Insolvency Professional Guilty of Misconduct for Accepting Assignment Without Authorization

The Disciplinary Committee found an Insolvency Professional guilty of Professional Misconduct for accepting a Liquidator assignment without a valid Authorisation for Assignment (AFA). Despite the IP's argument that AFA provisions did not apply, the Committee determined that the IP's failure to obtain AFA constituted a violation of regulations. Emphasizing regulatory compliance, the Committee highlighted the importance of adhering to the Code of Conduct specified in the Insolvency Professional Regulations. Consequently, the Committee disposed of the Show Cause Notice without specific directions, imposing penalties for the misconduct and forwarding the order for information to relevant authorities.

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Issues:
- Alleged contraventions of sections 208(2)(a) & (e) of the Insolvency and Bankruptcy Code, 2016, and regulations 7(2)(a) & (h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 by an Insolvency Professional (IP) for accepting an assignment without a valid Authorisation for Assignment (AFA).

Analysis:

Issue 1: Alleged Contraventions
The Insolvency and Bankruptcy Board of India (IBBI) issued a Show Cause Notice (SCN) to an Insolvency Professional (IP) for accepting an assignment without a valid AFA, alleging contraventions of relevant sections of the Code and regulations. The IP, in response, argued that the AFA provisions did not apply as the assignment was a continuation of his previous role. However, the Disciplinary Committee (DC) found that Regulation 7A of the IP regulations mandates IPs to hold a valid AFA for assignments after 31st December 2019. The DC noted that the IP's failure to obtain AFA despite adequate time given constituted a violation.

Issue 2: Regulatory Compliance
The DC emphasized the importance of regulatory compliance, citing Section 208 of the Code which obligates IPs to follow the code of conduct and comply with byelaws. The DC highlighted that the IP's registration was subject to adherence to the Code, Regulations, and bye-laws of the Insolvency Professional Agency. The DC underlined that the IP's actions contravened the Code of Conduct specified in the IP Regulations.

Issue 3: Disciplinary Action
The DC found the IP guilty of Professional Misconduct for accepting the assignment as a Liquidator without a valid AFA. The IPA's Disciplinary Committee had already imposed a penalty on the IP for this misconduct. Consequently, the DC, under Regulation 11 of the IBBI Regulations, disposed of the SCN without issuing any specific direction. The order was forwarded to the IPA and the National Company Law Tribunal for information.

In conclusion, the judgment underscores the significance of regulatory compliance for Insolvency Professionals and highlights the consequences of failing to adhere to the prescribed regulations, ultimately resulting in disciplinary action and penalties.

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