Debtor Violates Insolvency Code Duties: Fined, Education Mandate

The Debtors' Court found Mr. Kejriwal in violation of statutory requirements under the Insolvency and Bankruptcy Code, 2016. He failed to comply with his duties as Interim Resolution Professional (IRP) and Resolution Professional (RP), did not manage the corporate debtors (CDs) as going concerns, and resigned without Adjudicating Authority (AA) permission. Despite citing illness and initial non-going concern status of the CDs, he was penalized with a monetary fine equivalent to his fees in both cases. Mr. Kejriwal was also mandated to undertake an educational course before taking on any future Insolvency and Bankruptcy Code assignments.

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Issues Involved:

1. Non-compliance with statutory requirements in the CIRP of Upadan Commodities Private Limited.
2. Non-compliance with statutory requirements in the CIRP of Maa Tara Industrial Complex Pvt. Ltd.
3. Failure to manage the CDs as a going concern.
4. Resignation without prior permission from the Adjudicating Authority (AA).

Detailed Analysis:

1. Non-compliance with statutory requirements in the CIRP of Upadan Commodities Private Limited:

The AA admitted the CIRP application and appointed Mr. Kejriwal as IRP on 29th August, 2017, directing him to submit a progress report by 4th October, 2017. Mr. Kejriwal failed to file the progress report, leading the AA to order his presence and report submission by 16th October, 2017. He again failed to comply, prompting the AA to issue a notice. Mr. Kejriwal eventually filed a report on 25th October, 2017, citing illness as the reason for non-compliance. The AA noted his failure to publish the public announcement and hold the CoC meeting, directing compliance within 15 days. Despite subsequent filings, Mr. Kejriwal's actions, including his resignation on 18th December, 2017, without AA's permission, delayed the process, leading to the appointment of a new RP and eventual liquidation of the CD.

2. Non-compliance with statutory requirements in the CIRP of Maa Tara Industrial Complex Pvt. Ltd.:

The AA admitted the CIRP application and appointed Mr. Kejriwal as IRP on 8th September, 2017, directing him to submit a progress report by 10th October, 2017. Mr. Kejriwal failed to file the progress report, leading the AA to order its submission within ten days. He eventually filed a report on 25th October, 2017, citing illness as the reason for non-compliance. The AA noted his failure to publish the public announcement and hold the CoC meeting, directing compliance within 15 days. Despite subsequent filings, Mr. Kejriwal's actions, including his resignation on 18th December, 2017, without AA's permission, delayed the process, leading to the appointment of a new RP.

3. Failure to manage the CDs as a going concern:

Mr. Kejriwal did not take over the management of the CDs or seek AA's direction for non-cooperation from the CDs. He failed to run the CDs as a going concern, as required under section 20 of the Code. The DC found no evidence of his efforts to manage the CDs, noting that he wrote a few letters seeking documents but did not bring the issue to AA's notice under section 19 of the Code.

4. Resignation without prior permission from the Adjudicating Authority (AA):

Mr. Kejriwal resigned as RP in both CIRPs without prior permission from the AA, despite consenting to act as IRP and RP. He cited personal reasons for his resignation but later mentioned non-payment of fees and lack of cooperation from the CDs. The DC found his excuse for resignation without merit, as he volunteered to be appointed as RP despite knowing the circumstances.

Conclusion:

The DC concluded that Mr. Kejriwal violated several provisions of the Insolvency and Bankruptcy Code, 2016, and related regulations. He failed to discharge his responsibilities as IRP and RP, did not manage the CDs as going concerns, and resigned without AA's permission. The DC noted two mitigating factors: his illness during the relevant period and the CDs not being going concerns initially.

Order:

The DC imposed a monetary penalty equal to 100% of the total fee payable to Mr. Kejriwal as IRP and RP in the CIRPs of Upadan Commodities Private Limited and Maa Tara Industrial Complex Pvt. Ltd., to be deposited within 30 days. Additionally, Mr. Kejriwal was directed to undergo a pre-registration educational course to improve his understanding of the Code and regulations before accepting any assignment under the Insolvency and Bankruptcy Code, 2016. The order shall come into force 30 days from its issue, and copies were forwarded to relevant authorities for information.

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