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TMI Blog2018 (8) TMI 1616X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed Ernst and Young LLP to raise invoices for his professional fee, thereby, treating the profession of Insolvency Professionals as employment under an entity. He contravened section 208 of the Code. Order - Mr. Venkatasubramanian has violated sections 5(13) and 208 of the Code read with regulations 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 along with the items 1, 5, 9 and 25 of the Code of Conduct for Insolvency Professionals specified in the First Schedule to the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. Accordingly, the Disciplinary Committee, in exercise of powers conferred under section 220 (2) of the Code read with sub-regulation (7) and (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, hereby, imposes a monetary penalty of one lakh rupees on Mr. Dinkar T. Venkatasubramanian, Insolvency Professional [Registration number IBBI/IPA-001/IP-P00003/2016-17/10011], IRP/RP in the matter of JEKPL Private Limited. Mr. Venkatasubramanian shall deposit the penalty amount by a crossed demand draft payable in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an was illegally paid to M/s E Y LLP thereby escaping his personal income tax liability by making the payment of his professional fee in the name of third party and requested the Board for taking necessary disciplinary action against Mr. Venkatasubramanian. 1.4 The DC also notes that in the CoC meeting held on 4th August, 2017 w.r.t. JEKPL Private Limited, the members of the CoC confirmed that nobody has appointed M/s E Y LLP for any professional work relating to the resolution process of JEKPL Pvt. Ltd. Mr. Mukesh Mohan on 11th August, 2017 enclosed an email which he received from one of the members of the CoC in response to the previous mentioned issue the payments to EY [Ernst and Young LLP] have been made by the bank on the instructions of Company JEKPL Private Limited through the then IRP Mr. Dinkar T. Venkatasubramanian. The Bank has not engaged the services of the EY for any purposes. . 1.5 The replaced RP vide his communication dated 23rd August, 2017 informed to Board that to verify whether all the expenditure/payments after commencement of CIRP were pre-approved by the Committee of Creditors, BGJC Associates LLP was appointed to conduct vetting of CIRP cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations made thereunder. 3. Submissions by Mr. Venkatasubramanian 3.1 In reply to SCN dated 25th January, 2018, as regard to Fee Acknowledgement Contract and subsequent invoices raised by Ernst Young LLP in their name against the work of IRP/RP done by Mr. Venkatasubramanian, he has submitted as under: - (a) The fee arrangement dated 17th March, 2017 with Ernst Young LLP was entered into by him in good faith and is based on his understanding of the provisions of the Code, CIRP Regulations and the Code of Conduct for Insolvency Professionals, as also the best practice in this respect followed by insolvency practitioners in other jurisdictions. (b) The rights and duties of the partners of limited liability partnership are governed by the limited liability partnership agreement. Sub-section (1) of section 42 of the LLP Act states, the rights of a partner to a share and profit and distribution are transferrable. Schedule 1 to the LLP Act further provides that the mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and its partners shall be determined, subject to the terms of any limited liability partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rganizational policies and procedures. (iii) In exchange, he would authorize EY to bill and collect all fee due to him in his role as Interim Resolution Professional/ Resolution Professional. 3.2 During personal hearing on 27th April, 2018, Mr. Venkatasubramanian stated that: (a) He is registered with the Board as Insolvency Professional since 27th January, 2017. There is an agreement between all the partners of the Ernst Young LLP and that agreement applies to him as well. When the LLP Agreement was made, at that time the Code was not in existence. After the enactment of the Code, he took up the assignments as professional. (b) There was no clarity as to how and whom fee is to be paid for his professional services. The Board has clarified this issue vide circular dated 16th January, 2018, regarding fees payable to an insolvency professional and to other professionals appointed by an insolvency professional and he has followed it in letter and spirit after the date of issue of the said circular. (c) He questioned how the Board is aggrieved of such raising of invoices by M/s E Y LLP for his fee for the services rendered by him as of IRP/RP in the CIRP of JEKPL Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the bills so raised by Ernst and Young LLP as being the IRP/RP of JEKPL Private Limited and thus influenced the decision or the work of the committee of creditors and the debtor. (e) Limited Liability Partnerships stands as a separate and independent legal entity as to the professionals who are its partners. Raising fee invoices by LLPs on behalf of Insolvency Professional who has been appointed as IRP/RP and for the services rendered by such professional is the violation of the very basic notion of the fee as it is charging some against services rendered . It is professional not the LLP who renders services under the Code. An LLP cannot enrol as Insolvency Professional. (f) Section 5(13) of the IBC, 2016 defines the expression insolvency resolution process costs , which includes under its clause (b) the fees payable to any person acting as a resolution professional. Therefore, only an IRP/RP is entitled to directly receive the fees payable along with the out-of-pocket expenses in relation to a resolution process for which he has been appointed as the IRP/RP. The explanation to regulation 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and properly undertaken. He shall not accept any fees or charges other than those which are disclosed to and approved by the persons fixing his remuneration. (iii) Any payment of fees for the services of an insolvency professional to any person other than the insolvency professional shall not form part of the insolvency resolution process cost. (iv) any other professional appointed by an insolvency professional shall raise bills /invoices in his / its (such as registered valuer) name towards such fees, and such fees shall be paid to his / its bank account. 5. Conclusion 5.1 Insolvency professionals play a vital role in the resolution process and forms a crucial pillar upon which rests the effective, timely functioning as well as credibility of the entire edifice of the resolution process. The Code of Conduct for Insolvency Professionals under the Code read with the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, provide under Integrity and objectivity- an insolvency professional must maintain integrity by being honest, straightforward, and forthright in all professional relationships. Further, Independence and impartiality- an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made to Ernst Young LLP. The said settlement of bills is in violation to express provisions of the Code and regulations made thereunder. However, Mr. Venkatasubramanian has submitted that there was no clarity as to how and to whom fee is to be paid for his professional services as an IRP/RP and the Board has recently clarified this issue vide circular dated 16th January, 2018, regarding fees payable to an insolvency professional and to other professionals appointed by an insolvency professional. Given that the Code is a new law and Mr. Venkatasubramanian has undertaken CIRP in the matter of JEKPL Private Limited for the first time and he is following circular dated 16th January, 2018 in letter and spirit, effective the date of the circular as stated by him in his written submission on affidavit dated 24th April, 2018, the DC is inclined to take lenient view. 6.3 Accordingly, the Disciplinary Committee, in exercise of powers conferred under section 220 (2) of the Code read with sub-regulation (7) and (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, hereby, imposes a monetary penalty of one lakh rupees on Mr. Dinkar T. Venkatasubramanian, Insol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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