7 Aug 2019 6:00 AM GMT
The First Appellate Authority (FAA) of the Insolvency and Bankruptcy Board of India has held against disclosure of names of insolvency professionals (IPs) facing disciplinary proceedings saying the same would impede the investigation process due to unwarranted public attention and is likely to harm practice of most IPs who are established professionals like Chartered Accountants. The FAA...
The First Appellate Authority (FAA) of the Insolvency and Bankruptcy Board of India has held against disclosure of names of insolvency professionals (IPs) facing disciplinary proceedings saying the same would impede the investigation process due to unwarranted public attention and is likely to harm practice of most IPs who are established professionals like Chartered Accountants.
The FAA also held that there are sufficient checks and balances in place to ensure that IPs facing disciplinary proceedings are not appointed as resolution professionals.
"Disciplinary proceedings before the Board are quasi-judicial in nature and any disclosure of the names of IPs against whom such proceedings are ongoing would impede the investigation process due to unwarranted public attention. Moreover, such processes can be at various stages. Mere issuance of a show cause notice to an IP does not imply that such person is guilty of any misconduct. It is merely seeking an explanation from the IP of any aberration in the established process. If, there is any gap in the explanation provided by the IP, then further action is taken by the Board.
"Revealing the names of such IPs, is likely to harm their practice as most of the IPs are established professionals like Chartered Accountants, Company Secretaries, Cost Accountants, Advocates and managerial experts.Competition may get advantage of the same. Further, the concerns of the appellant haveal ready been taken care of by sufficient checks provided by the Board…. In view of this, the request of the appellant to disclose the list of insolvency professionals against whom disciplinary proceeding is under process cannot be accepted and accordingly, the appeal is disposed of," held Dr Navrang Saini, Whole Time Member and First Appellate Authority of IBBI.
He was hearing an appeal filed by advocate NipunSinghviagainst the order of CPIO, IBBI holding that information about insolvency professionals who have been issued show cause notice for disciplinary proceedings is exempt from disclosure under section 8(1)(h) of the RTI Act which exempts an information which would impede the process of investigation or apprehension or prosecution of offenders.
Singhvi had sought information about insolvency professionals who have been issued show cause notice for disciplinary proceedings as clarified in circular issued by the IBBI on April 23, 2018 wherein the Board had said that IBC envisages that an insolvency professional may be appointed as interim resolution professional, resolution professional or liquidator or a bankruptcy trustee if no disciplinary proceeding is pending against him.
In appeal, Singhvi contended that the reply of CPIO is prejudicial to the interest of the stakeholders as it is necessary to conduct a background check of the IPs at the time of appointment and if such information is not provided to the general public, it will harm the interest of the legal process and the interest of the parties concerned.
After hearing the appeal, the FAA held, "Under the Code, it is the Adjudicating Authority (AA)( which appoints the IRP underSection 16 of the Code after ascertaining that no disciplinary proceeding is pending against them".
Checks and Balances
"To prevent IPs with disciplinary proceedings pending against them from being appointed as IRP, the IP proposed to be appointed as IRP has to give a consent in Form 2 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to the AA wherein, she has to certify that no disciplinary proceedings are pending against her with the Board. Further, the Board vide the Insolvency Professionals to act as Interim Resolution Professionals and Liquidators (Recommendation) Guidelines, 2019 dated 14th May, 2019 has prepared a common panel of IPs (valid for six months) who are clear from the disciplinary angle, for appointment as IRPs and Liquidators and shares the same with the Adjudicating Authority (AA). The AA may pick up any name from the panel for appointment of IRP or Liquidator. The panel has Bench wise list of IPs based on the registered office of the IP. It will have a validity of six months and a new Panel will replace the earlier Panel every six months. In addition to the above, the Board also keeps the updated list of IPs on its website (login, password protected) and remark is given against the name of IP's against whom disciplinary proceedings is pending. The respective bench of the AA, before appointing any IP as IRP can satisfy itself that no disciplinary proceedings are pending against the proposed IP. Thus, sufficient checks have been built into the process to prevent such IPs from being appointed as IRPs.
Commenting on the development, Advocate Vishal J Dave, an expert in the field said, "The First Appellate Authority has erred in appreciating that the Form 2 (Consent by Proposed) is given at the time of filing of application by the creditor but the same is not checked again at the time of admission. Recently also, it has come to notice in a matter wherein IBBI held that the IP was not holding the registration even then he was appointed by NCLT because his registration had expired. It is clear that the NCLT works on the basis of documents supplied at the time of filing of application, this non-disclosure shall hurt the basic transparency principle behind the IBC".
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