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TMI Blog2024 (6) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... d the proviso to Schedule I-(1) (3) was issued in the year 2021 which is two years after the auction. Since the proviso prohibiting payment of fee for participation in the auction process was brought out only on 30.09.2021, the Petitioner cannot be found guilty of imposing non-refundable participation fee on prospective bidders more so when the reserve price of the assets which were to be sold was much more higher than the participation fee imposed on the prospective bidders for participating in the auction process - this Court is not inclined to accept the view taken by the Board that the Petitioner has violated any Code of Conduct under IP regulations. Charge against the Petitioner for appointing unregistered valuers - HELD THAT:- This Court is of the opinion that though what the Petitioner has done is not in strict confirmation of the regulations, but this Court finds that the two persons, i.e. Mr. Manish Kaneria and Mr. Rakesh Narula, are registered valuers in their individual capacity - It is not the case of the Respondents that the valuation report given Mr. Manish Kaneria and Mr. Rakesh Narula in the name of their firm has not been accepted or that it has been questioned any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is of the opinion that the findings arrived at by the Board that the Petitioner is guilty of the last charge does warrant any interference, and therefore, this Court is not inclined to set aside the Order of suspension of the registration of the Petitioner. However, in view of the fact that out of 24 months of suspension, the Petitioner has already undergone 20 months of suspension, this Court is inclined to modify the punishment of suspension from a period of two years to the period already undergone. The petition is disposed off. - HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD For the Petitioner Through: Mr. Ramji Srinivasan, Sr. Advocate, Mr. Milanka Chaudhary, Ms. Ashly Cherian and Ms. Swet Shikha, Advocates. For the Respondent Through: Mr. Vikas Mehta, Ms. Rashi Rampal, Mr. Apoorv Khaton and Mr. Ankit Vashisht, Advocates. JUDGMENT 1. The Petitioner has approached this Court challenging an Order dated 28.09.2022, issued by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (hereinafter referred to as the IBBI ) in case bearing No. IBBI/DC/131/2022, suspending the registration of the Petitioner herein for a period of two years. 2. The facts, in brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bing non-refundable participation fee of Rs. 5,00,000/-, Rs. 10,00,000/-, Rs. 10,00,000/- and Rs. 50,000/- vide public announcements made on 17.09.2019, 27.09.2019, 21.10.2019, and 11.11.2019 respectively on prospective bidders for participating in the auction process at the time of submission of Expression of Interests is concerned, the IBBI held that seeking non-refundable participation fees from prospective bidders defeats the spirit of the IBC, one of the objectives of which is maximization of value of assets of the Corporate Debtor. The IBBI held that such unreasonable conditions have the effect of dissuading the prospective bidders from participating in the bidding process. The Board, therefore, held that the Petitioner has acted in contravention of regulation 36A (4) (d) and regulation 36B (4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the CIRP Regulations ) and also in contravention of clauses 13 and 14 of the Code of Conduct for Insolvency Professionals Regulations. iii. As regards the third charge against the Petitioner, i.e. appointment of unregistered valuers is concerned, the allegation against the Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Petitioner is one of the partners of the BRAL and since the inception of the liquidation process till the quarter period ended in June, 2022, the fees payable to BRAL is Rs. 2,83,28,750/- whereas fees payable to the Petitioner is Rs. 2,21,00,000/- and, therefore, the BRAL was paid more fees than the Liquidator himself. The Board, therefore, held that any entity engaged to help a liquidator cannot be expected to be entrusted with responsibilities more than that of liquidator so as to justify higher fees to such an entity in comparison to that of the liquidator. Therefore, engaging a related entity on vague terms and conditions and paying them fee more than the fee of liquidator is not only unjustified but also mala fide and, therefore, the Petitioner is guilty of contravention of Regulation 7 (2) of the Liquidation Regulations and Clause 25A of the Code of Conduct under IP regulations. h. By the Impugned Order, the Board has suspended the registration of the Petitioner for a period of two years w.e.f. 28.10.2022. i. It is this Order which is under challenge in the present Writ Petition. 3. Notice in the present Writ Petition was issued on 18.10.2022. Pleadings are complete. