Insolvency professional's suspension reduced to time served after clearing most misconduct charges

Delhi HC partially allowed a petition challenging a two-year suspension of an insolvency professional's registration. The court found the petitioner not guilty of imposing non-refundable participation fees on auction bidders, as relevant regulations were enacted after the auction occurred. The court also cleared charges regarding appointment of unregistered valuers, finding the individuals were registered in their personal capacity. However, the court upheld the charge concerning appointment of BDO Restructuring Advisory LLP, where the petitioner was a partner, finding this constituted misconduct to circumvent fee regulations. The suspension was reduced to time already served (20 months) instead of the original two years.

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Issues Involved:
1. Influencing Registered Valuer to change valuation of assets.
2. Prescribing non-refundable participation fee.
3. Appointment of unregistered valuers.
4. Paying excess fee to a support service called BRAL, in which the Petitioner was a partner.

Summary:

1. Influencing Registered Valuer to change valuation of assets:
The IBBI took a lenient view and did not proceed further with the contravention, closing the charge against the Petitioner with a word of caution.

2. Prescribing non-refundable participation fee:
The IBBI held that seeking non-refundable participation fees from prospective bidders defeats the spirit of the IBC, which aims at maximization of value of assets of the Corporate Debtor. The Board found that such conditions dissuade prospective bidders, thus contravening regulation 36A (4) (d) and regulation 36B (4) of the CIRP Regulations and clauses 13 and 14 of the Code of Conduct for Insolvency Professionals Regulations. However, the Court accepted the Petitioner's contention that the proviso to Schedule I-(1) (3) of the Liquidation Regulations, which prohibits non-refundable fees, was not in force during the auction process. Therefore, the Petitioner was not found guilty of this charge.

3. Appointment of unregistered valuers:
The IBBI found that the Petitioner appointed two registered valuers, but the bills were made in the name of RBSA Valuation Advisors LLP, which was not a registered valuer at that time. The Petitioner was found in contravention of IBBI Circular No. IBBI/RV/019/2018 and Regulation 7 (1) read with Regulation 35 (2) of Liquidation Regulations. The Court, however, noted that the valuation reports were signed by registered valuers and no extra fees were paid for outsourcing. Thus, the Court did not find any serious misconduct by the Petitioner.

4. Paying excess fee to BRAL:
The IBBI found that the Petitioner, being a partner in BRAL, engaged the firm for support services and paid it more fees than what was paid to the Petitioner as Liquidator. This was seen as a calculated attempt to circumvent Regulation 4 of the Liquidation Regulations. The Court upheld the IBBI's finding of misconduct, noting that the terms of appointment of BRAL were vague and the fees exceeded that of the Liquidator, which is contrary to the intent of the liquidation process.

Conclusion:
The Court upheld the IBBI's decision to suspend the Petitioner's registration but modified the suspension period from two years to the period already undergone, noting that the Petitioner had already undergone 20 months of suspension. The Writ Petition was disposed of accordingly.

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