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TMI Blog2020 (6) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Authority (IA) to conduct an inspection of Mr. Tarun Jaggi, on having reasonable grounds to believe that the IP had contravened provisions of the Code, Regulations, and directions issued thereunder. 1.3 The Board on 27th November 2019 had issued the SCN to Mr. Tarun Jaggi, based on findings of an inspection in respect of his role as a liquidator in Voluntary Liquidation of Viber Media India Pvt. Ltd. and MGI Group India Pvt. Ltd. The SCN alleged contravention of Section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 (Code), several provisions of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and the Code of Conduct under regulation 7(2) thereof, the IBBI (Voluntary Liquidation Process) Regulation 2017 (Voluntary Liquidation Process Regulations). Mr. Tarun Jaggi replied to the SCN vide letter dated 18th December 2019. 1.4 The Board referred the SCN, response of Mr. Tarun Jaggi to the SCN and other material available on record to the Disciplinary Committee (DC) for disposal of the SCN in accordance with the Code and Regulations made thereunder. Mr. Tarun Jaggi availed an opportunity of personal hearing before the DC on 16th March 2020 where he reit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsite but inadvertently missed to make publication of the same in newspapers and to make that compliance good, he himself made a suo moto request to the IBBI to grant permission and accordingly the publication has been made on 27.6.2019 which was a delayed publication as per the IBBI Regulations. He also submitted that except the delay in publication in the newspapers, all the reporting and compliances have been made on time before the Board and other respective authorities under IBC Regulations in connection with Viber Media India Private Limited. Analysis: Regulation 14 of IBBI (Voluntary Liquidation Process) Regulation 2017 provides as under: "(1) The liquidator shall make a public announcement in Form A of Schedule I within five days from his appointment. (2) The public announcement shall- (a) call upon stakeholders to submit their claims as on the liquidation commencement date; and (b) provide the last date for submission of claim, which shall be thirty days from the liquidation commencement date. (3) The announcement shall be published- (a) in one English and one regional language newspaper with wide circulation at the location of the registered office and prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictly adhere to the timelines prescribed under the provisions of the Code and the regulations made thereunder. He must act with utmost care and caution and must not be negligent while performing his duties during insolvency resolution or liquidation, as the case may be. Further, compliance of law after the time prescribed by the Code cannot be treated as 'compliance' of law. In the present case, the Liquidator admitted that he inadvertently missed making the public announcement in the newspapers within prescribed time i.e. five days from his appointment. Thus, the Liquidator has contravened the provisions of section 208(2)(a) of the Code, regulations 14(1) and 14(3)(a) of Voluntary Liquidation Process Regulations and regulation 7(2)(a) and 7(2)(h) of IP Regulations read with clauses 10, 13 and 14 of the Code of Conduct as given in the First Schedule of the IP Regulations. 3.2 Contravention: In the matter of MGI Group India Private Limited, the Voluntary Liquidation commenced on 8.5.2018 while public announcement was made in newspapers on 10.1.2019 i.e. after a delay of approx. 8 months. As per Regulation 14(1) read with Regulation 14(3)(a) of IBBI (Voluntary Liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir claims as on the liquidation commencement date; and (b) provide the last date for submission of claim, which shall be thirty days from the liquidation commencement date. (3) The announcement shall be published- (a) in one English and one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the corporate person and any other location where in the opinion of the liquidator, the corporate person conducts material business operations; (b) on the website, if any, of the corporate person; and (c) on the website, if any, designated by the Board for this purpose. " Thus, Regulation 14 of Voluntary Liquidation Process Regulations makes it mandatory for the Liquidator to make public announcement in Form A of Schedule I within five days from the date of his appointment. Such public announcement must be published on the website designated by the Board and also on the website of the corporate person. Undisputedly, the public announcement was published on the website of the Board within the stipulated period of five days from the date of appointment of Liquidator i.e. on 09.05.2018. Further, the Liquidator, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings following his appointment for the benefit of all stakeholders. He must diligently perform his duties and must adhere to the timelines prescribed under the provisions of the Code and the regulations made thereunder. Further, compliance of law made after the time as stipulated by the Code cannot be treated as 'compliance' of law in the strict sense. In the present case, the Liquidator admitted that he did not make the public announcement in the newspapers within five days from his appointment. Thus, the Liquidator has contravened the provisions of section 208(2)(a) of the Code, regulations 14(1) and 14(3)(a) of Voluntary Liquidation Process Regulations and regulation 7(2)(a) and 7(2)(h) of IP Regulations read with clauses 10, 13 and 14 of the Code of Conduct as given in the First Schedule of the IP Regulations. 3.3 Contravention: In the matter of MGI Group India Private Limited, the Liquidator appointed Deloitte Haskins & Sells for auditing the books of accounts of the CD. However, they were providing auditing services to the CD even before commencement of voluntary liquidation proceedings. The Liquidator's reply, "as it is a members voluntary winding up of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intent of Regulation 11 of Voluntary Liquidation Process Regulations is to ensure the independence of the professional engaged by the liquidator for carrying the services sought to be rendered by the professional to the company under liquidation. Thus, there is no non-compliance or contravention of any of the provisions of the Code and regulations. Analysis: Regulation 11(2) of IBBI (Voluntary Liquidation Process) Regulation 2017 clearly provides as under: "The liquidator shall not engage a professional under sub-regulation (1) who is his relative, is a related party of the corporate person or has served as an auditor to the corporate person at any time during the five years preceding the liquidation commencement date. " An IP must maintain complete independence in his professional relationships and should conduct the insolvency resolution, liquidation or bankruptcy process, as the case may be, independent of external influences. The members of the corporate person under voluntary winding up may take various decisions, however, it is the duty of the Liquidator to act in accordance with the provisions of the Code and the regulations made thereunder. Further, the IP must act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 208(2)(a) of the Code, regulation 11(2) of Voluntary Liquidation Process Regulations and regulation 7(2)(a) and 7(2)(h) of IP Regulations read with clauses 3, 10 and 14 of the Code of Conduct as given in the First Schedule of the IP Regulations. 4. Conclusion: 4.1 The Code is a law for insolvency resolution, as evident from the long title to the Code, which reads as under: "An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, " 4.2 To achieve the objectives of the Code, a key supporting institution is insolvency profession. He conducts the entire insolvency resolution process and if ordered, liquidation process. During such conduct, an IP must maintain complete independence in his professional relationships and should conduct the insolvency resolution, liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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