooperation from the KMPs of the CD is evident from the orders of AA in that regard. Hence, DC takes a lenient view. Making public announcement of initiation of CIRP at the place of principal office - HELD THAT - The DC notes that when a corporate debtor undergoes corporate insolvency resolution process, an IP is vested with the management of its affairs and he manages its operations as a going concern. He complies with the applicable laws on behalf of the corporate debtor. He conducts the entire CIRP. Such responsibilities of an IP require the highest level of professional excellence and integrity. Section 15(2) of the Code provides for the Public announcement of corporate insolvency resolution process to be made in such manner as may be specified - In the present matter, the DC notes that the submission of Mr. Singhania who acted on the information of the Advertisement agency that the Financial express and Dainik Statesman (vernacular daily) were circulated across West Bengal including Siliguri, where the corporate office is located. Mr. Singhania has also produced the report of the Audit Bureau of Circulations for July to December, 2017 certifying publication of the Dainik statesman in Kolkata and Siliguri. Thus, the DC notes that the Public Announcement in Form A was in compliance to section 13(2) of the Code. Failure to provide details of Land and Building etc. to the one of the Registered valuers - HELD THAT - The DC notes that regulation 27 of the CIRP regulations provides that the resolution professional shall appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35 - In the instant matter, the DC has noted that Mr. Singhania accepted the Report of M/s Adroit Tech Services Pvt. Ltd. with the limitation that in the absence of the details pertaining to the Land and Building and Plant and Machinery we haven't added any such value to the vauation. This shows that Mr. Singhania has not taken care of the observations made by the valuer. However, Mr. Singhania has clarified that the Reports of valuers were based on internationally accepted valuation standards and the promoter directors did not cooperate with him in providing the details of the assets. DC notes that since there being no significant variation in the two reports, it appears that the limited details as available with Mr. Singhania were provided to both the valuers. Mr. Singhania should have made some more efforts to get the details of the assets. However, in view of his submissions that due to non-cooperation of the directors of the CD, the details of individual assets were not available with Mr. Singhania. Therefore, the clarification given by Mr. Singhania is accepted. The DC finds that Mr. Kamalesh Kumar Singhania, as an RP, has contravened section 208(2)(a) and (e) of the Code read with Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2017 and Regulation 7(2)(a) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016, and clause 1, 2, 3, 10 and 14 of the Code of Conduct under regulation 7(2) thereof - the SCN is disposed off with following directions (i) Mr. Kamalesh Kumar Singhania shall undergo pre-registration educational course from the IPA of which he is a member. (ii) Mr. Kamlesh Kumar Singhania shall not take any new assignment/process under the Code without compliance of the above direction. (iii) Mr. Kamlesh Kumar Singhania shall, however, continue to conduct and complete the assignments/processes he has in hand, if any, as on the date of this order. (iv) This order shall come into force on expiry of 30 days from the date of its issue. (v) A copy of this order shall be forwarded to the ICSI institute of Insolvency Professionals where Mr. Kamalesh Kumar Singhania is enrolled as a member. (vi) A copy of this order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal, New Delhi, for information.
Issues Involved:
1. Alleged contravention regarding the acceptance of revised claims and voting shares during CIRP. 2. Alleged bias in favor of one stakeholder by providing an amount higher than the claimed amount. 3. Deferring the publication of Expression of Interest (EoI). 4. Incorrect statements in the Information Memorandum (IM). 5. Public announcement of CIRP not made at the principal office location. 6. Failure to provide asset details to one of the registered valuers. Issue-wise Detailed Analysis: I. Contravention Regarding Acceptance of Revised Claims and Voting Shares: - Allegation: Mr. Kamalesh Kumar Singhania accepted a revised claim from PNB that included interest for the post-CIRP commencement period, which contravened regulation 13(1) of the CIRP regulations. This resulted in PNB gaining additional voting share in the CoC. - Submission: Mr. Singhania argued that the revised claim was necessary due to payments made by guarantors and relied on the proviso to section 29A(c) of the Code. He also stated that no extra voting rights were given to PNB for the revised claim. - Finding: The Disciplinary Committee (DC) found that while the acceptance of interest for the period from 1st June 2017 to 20th September 2017 was valid, the acceptance of interest for the post-CIRP period (21st September 2017 to 10th April 2018) violated Regulation 13 of the CIRP Regulations. II. Alleged Bias in Favor of One Stakeholder: - Allegation: Mr. Singhania was accused of bias for proposing to pay ?10.38 crore to PNB against its revised claim of ?1.27 crore. - Submission: Mr. Singhania explained that the Resolution Applicants were informed of the revised claims and adjusted their offers accordingly. He also noted that other claims were received and that PNB would have had 100% voting rights irrespective of the claim amount. - Finding: The DC acknowledged that the revised claim was a new claim for interest and noted that no extra voting rights were given to PNB. However, the acceptance of post-CIRP interest was still found to be in violation of the regulations. III. Deferring the Publication of EoI: - Allegation: Mr. Singhania deferred the publication of EoI, which was seen as a delay in the CIRP process. - Submission: Mr. Singhania stated that the decision to defer was made by the CoC due to a pending settlement proposal from the promoter of the CD. - Finding: The DC took a lenient view, acknowledging that the deferment decision was made by the CoC and was contextually reasonable. IV. Incorrect Statements in the Information Memorandum: - Allegation: The IM prepared by Mr. Singhania contained discrepancies regarding the lease of land and the dues payable to workers. - Submission: Mr. Singhania explained that the lease renewal process was pending and that the discrepancies in workers' dues were due to varying information from the CD's directors. - Finding: The DC noted the non-cooperation from the KMPs of the CD and took a lenient view, accepting Mr. Singhania's explanation. V. Public Announcement Not Made at Principal Office Location: - Allegation: The public announcement of CIRP was not made at the principal office location in Darjeeling. - Submission: Mr. Singhania stated that the newspapers used for the announcement were circulated across West Bengal, including Siliguri, where the principal office was located. - Finding: The DC accepted Mr. Singhania's submission, noting that the public announcement complied with section 13(2) of the Code. VI. Failure to Provide Asset Details to One of the Registered Valuers: - Allegation: Mr. Singhania failed to provide asset details to M/s Adroit Tech Services Pvt. Ltd., affecting the valuation report. - Submission: Mr. Singhania argued that the directors of the CD did not cooperate, and the valuers used different valuation methods. - Finding: The DC accepted Mr. Singhania's explanation, noting the non-cooperation from the CD's directors and the lack of significant variation in the valuation reports. Order: - Directions: Mr. Kamalesh Kumar Singhania is directed to undergo a pre-registration educational course and is barred from taking new assignments under the Code until compliance. He may continue with ongoing assignments. The order will take effect 30 days from issuance, and copies will be forwarded to relevant authorities. - Conclusion: The show cause notice is disposed of with the above directions.
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