IBBI Disciplinary Committee Restrains Insolvency Professional From Rendering Services For Two Years

In a recent matter before the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI), bearing No. IBBI/DC/91/2021, an Insolvency Professional, namely Mr. Manoj Kumar Singh, has been found to be dispensing his duties as an Interim Resolution Professional in contravention of the Insolvency and Bankruptcy Code, 2016 ("IBC") and its regulations. The Disciplinary Committee, vide an order dated 08.04.2022, has directed Mr. Singh to not seek or accept any process or assignment; or render any services under the IBC for a period of two years from the date when the said order comes into force. Background Facts The NCLT New Delhi Bench-II ("Adjudicating Authority"), vide an order dated 27.01.2020, had admitted an application under Section 9 of the IBC for Corporate Insolvency Resolution Process ("CIRP") of Palm Developers Pvt. Ltd. ("Corporate Debtor"). Mr. Manoj Kumar Singh, Insolvency Professional, was appointed as the Interim Resolution Professional ("IRP"). Mr. Singh had constituted the Committee of Creditors ("CoC") on 20.02.2020 with two Corporate Guarantors whose guarantees were yet to be invoked; their voting share was approximately 88%. On 25.02.2020, an interim application bearing I.A. No. 1610 /2020 was filed before the Adjudicating Authority by a member of the CoC, seeking re-constitution of the CoC. In pursuance of which, the Adjudicating Authority on 28.02.2020 had passed the following directions: "In view of the aforesaid situation where CoC has been constituted with Corporate Guarantors who do not have a cause of action, no further steps shall be taken in the meeting of the CoC till the voting percentage is ascertained. The IRP is restrained from holding a meeting of CoC or putting any agenda to vote physically or online till the constitution of CoC is ascertained. It is also brought to the notice of this Bench that the IRP has not taken any steps as mandated under the Code nor taken any steps to take over the assets of the Corporate Debtor till date". On 07.09.2020, the Adjudicating Authority had modified the direction passed in the order 28.02.2020 and directed Mr. Singh to proceed in the matter in accordance with the provisions of the IBC. Thereafter, on 13.01.2021, the IBBI had appointed an Inspecting Authority ("IA") in the exercise of its power under Section 196 of IBC read with Regulation 3 of the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 ("Inspection Regulations"). The IA was appointed to inspect Mr. Manoj Kumar Singh, on having reasonable grounds to believe that he had contravened provisions of the IBC, Inspection Regulations, and directions of Adjudicating Authority issued thereunder. Accordingly, the IA submitted its report dated 06.06.2021 to the IBBI. Show Cause Notice Issued By The IBBI The IBBI had issued a Show Cause Notice ("SCN") to Mr. Singh on 30.07.2021, in respect of his role as an IRP in the CIRP of the Corporate Debtor. The SCN alleged the contravention of the following provisions by Mr. Singh: Constitution of Committee of Creditors ("CoC") with two Corporate Guarantors whose guarantees were yet to be invoked and hence, did not have any cause of action.Failure to take the CIRP forward after the directions given in order dated 07.09.2020. Depriving the legitimate creditors of their rightful rights and share despite being fully aware of the provisions of the IBC and Regulations made thereof.Failure to consider that CoC could be constituted in terms of Regulation 16B of the CIRP Regulation i.e. with the creditors in class whose claims had been verified in the present matter. No notable work been done apart from conducting the 1st CoC meeting on 26.02.2020. Failure to appoint valuers; not sharing the Information Memorandum; not publishing Form –G in terms of Regulation 36A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"); and not forming any opinion if Corporate Debtor is subject to Section 43, 45, 50 or 66 of IBC within a relevant period.Contravention of Sections 17, 18, 20, 25, 208(2)(a) and (e) of the IBC; Regulations 16B, 27, 35A, 36, 36A and 40A of the CIRP Regulations; Regulation 7(2)(a) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016 ("IP Regulations"); and Clauses 1, 2, 10, 13 and 14 of the Code of Conduct specified in First Schedule of the IP Regulations. The Response Of Mr. Singh To The Show Cause Notice The response was given to SCN by Mr. Singh on 19.08.2021, and it laid out the following counter arguments: No deficiency in performance of duties: Immediately upon being appointed as IRP, Mr. Singh had made a public announcement, intimated the bankers and ex-management of the commencement of CIRP of Corporate Debtor, visited the office of Corporate Debtor, appointed security service and took control of...

IBBI Disciplinary Committee Restrains Insolvency Professional From Rendering Services For Two Years

Pallavi Mishra

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IBBI Disciplinary Committee Restrains Insolvency Professional From Rendering Services For Two Years

Pallavi Mishra

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INR 1099+GST

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This is a premium content
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