TaxTMI 
TaxTMI 
2019 (4) TMI 1206
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate Ltd., (b) Global Proserv Ltd., and (c) S. N. Plumbing Private Ltd. The SCN alleged contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), the IBBI (Insolvency Professionals) Regulations, 2016 (IPR) and the Code of Conduct under regulation 7(2) thereof, and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Mr. Ruia replied to the SCN vide letter dated 8th August, 2018. 1.3 The Board referred the SCN, response of Mr. Ruia to the SCN and other material available on record to the Disciplinary Committee (DC) for disposal of the SCN in accordance with the Code and regulations made thereunder. Mr. Ruia availed an opportunity of personal hearing before the DC on 15th October, 2018. Consideration of SCN 2. The DC has considered the SCN, the oral and written submissions of Mr. Ruia thereon and other material available on record and proceeds to dispose of the SCN. 2.1 Fee for Services as IRP / RP 2.1.1 In the CIRP of Sanjay Strips Private Ltd.: 2.1.1.1 It has been alleged as under: (a) The Hon'ble Adjudicating Authority (AA), vide order dated 3rd November, 2017, expressed concern on the amount of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is the discretion of the Professional considering the volume of work.' (c) After taking over as IRP, he found that the CD has some more creditors and hence he sought approval of CoC for a higher fee. (d) The term sheet provided for Rs. 2 lakh as advance towards reimbursement of expenses on travel and hotel stay. It did not limit the amount of expenditure. Further, he claimed reimbursement of Rs. 2.25 lakh only, not Rs. 3.25 lakh, which is a typographical error. 2.1.1.3 The DC finds as under: (a) The submission of Mr. Ruia, as at 2.1.1.2(d) above, appears satisfactory. The revised term sheet provides for an advance of Rs. 2 lakh towards reimbursement of certain expenses and hence claim of Rs. 2.25 lakh is not inconsistent with the term sheet. (b) However, other submissions by Mr. Ruia do not appear convincing. He has very emphatically claimed that it is his discretion to a charge a fee. Discretion is opposite of indiscretion and does not mean action without rhyme and reason. It means responsible conduct, as a reasonably prudent person would, under similar facts and circumstances. It is difficult to appreciate that any amount of fee can be cha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al of fee by the AA and displayed professional incompetence by using stale information for decision making. Therefore, Mr. Ruia contravened the provisions of sections 208(2)(a) and (e) of the Code, regulation 33 of the CIRPR and regulations 7 (2) (a) and (h) of the IPR read with clauses 1, 2, 5, 9, 10, 12, 14, 16, 25 and 27 of the Code of Conduct thereof. 2.1.2 In the CIRP of S. N. Plumbing Private Ltd., the Board noted that Mr. Ruia contracted a consolidated professional fee of Rs. 50 lakh plus out-of-pocket expenses, with the applicant who had a claim of Rs. 13.76 lakh only. It was alleged that this defied logic and indicated intention of Mr. Ruia to inflate expenses. Mr. Ruia has made a bald statement that the amount of fee was clear reflection of work that he has to undertake as an IRP. The analysis in Para 2.1.1.3 above equally applies in case of this CIRP also. The DC is, therefore, of the view that Mr. Ruia contravened provisions of sections 20, 208(2)(a) and (e) of the Code, regulation 33 of the CIRPR and regulations 7 (2) (a) and (h) of the IPR read with clauses 1, 2, 5, 9, 10, 12, 14, 16, 25 and 27 of the Code of Conduct thereof. 2.2 Appointment as RP 2.2.1 In th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ide the term sheet to the Inspection Authority for which an allegation of non-co-operation has been made. However, as observed by the DC in Para 2.3.1 below, Mr. Ruia did similar mischief regarding his appointment as RP, as explained in Para 2.2.1 above and, therefore, contravened the provisions of sections 22, 208(2)(a) and (e) of the Code, regulations 33 and 34 of the CIRPR, regulations 7 (2) (a) and (h) of the IPR read with clauses 1, 2, 5, 9, 10, 12, 14 and 27 of the Code of Conduct thereof. 2.3 Non Co-operation 2.3.1 In the CIRP of Global Proserv Ltd.: 2.3.1.1 The Inspecting Authority sought a copy of the term sheet in respect of Global Proserv Ltd. Mr. Ruia did not provide the same. Therefore, the Board held the view that Mr. Ruia did not co-operate with the inspection. 2.3.1.2 Mr. Ruia has admitted that he failed to submit it. He has now enclosed a copy of the term sheet. 2.3.1.3 The DC finds as under: (a) Admittedly, Mr. Ruia failed to provide material called upon by the Inspecting Authority. This amounts to non-cooperation with the Authority and hindrance to the work of the Board. (b) The SCN alleges irregularity in respect of two terms, na....