2021 (3) TMI 647 - Board - Insolvency and Bankruptcy

Validity of accepting the assignment as Resolution Professional (RP) in Corporate Insolvency Resolution Process (CIRP) of Reliable Paper (India) Limited (CD) after 31st December, 2019 without holding a valid Authorisation for Assignment (AFA) issued to him by his IPA - contravention of section 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 - HELD THAT - It is clear from Regulation 7A of IP regulations 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 credibility of the processes under the Code depends upon the observance of the Code of conduct by the IRP/RP during the process. Section 208(2) of the Code provides that every IP shall take reasonable care and diligence while performing his duties and to perform his functions in such manner and subject to such conditions as may be specified. Further, the Code of Conduct specified in the First Schedule of the IP regulations enumerates a list of code of conduct for insolvency professionals including maintaining of integrity and professional competence for rendering professional service, representation of correct facts and correcting misapprehension, not to conceal material information and not to act with mala fide or with negligence. In the present matter, Mr. Juneja had given consent to accept the assignment as IRP in Form-2 on 12th April, 2019 in the CIRP of the CD and the date of commencement of the CIRP is 3rd December, 2019. However, it is also observed that Mr. Juneja was ratified as RP in the CIRP of the CD in the 1st meeting of the CoC held on 6th January, 2020, i.e., after the threshold date of 31st December, 2019 without having a valid AFA. The DC finds that though acceptance of assignment was prior to cut-off date, i.e., 31st December, 2019, however, notification for the same was notified on 23rd July, 2019. Mr. Juneja should have applied for AFA especially in view of ratification of his name to act as RP by the CoC. The DC finds that an order has been passed against Mr. Juneja on 1st December, 2020 by the Disciplinary Committee of IPA for accepting assignment as RP after 31st December, 2019 without holding a valid AFA in the CIRP of the CD and it has been decided that Mr. Juneja is guilty of professional misconduct and a penalty of ₹ 10,000/- has been imposed.

Summary

Issues:
Violation of section 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016, regulations 7(2)(a), 7(2)(h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016, and Code of Conduct for Insolvency Professionals.

Analysis:

Background:
The Insolvency and Bankruptcy Board of India (IBBI) issued a Show Cause Notice (SCN) to Mr. Girish Siriram Juneja for accepting an assignment as Resolution Professional (RP) in a Corporate Insolvency Resolution Process (CIRP) after 31st December, 2019 without a valid Authorisation for Assignment (AFA) from his Insolvency Professional Agency (IPA).

Show Cause Notice:
The SCN alleged contravention of specific sections and regulations related to the Insolvency and Bankruptcy Code, 2016, and the IP Regulations for accepting the assignment without a valid AFA.

Submissions by Mr. Juneja:
Mr. Juneja argued that he accepted the assignment as Interim Resolution Professional (IRP) before the relevant regulation came into force and had not violated any provisions of the Code. He also mentioned that he had applied for an AFA from his IPA.

Analysis and Findings:
The Disciplinary Committee (DC) found that Regulation 7A clearly mandates Insolvency Professionals to have a valid AFA before undertaking any assignment after 31st December, 2019. Mr. Juneja's failure to have a valid AFA was a breach of regulations and the Code.

The DC noted that the credibility of insolvency processes relies on adherence to the Code of Conduct, and Mr. Juneja's actions were deemed as professional misconduct. A penalty was imposed by the IPA's Disciplinary Committee for the violation.

Order:
Considering the IPA's decision, the DC disposed of the SCN without further direction. Copies of the order were forwarded to the IPA and the National Company Law Tribunal for information.

In conclusion, the judgment highlights the importance of compliance with regulations and the Code of Conduct for Insolvency Professionals to maintain the integrity of insolvency processes and uphold professional standards.