Court rules in favor of Insolvency and Bankruptcy Board in de-recognition case. The court ruled in favor of the Insolvency and Bankruptcy Board of India (Board) in the case concerning the de-recognition of Insolvency Professional ...
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Court rules in favor of Insolvency and Bankruptcy Board in de-recognition case.
The court ruled in favor of the Insolvency and Bankruptcy Board of India (Board) in the case concerning the de-recognition of Insolvency Professional Entities (IPEs) for non-compliance with regulation 12 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. Thirteen IPEs were de-recognized for failing to meet the specified requirements, with the court directing them to surrender their certificates of recognition and notify the Registrar of Companies about their de-recognition. The judgment emphasized that despite de-recognition, the IPEs remain liable for any actions or omissions of their partners or directors during their tenure as insolvency professionals.
Issues: De-recognition of Insolvency Professional Entities under regulation 14 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016
Analysis: 1. The judgment revolves around the de-recognition of Insolvency Professional Entities (IPEs) by the Insolvency and Bankruptcy Board of India (Board) under regulation 14 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. The Board granted recognition to IPEs subject to the condition that they must continuously satisfy the requirements under regulation 12 of the Regulations.
2. The Regulations were amended by the Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment) Regulations, 2018, setting deadlines for compliance by IPEs recognized as of 1st April, 2018. The amendments required compliance with specific clauses of sub-regulation (1) of regulation 12 by certain dates. The Board issued circulars advising IPEs to ensure compliance, failing which de-recognition could occur as per regulation 14.
3. Subsequently, the Board requested status updates on compliance from IPEs and informed that non-response by a specified date would lead to presumed non-compliance and de-recognition. Ten IPEs sought extensions, which were not granted due to the absence of provisions for relaxation or extension in the Regulations. Consequently, these ten IPEs were de-recognized for non-compliance with regulation 12.
4. Two IPEs did not respond to compliance inquiries, leading to their de-recognition as well. Additionally, one IPE confirmed its non-compliance. The Board de-recognized these IPEs for failing to meet the stipulated requirements under regulation 12, making a total of thirteen IPEs de-recognized.
5. The judgment directed the de-recognized IPEs to surrender their original certificates of recognition to the Board and inform the Registrar of Companies about their de-recognition. Despite de-recognition, the IPEs remain jointly and severally liable for any acts or omissions of their partners or directors as insolvency professionals during their partnership or directorship, as per sub-regulation (3) of regulation 13 of the Regulations.
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