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess at the time of submission of Expression of Interests is against the freedom available to the market participants and basic principles of the code and, therefore, even though there is no express violation of any Regulations by the Petitioner, in the interest of the Corporate Debtor and in order to maximize the participation in the auction process, the Petitioner ought not to have imposed any fee on prospective bidders. 8. With regard to the abovementioned charge of prescribing non-refundable participation fee on prospective bidders for participating in the auction process at the time of submission of Expression of Interests is concerned, this Court is inclined to accept the contention of the learned Counsel for the Petitioner inasmuch as the Petitioner has not acted in violation of any express contravention of any Regulations or Clauses. Material on record indicates that proviso to Schedule I-(1) (3) of the Regulations was not in force when the auction took place and the proviso to Schedule I-(1) (3) was issued in the year 2021 which is two years after the auction. Since the proviso prohibiting payment of fee for participation in the auction process was brought out only on 30.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk to other registered valuers for the purpose of valuing the assets and the same is violative of Circular bearing No. No. IP/002/2018 dated 03.01.2018 issued by the IBBI. 11. This Court is of the opinion that though what the Petitioner has done is not in strict confirmation of the regulations, but this Court finds that the two persons, i.e. Mr. Manish Kaneria and Mr. Rakesh Narula, are registered valuers in their individual capacity. Though the valuation report has been given in the name of their partner firms, the valuation reports have been signed by the abovementioned persons. It is not the case of the Respondents that the valuation report given Mr. Manish Kaneria and Mr. Rakesh Narula in the name of their firm has not been accepted or that it has been questioned anywhere. It is also not the case that the valuers to whom Mr. Manish Kaneria and Mr. Rakesh Narula have further outsourced the work, are not registered valuers. No extra fees in the name of outsourcing the work and hiring additional valuers has been paid by the Board. The total fees which have been paid to the registered valuers includes all the work done for valuing the assets of the Corporate Debtor. This Court, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pped under Regulation 4 of the Liquidation Regulations. Learned Counsel for the Respondent, therefore, states that the Petitioner has engaged a firm in which he is a partner only to circumvent the fee cap given in Regulation 4. Learned Counsel for the Respondent further submits that a firm which has been engaged to assist the Liquidator cannot charge a fee more than that of liquidator. 14. A perusal of the Scheme of the IBC shows that once the attempts to resurrect a company fails, the company goes into liquidation and very often the Resolution Professional, who is resurrecting the company, is appointed as the Liquidator of the company. The purport of the Liquidator is to ensure that maximum value of the assets of the company is released by selling assets of the company so that the debtors, which include the financial institutions; Public Sector Banks; employees; etc, are paid in full. The Liquidator cannot be permitted to dissipate the assets of the company as the same will defeat the entire liquidation process and this would go contrary to the very scheme of the IBC. 15. The role of the liquidator in insolvency proceedings is paramount to the entire process. The liquidation proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess. A Liquidator cannot permit a Corporate Debtor, which is in liquidation, to bleed the company which itself is in liquidation. The amount given is meant to clear the debts of the creditors and payments of the employees. The fact that the Petitioner does not strictly falls as a related party within the scope of Section 5 (24) of the of the IBC cannot absolve the Petitioner, who has appointed a firm, in which he is a partner, to provide support services and allowing the said firm to raise bills which are higher than the fee of the Petitioner himself. The act of the Petitioner is contrary to the intent of the liquidation process. The facts of the case cries aloud that BRAL has not only been engaged to provide support services. The actual motive of the Petitioner behind appointing BRAL was to increase his own fee by circumventing Regulation 4 of the Liquidation Regulations. The fact that fees bill of BRAL has not been cleared does not absolve the Petitioner of the charge of misconduct and contravention of Liquidation Regulations. In view of the above, this Court is of the opinion that the finding of the Disciplinary Committee of the IBBI with respect to the charge of appointment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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