TaxTMI 
TaxTMI 
2018 (8) TMI 1616
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....n the matter of JEKPL Private Limited [Company Petition No. 24/Ald/2017] for violation of the provision of section 5 (13) of the Insolvency and Bankruptcy Code, 2016 (Code) read with regulation 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Board referred the SCN, response of Mr. Venkatasubramanian to the SCN dated 25th January, 2018 and other material available on record to the Disciplinary Committee (DC). 1.2 The DC notes that the corporate applicant, JEKPL Private Limited has filed an application under section 10 of the Code before the Adjudicating Authority (AA) (Allahabad) for initiating the corporate insolvency resolution process (CIRP) proposing Mr. Dinkar T. Venkatasubramanian's name as an Insolvency Professional. The AA by the order dated 17th March, 2017 admitted the case and appointed Mr. Venkatasubramanian as the IRP. On 19th April, 2017, the Committee of Creditors (CoC) resolved to replace Mr. Venkatasubramanian and appoint another insolvency professional to act as the Resolution Professional (RP) and the same was confirmed by the AA vide order dated 1st June, 2017. 1.3 In the....
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....EKPL Private Limited based on the material available on the record as to why appropriate action, as permissible under the Code and the relevant regulations should not be initiated for violation of section 5 (13) of the Code and regulation 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations, 2016. 1.7 Mr. Venkatasubramanian responded to the SCN vide letter dated 25th January, 2018. Further, Mr. Venkatasubramanian appeared for personal hearing before the DC on 27th March 2018. He has submitted further written submission vide letter dated 24th April, 2018. 2. Show Cause Notice The DC notes from the SCN, as under: (a) During his tenure as an IRP, Mr. Venkatasubramanian entered into a "Fee Acknowledgement Letter" dated 17th March, 2017, with Ernst & Young LLP to "perform certain services to assist him in connection with CIRP of the Payer". Further, under clause 4 of the said agreement, Mr. Venkatasubramanian had authorised Ernst & Young LLP to raise invoices on payer for his "fees and other out of pocket expenses for work undertaken by him in connection with Corporate Insolvency Resolution Process (....
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....ited liability partnership to register as insolvency professionals, and by implication therefore, acknowledge, that such partner would be bound by the limited liability partnership agreement with his/her partners and governed by the LLP Act, he considered it as a reasonable view to take that the said fee arrangement would be in compliance of the LLP Act and the Code. (e) Until the Circular dated 16th January, 2018 was issued by the Board, sub-section (13) of section 5 and regulations 33 and 34 could not be read to be prescriptive or restrict resolution professional that are partners in a limited liability partnership or insolvency professionals entity from raising/receiving fee in the name of the limited liability partnership or insolvency professionals entity, as the case may be. (f) He was part of Ernst & Young LLP when selected by the financial creditors of JEKPL for appointment as IRP/RP. As he was expected to use the expertise, skills and time of the employees of EY in discharging his functions and duties as Interim Resolution Profession of JEKPL, these employees required to be compensated. Therefore, the following commercial arrangement was entered into betw....
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....mined the submissions and material available on record brevatim et seriatim, and finds as under: (a) The IP, either as an interim resolution professional or as resolution professional, exercises powers of the Board of Directors of the corporate debtor undergoing CIRP. The specific duties and responsibilities of an IP during CIRP are detailed under sections 25 and 28 of the Code and regulations made thereunder. Sections 206 and 207 of the Code read with the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 provides that an individual can only act as IRP/RP. Mr. Venkatasubramanian was appointed as IRP/RP in his individual capacity not as partner of LLP. Section 3(19) of the Code further defines an insolvency professional as, "a person enrolled under section 206 with an insolvency professional agency as its member and registered with the Board as an insolvency professional under section 207 ". (b) The Bills towards the fees of the IRP/RP for the services rendered by Mr. Venkatasubramanian as an IRP/RP have been raised by Ernst & Young LLP and payments towards settlement of said bills have also been made to Ernst & Young LLP. This i....
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.... provisions of the LLP Act, 2008, when the Insolvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 expressly provide for such IRP/RP fee to be part of the Insolvency Resolution Process Cost under section 5 (13) (b) of the Code. (h) Mr. Venkatasubramanian stated that the LLP Agreement of Ernst & Young LLP does not permit partners to earn fee outside of Ernst & Young LLP Agreement, but an LLP agreement is not supposed to circumvent and bypass the express provision of the Code. (i) Mr. Venkatasubramanian averred that he was expected to use the expertise, skills and time of the employees of EY in discharging my functions and duties as Interim Resolution Profession of JEKPL, these employees required to be compensated. But such expertise, skills and time of the employees cannot replace the role assigned to IRP/RP. (j) The Board issued a circular dated 16th January, 2018 regarding fees payable to an insolvency professional and to other professionals appointed by an insolvency professional which, inter alia, provides that: (i) 'the fees payable to any ....
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....en by him in connection with Corporate Insolvency Resolution Process (CIRP)" in respect of JEKPL Private Limited. Hence, he violated section 5(13) of the Code read with regulation 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 along with the items 1 and 5 of the Code of Conduct specified in the First Schedule to the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. (ii) Mr. Venkatasubramanian himself directed for the settlement of the bills so raised by Ernst and Young LLP as being the IRP/RP of JEKPL Private Limited thus contravened item 9 and 25 of the Code of Conduct for Insolvency Professionals. (iii) He allowed Ernst and Young LLP to raise invoices for his professional fee, thereby, treating the profession of Insolvency Professionals as employment under an entity. He contravened section 208 of the Code. 6. Order 6.1 Mr. Venkatasubramanian has violated sections 5(13) and 208 of the Code read with regulations 33 and 34 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ....