IBBI Suspends Insolvency Professional For Violation Of Code Of Conduct

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India ("IBBI"), while adjudicating a Show Cause Notice in the matter of Mr. Kedarram Ramratan Laddha (Insolvency Professional), has suspended the Insolvency Professional for a period of one year for accepting assignment as an Interim Resolution Professional without having a valid Authorisation for Assignment ("AFA") and while disciplinary proceedings were pending against him. The Order was passed on 24.06.2022. Brief Background IBBI had issued a Show Cause Notice ("SCN-1") dated 27.08.2020 to Mr. Kedarram for accepting assignment as an IRP in the matter of Regency Linx Exports Pvt. Ltd. and Premier Futsal Management Pvt. Ltd.; and as Liquidator in the matter of Steel Konnect (India) Pvt. Ltd. without possessing a valid 'Authorisation for Assignment' (AFA). During the pendency of SCN-1, the National Company Law Tribunal, Ahmedabad Bench ("Adjudicating Authority"), vide an order dated 17.12.2020 had admitted a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), which was filed by Salem Stainless Steel Suppliers Pvt. Ltd. ("Operational Creditor") seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against M/s. Cooltech Consumers Pvt. Ltd. ("Corporate Debtor"). On 17.12.2020, CIRP was initiated against the Corporate Debtor and Mr. Kedarram was appointed as the Interim Resolution Professional (IRP). No disclosure was made by Mr. Kedarram before the Adjudicating Authority regarding pendency of proceedings under SCN-1 against him. Thereafter, the SCN-1 was disposed of by the Disciplinary Committee on 07.01.2021 with no directions. The IBBI issued a second Show Cause Notice ("SCN-2") dated 09.05.2022 to Mr. Kedarram, for accepting assignment as an IRP in CIRP of M/s Cooltech Containers Pvt Ltd (Corporate Debtor) at a time when he did not hold a valid AFA and disciplinary proceedings were pending against him in view of SCN-1 dated 27.08.2020. It was alleged in SCN-2 that the conduct of Mr. Kedarram Ramratan Laddha of accepting assignment as IRP without valid AFA and during pendency of disciplinary proceedings was in violation of IBBI Circular No: LA/010/2018 dated 23.04.2018, Section 208(2)(a) and 208(2)(e) of the IBC read with Regulation 7A, 7(2)(a) and 7(2)(h) of the IP Regulations, Clause 1, 2, 11, 12 and 14 of the Code of Conduct prescribed under IP Regulations. Relevant IBBI Circular The IBBI Circular No: LA/010/2018 dated 23.04.2018 states: "a disciplinary proceeding is considered as pending against an insolvency professional from the time he has been issued a show cause notice by the Insolvency and Bankruptcy Board of India all its disposal by the disciplinary committee; and an insolvency professional who has been issued a show cause notice shall not accept any fresh assignment as interim resolution professional, resolution professional, liquidator, or a bankruptcy trustee under the Code." Contentions Of The Insolvency Professional The Insolvency Professional, Mr. Kedarram, submitted in his defence that the Adjudicating Authority vide an order dated 13.07.2021 had replaced him with Mr. Rajubhai Patel as the IRP in the CIRP of M/s Cooltech Containers Pvt. Ltd (Corporate Debtor). Further, the SCN-1 dated 27.08.2020 was disposed without any directions. It was further submitted that his appointment as an IRP was confirmed by Adjudicating Authority on 17.12.2020 and at the time of personal hearing for earlier SCN-1 held on 10.09.2020 the Disciplinary Committee had orally pronounced the order and closed the disciplinary proceedings against him. The signed order was received on 07.01.2021. For accepting the assignment without holding AFA, Mr. Kedarram submitted that his appointment as IRP was made based on his written consent at the time of filing of petition for initiation of CIRP on 03.07.2019 (Consent Date). That at the time of Consent Date, there were no provisions for holding AFA. The provision for having AFA was inserted under the Regulation 7A in IP Regulations vide notification dated 23.07.2019 which was much after the Consent Date. Regulation 7A being prospective in nature, the issue of accepting assignment as IRP after 31.12.2019 without holding a valid AFA in the CIRP of the Corporate Debtor was incorrect. Lastly, an application of withdrawal of consent could not be filed before the Adjudicating Authority as Mr. Kedarram had COVID-19 symptoms in December 2020 and had accordingly quarantined himself. In the meantime, the Operational Creditor had submitted Form FA for withdrawal of the petition. Due to this reason, Mr. Kedarram had made the disclosure of his appointment on 08.01.2021. Decision Of The Disciplinary Committee The Disciplinary Committee observed that "the Code of Conduct prescribed under Insolvency Professional Regulations mandates the Insolvency Professional to...

IBBI Suspends Insolvency Professional For Violation Of Code Of Conduct

Pallavi Mishra

Tags