Insolvency & Bankruptcy Board imposes penalty on RP for lapses in procedures

Insolvency & Bankruptcy Board imposes penalty on RP for lapses in procedures

He has been fined Rs.5 lakhs for misconduct

The disciplinary committee of the Insolvency and Bankruptcy Board of India (IBBI), comprising a whole-time member Jayanti Prasad, has imposed a penalty on the Resolution Professional (RP) Sanjeev Ahuja.

This was due to the lapses in following the procedures on appointing non-registered valuers, not sending a notice of the meeting of the Committee of Creditors (CoC) to the operational creditors (OCs), and not seeking the COC's approval on the insurance cost.

The committee found that the Corporate Insolvency Resolution Process (CIRP) Regulations, the Board Circular No. IBBI/RV/019/2018, and the Code of Conduct was violated as of the date of execution of the February 2019 engagement letter.

While, both the valuers appointed were not registered, it is expected of the RP to independently and objectively conduct the CIRP on taking the assignment.

The Board observed, "The OCs in the CIRP should have been given the notice to attend the CoC meetings as their aggregate claim was 15 percent of the total claims against the CD-1."

Buying an insurance policy and including the expenditure in the CIRP cost without the approval of the CoC for expenses to be incurred, shall be fixed by the CoC. Thus, approval is required for inclusion in IRPC. But the RP did not bring the expenses to the knowledge of the CoC in any of its meetings.

The committee thus ruled that Ahuja contravened the CIRP Regulations. While imposing a fine on him, the committee directed him to be more cautious in the future.