IBBI disposes of SCN to IP as disciplinary action already taken for accepting assignment sans valid AFA

IBBI disposes of SCN to IP as disciplinary action already taken for accepting assignment sans valid AFA

Insolvency Professional S Rajagopal had contravened the code of conduct under sections 208(2)(a) and(e) of the Code and regulations 7(2)(a) and (h) and 7A of the IP Regulations read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the FirstSchedule of the IP Regulations in accepting the assignment as IRP in the CIRP of Coastal Energy Private Limited after 31 December 2019 without holding a valid AFA from the IPA.

In the matter of Mr. S Rajagopal, Insolvency Professional (IP) under Regulation 11 of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016,the Disciplinary Committee of the IBBI has disposed of the SCN(Show Cause Notice) without any direction against the IP since the ICSI Institute of Insolvency Professionals had already taken disciplinary action against the IP for accepting the assignment as IRP after 31 December, 2019 without holding a valid Authorisation for Assignment (AFA) in the matter of Coastal Energy Private Limited and had issued a warning.

Herein, the IBBI had issued on 28 August, 2020 the SCN to Mr. S Rajagopal for accepting the assignment as the Interim Resolution Professional (IRP) in the Corporate Insolvency Resolution Process (CIRP) of Coastal Energy Private Limited after 31 December 2019 without holding a valid Authorisation for Assignment (AFA).

The SCN issued by the IBBI alleged contraventions of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code);and 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 for accepting the assignment of the IRP in the CIRP of Coastal Energy Private Limited after 31 December 2019 for which public announcement was made on 8 January 2020 without holding a valid AFA from the IPA.

The IP submitted that the matter is sub-judice as it is the subject matter before the Hon'ble Supreme Court in Diary No. 4440/2020 and in WP(C) No. 9508/2019 before the Hon'ble Delhi High Court. The IP also stated that he had accepted the assignment and provided his consent in.

According to the IP, there was lack of clarity in the Regulations and ICSI IIP By-Laws, therefore the benefit of doubt for not seeking AFA should have been given. He also stated that the IPA had issued the show cause notice and an order had also been passed wherein he has been warned to be extremely careful, diligent, strictly act as per the law and that similar action should not be repeated.

The DC observed that Regulation 7A of the IP Regulations requires for any IP to have an AFA before undertaking any assignment after 31 December 2019.

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

In the present matter, it was observed that the IP had provided his consent to accept the assignment in Form-2 to Indian Overseas Bank on 1 March, 2019 prior to the amendment made to the IP Regulations for the CIRP of Coastal Energy Private Limited, before 31 December, 2019. However, it was also observed that the date of commencement of the CIRP was6 January, 2020 and Regulation 7A of the IP Regulations clearly and unambiguously states that an insolvency professional shall not accept or undertake an assignment after 31 December, 2019 unless he holds a valid AFA.

As per the DC, the credibility of the processes under the Code depends upon the observance of the Code of conduct by the IRP/RP/Liquidator during the process. Section 208(2) of the Code provides that every IP shall take reasonable care and diligence while performing his duties and to perform his functions in such manner and subject to such conditions as may be specified.

Further, the Code of Conduct specified in the First Schedule of the IP Regulations enumerates a list of code of conduct for insolvency professionals including maintaining of integrity and professional competence for rendering professional service, representation of correct facts and correcting misapprehension, not to conceal material information and not to act with mala fide or with negligence

So, in consequence, he had contravened the code of conduct under sections 208(2)(a) and(e) of the Code and regulations 7(2)(a) and (h), 7A of the 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 DC also found that the SCN dated 24 July, 2020 was issued by the IPA and the order had been passed against the IP 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 Coastal Energy Private Limited which warned him to be extremely careful, diligent, strictly act as per the law and that similar action not be repeated.