Role of IP is vital to the efficient operation of the Insolvency and Bankruptcy resolution

Role of IP is vital to the efficient operation of the Insolvency and Bankruptcy resolution

The Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board Of India (IBBI) has disposed of the SCN (Show Cause Notice) without any directions to Mr. Vijaykumar V Iyer who was appointed as an Interim Resolution Professional (IRP) and/ or resolution professional (RP) in Corporate Insolvency Resolution Process (CIRP) of Murli Industries Ltd. (CD 1)

This was done vide order passed by Hon'ble NCLT, Mumbai Bench; in the CIRP of Binani Cements Ltd. (CD 2) vide order passed by Hon'ble NCLT, Kolkata Bench and in the CIRP of Bhushan Steels Ltd. (CD 3) vide order passed by Hon'ble NCLT, New Delhi, Principal Bench. He was confirmed by the respective CoCs of CD 1, CD 2 and CD 3 as RP.

The IA (Inspecting Authority), in its report had observed that Mr. Iyer had violated certain provisions of the Insolvency and Bankruptcy Code, 2016 (Code) and IBBI (Insolvency Resolution Process for Corporate Persons) regulations, 2016 (CIRP Regulations) and IBBI (Insolvency Professionals) Regulations, 2016.

The RP submitted that the SCN did not include any finding or observation regarding any mala fide intent or finding or observation on the part of Mr. Iyer having made any undue, illegal or personal gain.It was also stated that the SCN, being in the nature of legal proceeding, ought not to have been initiated and was liable to be disposed of in favour of Mr. Iyer, in view of Section 233 of the Code.

The DC observed from the submission of Mr. Iyer that in this matter, financial creditors had 100% recovery of admitted claims plus interest. The CIRP Cost remaining to be paid at the time of implementation of the Resolution Plan was not deducted from the amounts payable to such creditors and was to the account of the Resolution Applicant.

The June Circular was issued after approval of fee of Argus Partners by the CoC. Further, in this matter, no invoices of Argus Partners which related to the period post the June Circular were paid after the issuance of such circular and Mr. Iyer complied in accordance with the June Circular after its issuance. Hence, DC was of the view that his conduct reflected his bonafide intent and good faith, and therefore, DC took a lenient view.

The DC noted that in the CIRP of CD 1, CD 2 and CD 3, the alleged contraventions in the SCN pertained to the period before the issue of clarifications by IBBI vide January and June Circulars of 2018. Further, after issuance of the Circulars, Mr. Iyer acted in compliance of the Circulars in all the aforesaid CIRPs in which there had been resolutions.

The DC further noted that in 2017, implementation of the Code was in the nascent stage and the legal jurisprudence of this new insolvency regime was evolving. Every matter for the IRPs/ RPs was a learning curve for them. In this backdrop, DC was of the view that Mr. Iyer should not be held liable for the alleged contraventions in the matter of CIRP of CD 1, CD 2 and CD 3.

It was also opined that under the provisions of the Code, an IP is recognized as an important component of the ecosystem who has been entrusted with a wide range of functions for the conduct of CIRP. The credibility of the whole process under the Code hinges upon the conduct and professional competence of IP who is required to observe the code of conduct.

The IP Regulations provides in the First Schedule the Code of Conduct to be followed by the IPs during the processes. Code of Conduct is a charter of professional norms which establishes the credibility of the process. During the course of CIRP, an IP is expected to act independently and perform his duties and functions with utmost care and caution.