2021 (3) TMI 95 - Board - Insolvency and Bankruptcy

Disciplinary Committee's Decision on Insolvency Professional's Allegations Sparks Legal Battle

The Disciplinary Committee found Mr. Arun Mohan facing serious allegations related to contraventions as an Insolvency Professional, including alleged ... Seeking grant of Bail - Functions and obligations of insolvency professionals - Demand of bribe from the complainant in connection with the claim submitted in the matter of CIRP of CD - SCN alleged contraventions of provisions of section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 (Code), Regulation 7(2)(a), (b), (f), (h) and (i) of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and clauses 1,2,3,5,9,12,14,17,24 and 28 of the Code of Conduct under regulation 7(2) thereof - HELD THAT:- Under the Code, the RP plays a key role in resolution process of the CD. IP is appointed by the Adjudicating Authority as an officer of the Court to oversee the resolution process and it is the duty of the RP to conduct CIRP with integrity, transparency and accountability in the process ensuring that all the stakeholders are kept informed, thereby ensuring an effective insolvency regime, which would in turn foster public confidence. Therefore, it becomes imperative for an IP to perform his duties with utmost care and diligence. Section 208(2) of the Code provides that every IP shall abide by the Code of conduct. It is the duty of the IP to ensure that his conduct would not undermine the credibility of the process. Therefore, while granting certificate of registration to an IP they are subjected to follow the Code of Conduct specified in the First Schedule to the IP Regulations to ascertain that the IP is a fit and proper individual. The FIR against Mr. Mohan is yet to culminate into a chargesheet, however, the submission of Mr. Mohan that before issuing of the SCN, statutory requirements of sections 217, 218, 219 and 220 of the Code were not complied with by the IBBI since no independent investigation was conducted and thus, the SCN is illegal, unlawful and void ab initio is untenable. Regulation 11 of the IP Regulations gives power to IBBI to issue SCN based on findings of an inspection, investigation or on material otherwise available on record, if the facts prima facie disclose any contravention of the Code, Rules or the Regulations thereof - The DC also notes that a criminal writ petition has also been filed by Mr. Mohan before Hon'ble High Court of Delhi against CBI praying that the Petitioner is not a public servant and, for quashing the FIR and any other proceeding emanating therefrom which was admitted vide order dated 24-2-2020. The Hon'ble High Court of Delhi, vide Order dated 3-11-2020, adjourned the matter at the request of the counsel appearing for CBI on the ground of medical emergency. Thus, the matter is next posted on 15-12-2020 and the Hon'ble Court also clarified that no further adjournments would be granted. The DC, in exercise of the powers conferred under section 220(2) of the Code read with sub-regulations (7), (8) and (10) of Regulation 11 of IBBI (Insolvency Professional) Regulations, 2016, issues the following directions: (i) Mr. Arun Mohan shall not seek or accept any process or assignment in any capacity under the Code, till he is exonerated of the charges. (ii) A copy of this order shall be forwarded to the ICSI Institute of Insolvency Professionals where Mr. Arun Mohan is enrolled as a member. (iii) A copy of this Order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal, for information. Issues Involved:1. Alleged contraventions by Mr. Arun Mohan as an Insolvency Professional (IP).2. Complaint and FIR against Mr. Arun Mohan alleging demand for a bribe.3. Compliance with statutory requirements before issuing the Show Cause Notice (SCN).4. Determination of Mr. Arun Mohan's fitness and propriety to continue as an IP.5. Legal proceedings and judicial custody of Mr. Arun Mohan.Detailed Analysis:1. Alleged Contraventions by Mr. Arun Mohan:The Insolvency and Bankruptcy Board of India (IBBI) issued a Show-Cause Notice (SCN) to Mr. Arun Mohan based on his role as an Interim Resolution Professional (IRP) in the Corporate Insolvency Resolution Process (CIRP) of FR Tech Innovations Pvt. Ltd. The SCN alleged contraventions of Section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 (Code), Regulation 7(2)(a), (b), (f), (h), and (i) of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations), and various clauses of the Code of Conduct under regulation 7(2).2. Complaint and FIR Against Mr. Arun Mohan:A complaint was filed by Mr. Nishant Bugalia alleging that Mr. Arun Mohan demanded a bribe in connection with the claim submitted during the CIRP. This led to the registration of an FIR by the CBI on 11th January 2020, and Mr. Mohan was subsequently arrested and remanded to judicial custody. The complaint and verification report prima facie disclosed the commission of an offense punishable under Section 120B of the Indian Penal Code, 1860 (IPC) read with Section 7 and Section 7A of the Prevention of Corruption Act, 1988.3. Compliance with Statutory Requirements Before Issuing SCN:Mr. Arun Mohan argued that the IBBI did not comply with statutory requirements under Sections 217, 218, 219, and 220 of the Code before issuing the SCN, as no independent investigation was conducted. However, the Disciplinary Committee (DC) found this argument untenable, noting that Regulation 11 of the IP Regulations empowers the IBBI to issue an SCN based on material available on record if the facts prima facie disclose any contravention of the Code, Rules, or Regulations.4. Determination of Fitness and Propriety:The DC emphasized the importance of an IP performing duties with integrity, transparency, and accountability. The presence of the FIR and judicial remand for alleged offenses involving a demand for a bribe raised serious questions regarding Mr. Mohan's fitness and propriety to continue as an IP. The DC noted that the IP must abide by the Code of Conduct specified in the First Schedule to the IP Regulations to ensure public confidence in the insolvency regime.5. Legal Proceedings and Judicial Custody:Mr. Mohan was granted bail by the Special Judge (PC Act) on 25th January 2020. He filed a criminal writ petition before the Hon'ble High Court of Delhi to quash the FIR and set aside the judicial custody order. The High Court admitted the petition and adjourned the matter to 15th December 2020, clarifying that no further adjournments would be granted.Order:The Disciplinary Committee, exercising powers under Section 220(2) of the Code and relevant regulations, issued the following directions:1. Mr. Arun Mohan shall not seek or accept any process or assignment under the Code until exonerated of the charges.2. A copy of the order shall be forwarded to the ICSI Institute of Insolvency Professionals where Mr. Arun Mohan is enrolled.3. A copy of the order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal for information.The show-cause notice was thus disposed of.