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TMI Blog2018 (5) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 220 (2) of the Code read with sub-regulation (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, hereby suspends the registration of Ms. Bhavna Sanjay Ruia, Insolvency Professional [Registration No. IBBI/IPA-002/IP-N00371/2017-2018/11065] for a period of one year. It sincerely expects that Ms. Ruia will use this one year to strengthen her competency and ethical standards. - ORDER No. IBBI/DC/04/2018 - - - Dated:- 3-5-2018 - Dr. M. S. Sahoo Chairperson, IBBI And Dr. Mukulita Vijayawargiya Whole Time Member, IBBI ORDER 1. Background 1.1 The Insolvency and Bankruptcy Board of India (Board) issued a show-cause notice (SCN) dated 8th March, 2018 to Ms. Bhavna Sanjay Ruia, Vishal House, 1st Floor, Plot No. 33, Sector - 19C, Off Palm Beach Road, Vashi, Navi Mumbai, Maharashtra - 400705, who is a Professional Member of the ICSI Institute of Insolvency Professionals and an Insolvency Professional (IP) registered with the Board with registration number IBBI/IPA-002/IP- N00371/2017-2018/11065. The Board referred the SCN, response of Ms. Ruia to the SCN and other material available on record to the Disciplinary Committee (DC). 1.2 The D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated above. 5. In view of the above, the Adjudicating Authority is of the considered view that remuneration quoted by the IRP is quite exorbitant and the same needs to be referred to IBBI. Though there are no prescribed set of Rules and Regulations/Guidelines at present with regard to the fee payable to the IRP/RP, the Adjudicating Authority is of the considered view that the fee quoted by the professionals should be reasonable, commensurate with work to be handled. In view of the above we recommend the matter to IBBI for taking appropriate action/remedial measure against the proposed IRP including disciplinary action if any, as deemed fit. . 1.3 The DC further notes that the Board took on record the order dated 22nd November, 2017 of the Hon ble Adjudicating Authority. On consideration of responses dated 28th January, 2018 and 14th February, 2018 of Ms. Ruia on the observations of the Hon ble Adjudicating Authority and other material available on record, the Board formed a prima facie opinion that Ms. Ruia has contravened the provisions of regulation 7(2)(b) of the IBBI (Insolvency Professionals) Regulations, 2016 (Regulations) and clauses 2, 5, 10 and 25 of the Code of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of allowances and perquisites. b) She can not be sure of cooperation of employees who are loyal to existing management and hence she will be required to deploy professionals to act as CEO's and even additional staff. Payments to them are included in her fee. c) Her fee is subject to ratification by the CoC. Only the amount of fees ratified by the CoC will be considered as the Insolvency Resolution Process Cost (IRPC). ii) Submission dated 22nd March, 2018: a) The legislature has not limited the fee payable to an IRP / RP. b) Her responsibilities as IRP / RP would require adequate amount of help of professional personnel as part of her team. The fees and remuneration for the services provided by her team shall be borne from her fees. c) If need be, she has to put top notch professionals at several locations and costs on this account is included in her fee. d) Professionals hired for specialised and critical operations shall be paid by the corporate debtor as part of CIRP. Routine staff, assistants and supervisors appointed for the purpose of monitoring within the scope of her duties shall be paid by her from her fees. e) She has quoted a total fee 13.75 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appoint an IP of its choice as RP and fix his remuneration, Ms. Ruia, in her submissions dated 22nd March, 2018, has submitted that it is difficult to plan the activities for a single month only. She planned for a period of 6 or 9 months of CIRP to proceed with the case. She has further stated that this charge is hypothetical. 3.3 Ms. Ruia has essentially made the following submissions in her defence: a) The fee contracted is not final. It is subject to the ratification by the CoC and only the amount ratified will form part of the IRPC. b) Her professional fee is high because it includes the cost of running the corporate debtor as a going concern and running the CIRP. She cannot be sure of cooperation of employees who are loyal to existing management. Further, applications seeking cooperation are not disposed of for months. Hence, she needs to deploy additional staff and professionals. c) The law does not limit the fee of an IP. Nor does it define what is reasonable fee. She has charged a fee comparable to that of a liquidator. d) It is not a finding of the Hon ble Adjudicating Authority that the fee is exorbitant. e) She planned for a period of 6 or 9 month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for services of professional firms, (d) fee for CA / professional representative for representation, (e) fee for lawyers, (f) fee for professionals, (g) fee for project valuers, (h) cost of raising interim finance, (i) cost of public announcement, (j) cost of holding CoC meetings, etc. How can one believe that both the term sheet and her submission dated 21st April, 2018 are simultaneously true? According to the term sheet, her fee does not include the cost of public announcement, while her submission states that her fee includes the cost of public announcement. According to the term sheet, her fee