IBBI warns senior official to be careful and diligent in future

IBBI warns senior official to be careful and diligent in future

Regulation 6(1) of the CIRP Regulations - IP shall make a public announcement immediately on his appointment as an IRP

The Disciplinary Committee of the IBBI has warned Ms Sonu Jain(the IRP for the corporate insolvency resolution process [CIRP] in the matter of M/s Jhabua Power Limited) that she should take reasonable care and be extremely careful, diligent.

The IBBI issued the SCN to the IRP based on the findings in the inspection report in respect to her role as an IRP in the CIRP of M/s Jhabua Power Limited, CD. The SCN alleged contraventions of provisions of the Insolvency and Bankruptcy Code, 2016 (Code), IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and the Code of Conduct regulation 7(2) thereof, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 (CIRP Regulations) and certain IBBI Circulars.

The IRP submitted that there was no contravention of provisions as the Valuer appointment letters that IRP had sent were subsequently cancelled by CoC later on and the RP had presently appointed another set of Valuers. The date when the Valuers were appointed the IRP was no longer part of CIRP process. So, no non-compliance was in existence.

It was further submitted that as per Circular dated 13 August 2019 to issue the appointment letter in the name of RV or RVO only if they are registered and in the present case the IRP had already issued appointment letter before the clarification was issued. Ms Jain had vide email dated 13 October 2020 submitted the email reply of the Valuers stating that appointment letter issued by Ms Sonu Jain as IRP was not approved by CoC and a fresh appointment letter was issued by Abhilash Lal, the appointed RP.The IRP had been waiting for NCLT for a revised order appointing Mr Lal and re-initiating the process.

The DC noted that the IRP had appointed LSI Engineering & Consultants Ltd and AAA Valuation Professionals LLP on 12 July 2019, who were not registered with the IBBI. However, the IRP contended that there is no contravention as the Valuer appointment letters that she had sent were subsequently cancelled by CoC later on and the RP has presently appointed a different set of Valuer. The date when the Valuers were appointed she was no longer part of CIRP.

The IRP further submitted that she had already issued appointment letter before the clarification was issued in Circular dated 13 August 2019 but it was noted that the engagement was made in contravention of the IBBI Circular No. IBBI/RV/019/2018 dated 17 October 2018 which was effective on that date. Moreover, the DC noted that the IRP had appointed LSI Engineering & Consultants Ltd and AAA Valuation Professionals LLP in contravention of the regulation and circular.

However, the appointment of Valuer was later cancelled by CoC and registered Valuers were appointed by the RP, Mr Lal as per the regulations. Hence, DC was of the view that a lenient view may be taken. It was also noted that there was no contravention with regard to publication of the public announcement.

The DC also noted that the IRP had submitted that the IRP cannot handle the entire CIRP alone and requires a team to manage the day to day operations to continue. The staffs had all been appointed by the IRP to assist her as her employees and are drawing their salaries from her and are not separate professionals as required to be appointed by CoC approval. No person involved in the assignment was related to Ms Jain's firm, and her firm is also not involved in the assignment, therefore, there is no requirement to inform CoC about it separately.

In view of this submission, the DC was of the opinion that IRP can take assistance from the back office support in managing the day to day operation of CD and no specific disclosure is required for the same. However, if the fees of the support staff are paid from CIRP cost on ratification of the CoC the same has to be duly disclosed but in the present instance the personnel were employed directly by IRP and their fees were not charged from CIRP cost. Hence, there was no requirement of informing the CoC of the relationship as a related party of the support staff. Thus, there was no contravention in this regard.