Every IP obliged to comply with requirements, T&C specified in bylaws of respective IPA: Section 208 (2)(e)

Every IP obliged to comply with requirements, T&C specified in bylaws of respective IPA: Section 208 (2)(e)

The IBBI disposed of the SCN without any direction against Nitesh Kumar Sinha in view of the fact that the ICSI Institute of Insolvency Professionals had already warned him for undertaking assignment as IRP after 31 Dec, 2019 sans valid AFA in the matter of Terence Alloys Private Limited

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI) has disposed of the SCN(Show Cause Notice) without any direction against Mr. Nitesh Kumar Sinha (who is a Professional Member of the ICSI Institute of Insolvency Professionals (IPA) and an IP registered with the IBBI) in view of the fact that the ICSI Institute of Insolvency Professionals had already given warning to the IP for undertaking assignment as an Interim Resolution Professional after 31 December, 2019 without holding a valid AFA in the matter of Terrence Alloys Private Limited.

The IBBI had issued the SCN to the IP for accepting the assignment as Interim Resolution Professional(IRP) in the Corporate Insolvency Resolution Process of Terrence Alloys Private Limited after 31 December, 2019 without holding a valid Authorisation for Assignment (AFA) issued to him by his IPA.

The SCN issued by IBBI alleged contraventions of Sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code);Regulations 7(2)(a), 7(2)(h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with Clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the First Schedule of the IP Regulations.

The IP submitted that he was under bonafide belief that AFA was not required as he had given his consent on 7 August, 2019 for appointment as an Interim Resolution professional in this matter and therefore, his case was covered under proviso to Regulation 7A of the IP Regulations.

According to the IP, the IPA had also passed an order wherein warning had been issued to Mr. Sinha to be extremely careful and diligent and that he should act strictly as per the law and similar action should not be repeated. Further, the IPA had directed that Mr. Sinha shall not accept any new assignment without obtaining Authorisation for Assignment.

The Disciplinary Committee (DC) of the IBBI observed that Regulation 7A was inserted in the IP Regulations vide notification dated 23 July, 2019, much before 31 December, 2019. Adequate time was given to professionals to obtain AFA from their respective IPAs

The DC further noted that the certificate of registration granted to an IP is subject to the condition that he should follow at all times the provisions of the Code and Regulations and the by-laws of the Insolvency Professional Agency of which the IP is a member and also follow the Code of Conduct specified in the First Schedule to the IP Regulations.

In the present matter it was observed that Mr. Sinha had provided his acceptance to NCLT, Delhi under Rule 9 of the Insolvency and Bankruptcy (Application to Adjudication Authority) Rules, 2016 to accept the assignment as an Interim Resolution Professional in the Corporate Insolvency Resolution Process of Terrence Alloys Private Limited on 7August, 2019 which was prior to the cut-off date, i.e., 31 December, 2019.

It was noted that the amendment to the IP Regulations incorporating the provision relating to requirement of AFA to conduct the CIRP was notified on 23 July, 2019. Mr. Sinha gave his consent/acceptance to the NCLT, Delhi on 7 August 2019 which was after the said amendment, however, the said amendment came into force on 1January, 2020, according to which an insolvency professional shall not accept or undertake an assignment after 31 December, 2019 unless he holds a valid AFA.

Mr. Sinha after giving consent knew that in all probability he would be appointed as an IRP in the matter, therefore, Mr. Sinha should have applied for and obtained an AFA even if the consent was given on 7 August, 2019. As per Section 208(2)(e) of the Code, every IP is under an obligation to comply with all terms and requirements and conditions specified in the bylaws of the insolvency professional agency of which he is a member.

The DC found that an order had been passed against Mr. Sinha on 7 September, 2020 by the Disciplinary Committee of IPA for accepting assignment as IRP after 31 December, 2019 without holding a valid AFA in the matter of Terrence Alloys Private Limited, and wherein warning had been issued to him to be extremely careful and diligent and that he should act strictly as per the law and similar action should not be repeated.