2021 (3) TMI 96 - Board - Insolvency and Bankruptcy

Disciplinary proceedings - Validity of accepting the assignment as Interim Resolution Professional (IRP) in corporate insolvency resolution process (CIRP) of Ajanta Offset and Packaging Limited (CD) after 31st December, 2019 without holding a valid Authorisation for Assignment (AFA) issued to him by his IPA - contravention of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a), 7(2)(h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct for Insolvency Professionals contained in the First Schedule of the IP Regulations for accepting the assignment of IRP in CIRP of CD after 31st December, 2019 - HELD THAT - It is clear from the said Regulation that one of the essential conditions for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled as a professional member. In other words, without AFA, an IP is not eligible to undertake assignments or conduct various processes thereof. Regulation 7A was inserted in the IP Regulations vide notification dated 23rd July, 2019, much before 31st December, 2019. Adequate time was given to the professionals to obtain AFA from respective IPAs. The bye-laws of Indian Institute of Insolvency Professional of ICAI defines in para 4(1)(aa) the expression Authorisation for Assignment as an authorisation to undertake an assignment, issued by an insolvency professional agency to an insolvency professional, who is its professional member, in accordance with its bye-laws regulation. An application for grant of AFA can be made to the IPA under para 12A of said bye laws. The DC finds that an order by the Disciplinary Committee of the IPA dated 1st December 2020 has been passed disposing the SCN issued by IPA dated 31st August 2020 to Mr. Guddeti, on the issue of accepting assignment as IRP after 31-12-2019 without holding a valid AFA in the CIRP of Ajanta Offset and Packaging Limited, wherein Mr. Guddeti was not held guilty of Professional Misconduct as Mr. Guddeti had given his consent on 6th June, 2019 and appointment of IRP was confirmed by the AA based on his written consent - In view of the fact that the Disciplinary Committee of the Indian Institute of Insolvency Professional of ICAI has already passed order in this matter, the DC, in exercise of the powers conferred under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, disposes of the SCN without any direction. SCN disposed off.

Summary

Issues:
- Alleged contravention of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code)
- Violation of regulations 7(2)(a), 7(2)(h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations)
- Acceptance of assignment as Interim Resolution Professional (IRP) without a valid Authorisation for Assignment (AFA)
- Compliance with the Code of Conduct for Insolvency Professionals

Analysis:

Alleged Contravention of Code Sections and Regulations:
The Show-Cause Notice (SCN) alleged contravention of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016, along with regulations 7(2)(a), 7(2)(h), and 7A of the IBBI (Insolvency Professionals) Regulations, 2016. The notice highlighted the acceptance of the assignment as Interim Resolution Professional (IRP) in a corporate insolvency resolution process (CIRP) without a valid Authorisation for Assignment (AFA) after a specified date.

Written and Oral Submissions by Mr. Guddeti:
Mr. Guddeti's submissions emphasized the timing of his acceptance for the assignment, stating that it was before the relevant date when the requirement for AFA came into force. He explained the inadvertent error due to oversight and misunderstanding of the new provisions. Despite an application for AFA being rejected for non-compliance, Mr. Guddeti maintained his position regarding the timeline of his acceptance.

Analysis and Findings by the Disciplinary Committee:
The Disciplinary Committee (DC) analyzed the relevant regulations and provisions of the Code. It noted that Regulation 7A clearly mandated the necessity of a valid AFA for undertaking assignments after a specified date. The DC highlighted the obligations imposed by Section 208 of the Code, emphasizing compliance with the code of conduct and bye-laws of the insolvency professional agency. It underscored the significance of maintaining integrity, professional competence, and adherence to the Code of Conduct for Insolvency Professionals.

Decision and Disposal of the Show-Cause Notice:
Considering the findings and the order passed by the Disciplinary Committee of the Indian Institute of Insolvency Professional of ICAI, the DC disposed of the Show-Cause Notice without any specific direction. The order was forwarded to the relevant authorities for information. The decision was based on the previous order by the IPA's Disciplinary Committee, which did not find Mr. Guddeti guilty of professional misconduct based on the circumstances surrounding his acceptance of the assignment.

Conclusion:
The judgment elucidated the importance of compliance with regulatory requirements and the code of conduct for insolvency professionals. It highlighted the need for meticulous adherence to the provisions of the Code and regulations to uphold the credibility of insolvency processes. The decision to dispose of the Show-Cause Notice was based on the previous order by the IPA's Disciplinary Committee, indicating a nuanced consideration of the circumstances surrounding the alleged violation.