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ide e-mail dated 4th May, 2018, had informed the Inspecting Authority that he had appointed other professionals. However, he did not provide expenses incurred on such professionals. Therefore, the Board took the view that Mr. Ruia did not provide complete information. Mr. Ruia has submitted that he had appointed the professionals in the CIRP of Sanjay Strips Private Ltd. However, as he was not confirmed as RP, he did not take services from professionals and hence no payment was made to them. As regards CIRP of Global Proserv Ltd., he has submitted that he had paid a fee of Rs. 25,000 for services of professionals. However, it was inadvertently included in the legal fee, in stead of fee to professionals. As regards S. N. Plumbing Private Ltd., he has submitted that the fee was included in the total cost. The DC does not wish to dwell too much upon this and would prefer to grant benefit of doubt to Mr. Ruia. This allegation, however, could have been avoided if Mr. Ruia had provided complete information at the stage of inspection and classified and reported costs appropriately, which reflects his professionalism. 2.4 Appointment of IRP 2.4.1 Mr. Ruia, as IRP of S. N. Plumbing Pv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....15 CDs. Further, as IRP / RP of these 15 CDs, they would initiate CIRP of their debtors and appoint themselves as IRP / RP of those debtor and so on. When relationship triumphs over merits in professional matters, there is no place for independence, integrity and impartiality. A professional must be not only be impartial, but also appear to be impartial. Does a professional appear impartial if he gives 15 professional assignments at one go to his spouse? Any conduct, whether explicitly prohibited in the law or not, is unfair if it impinges on independence, integrity and impartiality of an IP or inconsistent with the reputation of the profession. (b) Conducting CIRP is a serious responsibility of an IP. Section 20 of the Code obliges the IRP to make every endeavour to protect and preserve the value of the property of the CD and manage the operations of the CD as a going concern. Section 23 of the Code mandates the RP to conduct the entire CIRP and manage the operations of the CD during the CIRP period. It is inconceivable that an individual (Ms. Ruia) who is a novice in the profession and has not handled a single CIRP till date, would act as IRP / RP in 15 CIRPs simultaneou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fee was submitted, the CoC would have either approved or rejected it. Therefore, the Board took a view that Mr. Ruia wasted resources and frustrated timelines for CIRP. Mr. Ruia has submitted that there was no precedent at the relevant time, and he felt it better to have debates in the CoC on two different aspects of a proposal. The DC does not wish to get into merits of this allegation. It would leave this to market practice, though it would not encourage breaking a substantive resolution into many resolutions which has the potential to create indecision, delay and wastage of resources. 2.6 Liquidation 2.6.1 It has been alleged that in the CIRP of Sanjay Strips Ltd., Mr. Ruia suggested liquidation in the first meeting of the CoC while ruling out an attempt for resolution. In response, Mr. Ruia has submitted that the South Indian Bank, the largest financial creditor, vide email dated 19th January, 2018, had suggested that the only way forward was liquidation. The financial creditors resolved in favour of liquidation in the reconvened 1st meeting of the CoC and he had no role therein. The DC, however, finds that Mr. Ruia issued notice on 12th January, 2018 scheduling the recon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of Mr. Sanjay Ruia as an Insolvency Professional, having Registration No. IBBI/IPA-001/IP-P00353/2017-2018/10654, shall be suspended for two years; (ii) Mr. Ruia shall not seek or accept any process or assignment or render any services under the Code during the period of suspension. He shall, however, continue to conduct and complete the assignments / processes he has in hand as on date of this order; and (iii) Mr. Ruia shall (i) undergo the pre-registration educational course specified under regulation 5(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 from his Insolvency Professional Agency, and (ii) work for at least six months as an intern with a senior insolvency professional, at any time during the period of suspension, to improve his understanding of the Code and the regulations made thereunder. 3.3 This Order shall come into force on expiry of 30 days from the date of its issue. 3.4 A copy of this order shall be forwarded to the Indian Institute of Insolvency Professionals of ICAI where Mr. Ruia is enrolled as a professional member for monitoring implementation of Order. 3.5 A copy of this order s....