as IRP / RP is exclusive of (a) professional fee for Valuers, Advocates, Solicitors, Forensic Auditors, Consultants and Advisers, and (b) fee for representation before the NCLT. However, according to her submission dated 21st April, 2018, her fee as IRP / RP includes (a) fee for CA / CS professional firms, (b) fee for services of professional firms, (c) fee for CA / professional representative for representation before various tax authorities, (d) fee for lawyers, (e) fee for professionals, (f) fee for project valuers, etc. iii) Vide her submission dated 22nd March, 2018, Ms. Ruia has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied additional manpower on the assumption that the employees of the corporate debtor may not cooperate. Though sections 17(1)(c) and 19(1) of the Code mandate all officers, managers and personnel of the corporate debtor to report to the IRP/RP and extend all co-operation, the Code envisages a situation where the personnel of the corporate debtor may refuse to cooperate. Section 19(3) of the Code empowers the IRP /RP to make an application to the Hon ble Adjudicating Authority to ensure cooperation. The Code nowhere expects the IRP / RP to replace the CEO, and CFO and engage hundreds of supervisors/ engineers just because she believes that the employees are loyal to the existing management and that they will not co-operate with her and the Hon ble Adjudicating Authority does not hear the matter for months. She cannot take law into her own hands. c) Ms. Ruia has very emphatically claimed that the legislature has not limited the fee payable to an IRP / RP. It is difficult to appreciate that any amount of fee can be charged by a professional just because the law does not limit it. The law [Clause 25 of the Code of Conduct for Insolvency Professionals under the First Schedule to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is beside the fact that the role of a liquidator is quite different from that of an IRP / RP. d) Ms. Ruia has submitted that the Hon ble Adjudicating Authority has merely made an observation in its order and that it is not a conclusive finding. It is felt that irrespective of semantics whether it is an observation or finding, it is important to note what the Hon ble Adjudicating Authority has stated: .. the Adjudicating Authority is of the considered view that remuneration quoted by the IRP is quite exorbitant. A considered view of the Hon ble Adjudicating Authority indicates due application of mind and the same cannot be disregarded or brushed aside. e) Ms. Ruia, as an IP, knows well that a RP is appointed only by the CoC. Yet she contracted with the operational creditor, who is not legally competent to appoint RP, to the effect that she would work as RP and she would work for a professional fee of ₹ 1.75 crore per month. This is an attempt to lock in her appointment as RP before the competent authority, that is, CoC is born and denude the competent authority of its rights to choose an IP as IRP and fix his fees. This is evident from her submission that she planned f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the Regulations and section 20 of the Code. ii) Ms. Ruia has demonstrated her inadequate understanding of the law to the effect that (a) the Code prescribes the fee of a liquidator; (b) the fee of a liquidator is linked to book value of assets, (c) the operational creditor appoints RP for CIRP and fixes his fee; (d) an IRP / RP meets the expenses of running the corporate debtor as a going concern from his professional fee; (e) an IRP / RP meets the expenses of CIRP from his professional fee; (f) an IRP / RP needs to deploy additional staff as the existing personnel of the corporate debtor do not cooperate and the Hon ble Adjudicating Authority does not hear matters for months, (g) an IRP / RP engages hundreds of personnel to run a corporate debtor; etc. This poorly reflects on her competence as IP and lack of understanding of the Code and the Rules and Regulations made thereunder. It is doubtful if she can be entrusted with a CIRP given her level of knowledge and understanding. The DC finds that Ms. Ruia has violated the provisions of clause 10 of the Code of Conduct for Insolvency Professionals under the First Schedule of the Regulations. iii) She has attempted to misl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 24 of the Code of Conduct for Insolvency Professionals under the First Schedule of the Regulations. iv) Ms. Ruia has admitted that she planned for 6 or 9 months of CIRP. The term sheet provides for professional fee of Ms. Ruia as RP. She took away the rights of the CoC to appoint an IP of its choice as RP and fix his fees. By misguiding an operational to sign a term sheet, she compromised her independence and attempted to jeopardise the interests of the CoC. The DC finds that Ms. Ruia has violated the provisions of clauses 1, 2, 5, 10, 12, 24 of and 27 the Code of Conduct for Insolvency Professionals under the First Schedule of the Regulations. 5.3 Ms. Ruia has engaged in acts that have brought disrepute to the noble profession of IP and severely compromised her status as a fit and proper person. The overall conduct of Ms. Ruia, as detailed above, is not unbecoming of an IP. The DC concludes that Ms. Ruia has contravened the provisions of clauses 1, 2, 5, 10, 12, 24, 25 and 27 of the Code of Conduct for Insolvency Professionals under the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 read with regulation 7(2)(b) of the said Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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