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TMI BlogAUTHORIZATION FOR ASSIGNMENT UNDER INSOLVENCY RESOLUTION PROCESSX X X X Extracts X X X X X X X X Extracts X X X X ..... AUTHORIZATION FOR ASSIGNMENT UNDER INSOLVENCY RESOLUTION PROCESS - By: - Mr. M. GOVINDARAJAN - Corporate Laws / IBC / SEBI - Dated:- 16-9-2020 - - Amendment to regulation The Insolvency and Bankruptcy Board of India ( Board for short) made the Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment) Regulations, 2019 vide Notification No. IBBI/2019-20/GN/REG045, dated 23.07.2019. The provisions of these regulations came into force from 23.07.2019. The amendment brought out the concept of assignment of authorization . Assignment The term assignment is defined under Regulation 2(1)(a) as any assignment of an insolvency professional as interim resolution professional, resolution professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, liquidator, bankruptcy trustee, authorized representative or in any other role under the Code. Authorization for assignment The expression authorization for assignment is defined under Regulation 2(1)(aa) as an authorization 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 7A provides that an insolvency professional shall not accept or undertake an assignment after 31st December, 2019 unless he holds a valid authorization for assignment on the date of such acceptance or commencement of such assignment. This shall not be applicable shall not apply to an assignment which an insolven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy professional is undertaking as on- 31st December, 2019; or the date of expiry of his authorization for assignment. Assignment for Authorization shall be valid for a period of one year from the date of its issuance or till the date on which you attain the age of 70 years, whichever is earlier. Obligation of Insolvency Professional Agencies Regulation 10 imposes an obligation on the Insolvency Professional Agencies that the Agency shall inform the Board when the Insolvency Professional Agency- issues or renews an authorization for assignment; suspends or cancels an authorization for assignment; revokes the suspension of an authorization for assignment; or accepts the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surrender of an authorization for assignment, within one working day of taking such action. The Board shall take note of the information furnished by the Insolvency Professional Agency. Disciplinary proceedings If the Insolvency Professional acts without getting the authorization for assignment he is liable for disciplinary action. If the Board is of the prima facie opinion that sufficient cause exists it shall issue a show-cause notice to the insolvency professional. Show cause notice The show-cause notice shall be in writing, and shall state- the provisions of the Code under which it has been issued; the details of the alleged facts; the details of the evidence i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n support of the alleged facts; the provisions of the Code, rules, regulations and guidelines thereunder allegedly violated, or the manner in which the public interest is allegedly affected; the actions or directions that the Board proposes to take or issue if the allegations are established; the manner in which the insolvency professional is required to respond to the show-cause notice; consequences of failure to respond to the show-cause notice; and procedure to be followed for disposal of the show-cause notice. The show-cause notice shall enclose copies of documents relied upon and extracts of relevant portions from the report of investigation or inspection, or other records. Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Show cause notice A show-cause notice issued shall be served on the insolvency professional- by sending it to the insolvency professional, at the address provided by him or provided by the insolvency professional agency with which he is enrolled, by registered post with acknowledgement due; or by an appropriate electronic means to the email address of the insolvency professional, provided by him or provided by the insolvency professional agency with which he is enrolled. Disciplinary Committee The Board shall constitute a Disciplinary Committee for disposal of the show-cause notice. The Committee shall endeavor to dispose of the show-cause notice within a period of six months of the assignme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The Disciplinary Committee shall dispose of the show-cause notice by a reasoned order in adherence to principles of natural justice, and after considering the submissions, if any, made by the insolvency professional, the relevant material facts and circumstances, and the material on record. Order The order of the Disciplinary Committee on disposing the show cause notice may order for- no action; warning; suspension or cancellation of authorisation for assignment; any of the actions under section 220(2) to (4) ; or a reference to the Board to take any action under section 220(5). The order shall be issued to the insolvency professional, with a copy issued to the insol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vency professional agency with which he is enrolled immediately, and be published on the website of the Board. Effective of order The order shall not become effective until thirty days have elapsed from the date of issue of the order unless the Disciplinary Committee states otherwise in the order along with the reason for the same. Case of Shri Ravi Sharma Shri Ravi Sharma is insolvency professional. He registered with ICSI Institute of Insolvency Professionals. He has got two assignments as voluntary liquidator in Indian Transelectric Company Limited on 03.03.2020 and A.B.S. Enterprises Private Limited on 02.07.2020. He made public announcements for the both the companies. The Insolvency Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional Agency observed that the said two assignments were taken by Shri Ravi Sharma without getting proper authorization for assignment of the Insolvency Professional Agency. The voluntary liquidator was issued show cause notice by the Insolvency Professional Agency on 22.07.2020. Sri Ravi Sharma in his reply admitted the occurrence of mistake/noncompliance and submitted that it occurred inadvertently and unintentionally resulting from oversight of the provision. Further, he extended apologies with prayer to allow continuation and approval of authorization. The Disciplinary Committee warned Shri Ravi Sharma to be extremely careful, diligent, strictly act as per law and similar action should not be repeated. The Discipl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inary Committee also imposed a fine of ₹ 10,000/- to be deposited within 30 days from the date of issue of the order. The Disciplinary Committee directed that Sri Ravi Sharma shall only accept any new assignment after depositing the penalty amount imposed and after obtaining Authorization for Assignment in view of Regulation 12A of Bye Laws of ICSI Institute of Insolvency Professionals from the date of coming into force of this Order. The Insolvency and Bankruptcy Board of India ( Board for short) also issued show cause notice on the same allegation on 28.08.2020. The show cause notice issued by the Board alleged contraventions of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code) , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contained in the First Schedule of the IP Regulations for accepting the assignment of the liquidator in Liquidation process of two cases. Sri Ravi Sharma in his reply admitted the occurrence of mistake/ non-compliance. He submitted that- the error has occurred inadvertently an unintentionally resulting from oversight of the newly incorporated provisions; he was under bona fide belief that AFA is required in cases of appointment which are made vide order of the AA and not in voluntary liquidation process; IPA has also issued the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause notice dated 22.07.2020 and order dated 7.09.2020 has also been passed imposing penalty of ₹ 10,000/-; he has applied for AFA but the same has been rejected due to show cause notice issued IPA. Since the IPA has initiated disciplinary action against Shri Ravi Sharma the Board issue no direction to Shri Ravi Sharma. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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