CIRP Conducted In A "Brazen Manner": IBBI Suspends Insolvency Professional For Three Years

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India ("IBBI"), while adjudicating a Show Cause Notice dated 08.04.2022 in the matter of Mr. Partha Sarathy Sarkar (Insolvency Professional), has suspended the Insolvency Professional for a period of three years for acting in contravention of the Insolvency and Bankruptcy Code, 2016 ("IBC") and the IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"). The specific violations were such that the Insolvency Professional had failed to make timely public announcement; did not seek extension from the Adjudicating Authority when CIRP period expired; failed to appoint registered valuers, maintain proper list of creditors and take control of the Corporate Debtor's assets. The Order was passed on 24.06.2022. Brief Facts The National Company Law Tribunal, New Delhi Bench ("Adjudicating Authority") vide its order dated 21.08.2019 had admitted the application filed by Mr. Anil Kheterpal under Section 9 of the IBC and had accordingly initiated Corporate Insolvency Resolution Process ("CIRP") against Innovari Technologies Pvt. Ltd. ("Corporate Debtor"). Mr. Partha Sarathy Sarkar ("Mr. Partha") was appointed as the Insolvency Resolution Professional (IRP) who was later confirmed as Resolution Professional (RP). Proceedings Before The Disciplinary Committee Of IBBI The IBBI had appointed an Inspecting Authority (IA) on 09.03.2021 to conduct inspection of the assignment (i.e. CIRP of Innovari Technologies Private Limited) being handled by Mr. Partha, upon reasonable grounds to believe that Mr. Partha had contravened provisions of the IBC and the CIRP Regulations. The IA had served a notice of inspection to Mr. Partha on 17.03.2021, informing that the inspection is to be undertaken and therefore all documents pertaining to the assignment be mailed available to the IA on or before 31.03.2021. However, Mr. Partha termed the Inspection Notice dated 17.03.2021 as misleading, defective and void. Further, Mr. Partha declined to fully co-operate or provide proper information to the IA for the purpose of inspection. Based on the Inspection Report submitted by the IA, a Show Cause Notice ("SCN") dated 08.04.2022 was issued to Mr. Partha by IBBI, alleging contravention of provisions of the IBC, CIRP Regulations and the Code of Conduct for Insolvency Professionals. Mr. Partha did not present himself for the virtual personal hearing and the Disciplinary Committee of IBBI, based on material on record, concluded that the following violations have been made by Mr. Partha: Non-cooperation with Inspecting Authority.Delay in making public announcement: the Corporate Debtor was admitted into CIRP on 21.08.2019, as per CIRP Regulations Mr. Partha was obligated to make a public announcement within three days from the date of his appointment. However, the public announcement was made on 27.09.2019, i.e. after a delay of 33 days.Non-appointment of registered valuers: the Insolvency Commencement Date ("ICD") was 21.08.2019 and registered valuers as per CIRP Regulations were to be appointed by the Resolution Professional within forty-seven days of the ICD. Mr. Partha failed to appoint the registered valuers and instead submitted to the IA that "the assets of the Corporate Debtor are untraceable as informed by the CoC members to the RP. Moreover, none of the CoC members are willing to contribute towards CIRP cost, hence no Registered Valuers could have been engaged." Violation of CIRP timeline: Section 12(1) of the IBC provides that CIRP shall be completed within a period of 180 days from the Insolvency Commencement Date and on failure of which the Resolution Professional may seek extension from the Adjudicating Authority. Mr. Partha failed to file any application for extension of CIRP period, which had commenced on 21.08.2019.Non-maintenance of list of creditors: Regulation 13 of CIRP Regulations requires the Resolution Professional to maintain a list of creditors, specifically including details such as the names, amount claimed, amount of claims admitted and security interest, if any. Mr. Partha had maintained only name of creditor, profile of creditor and amount of operational debt; and had failed to include the amount claimed by the creditors, amount of claim admitted and security interest, if any.Control and custody of assets of the CD: Section 25(1) of the IBC mandates a Resolution Professional to preserve and protect the assets of the Corporate Debtor. Mr. Partha failed to take control and custody of the assets of the Corporate Debtor which were lying with one the creditors. Decision Of The Disciplinary Committee The Disciplinary Committee observed that Mr. Partha had conducted the entire CIRP of the Corporate Debtor in a "brazen manner" and in violation of the IBC and CIRP Regulations. "Accordingly, the DC find ...

CIRP Conducted In A "Brazen Manner": IBBI Suspends Insolvency Professional For Three Years

Pallavi Mishra

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