Insolvency Professional Penalized for Misconduct in Assignment Authorization

The Disciplinary Committee found an Insolvency Professional guilty of Professional Misconduct for accepting an assignment without a valid Authorisation for Assignment (AFA). The Committee imposed a penalty in accordance with Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016. Despite the IP's argument that the AFA provision was not applicable for ratification as Resolution Professional, the DC held that the IP should have applied for the AFA, especially after the regulation came into force. The DC disposed of the Show Cause Notice without further direction, forwarding the order to relevant authorities for information.

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Issues:
Violation of regulations by an Insolvency Professional regarding acceptance of assignment without a valid Authorisation for Assignment (AFA).

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 Resolution Professional (RP) in a corporate insolvency resolution process (CIRP) after 31st December, 2019 without a valid AFA. The IP submitted a reply stating that the acceptance was given before the relevant regulation came into force, and he had applied for the AFA, which was pending. The Disciplinary Committee (DC) considered the SCN, reply, and relevant provisions of the Code and regulations.

The DC found that the regulations clearly required an IP to have a valid AFA before undertaking any assignment after 31st December, 2019. The IP's failure to obtain the AFA was a violation of the Code and regulations. The DC noted that the IP's certificate of registration was subject to following the Code, regulations, and bye-laws of the Insolvency Professional Agency. The credibility of the insolvency processes depends on the adherence to the Code of Conduct by the RP.

Despite the IP's argument that he believed the AFA provision was not applicable for ratification as RP, the DC held that the IP should have applied for the AFA, especially after the regulation came into force. The DC also considered that a penalty had been imposed on the IP by the Disciplinary Committee of the IPA for the same violation. Therefore, the DC disposed of the SCN without any further direction, forwarding a copy of the order to the IPA and the Registrar of the NCLT for information.

In conclusion, the DC found the IP guilty of Professional Misconduct for accepting the assignment without a valid AFA and imposed a penalty. The decision was made in accordance with the powers conferred under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016.

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