Insolvency Professional reprimanded for violating regulations, emphasizes adherence to rules

The Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India (IBBI) found an Insolvency Professional (IP) in violation of regulations for accepting an assignment as a Liquidator without a valid Authorization for Assignment (AFA) from his Insolvency Professional Agency (IPA) after the specified date. Despite the IP's argument of a technical error in the AFA process, the DC deemed his negligence in meeting the basic requirement for the assignment. As the IPA had already taken disciplinary action against the IP, the DC disposed of the Show Cause Notice without further direction, emphasizing the importance of adhering to regulations to uphold the credibility of insolvency processes.

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Issues:
Violation of Insolvency and Bankruptcy Code regulations by an Insolvency Professional regarding acceptance of assignment without valid authorization.

Analysis:
The Insolvency and Bankruptcy Board of India (IBBI) issued a Show Cause Notice (SCN) to an Insolvency Professional (IP) for accepting an assignment as the Liquidator without a valid Authorisation for Assignment (AFA) from his Insolvency Professional Agency (IPA) after 31st December, 2019. The IP was appointed as the resolution professional (RP) in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor (CD), and the decision for liquidation was made by the Committee of Creditors (CoC) on 19th December, 2019. The IP submitted a reply to the SCN and appeared for a personal e-hearing before the Disciplinary Committee (DC) of the IBBI. The IP argued that he had submitted the AFA application before the deadline but due to a technical error, it was not completed. However, the DC found his contention unjustified as he did not complete all the required steps in the AFA process, leading to negligence in fulfilling the basic requirement for the assignment.

The DC analyzed the relevant regulations, including Regulation 7A of the Insolvency Professionals Regulations, which mandates that an IP must hold a valid AFA before undertaking any assignment after 31st December, 2019. The DC noted that the IP did not have a valid AFA when he consented to act as the Liquidator, which was after the specified date. The DC emphasized the importance of adhering to the Code of Conduct and regulations to maintain the credibility of insolvency processes. Additionally, the IP's failure to complete the AFA process as per the prescribed steps was considered a reflection of negligence towards professional responsibilities.

The DC observed that the IPA had already taken disciplinary action against the IP for the same violation and imposed a penalty. Given the disciplinary action by the Insolvency Professional Agency, the DC, under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, disposed of the SCN without any further direction against the IP. The order was to be forwarded to the IPA and the National Company Law Tribunal for information. The show cause notice was consequently resolved, considering the disciplinary action already taken by the IPA against the IP.

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