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2020 (1) TMI 103 - Board - Insolvency and BankruptcyDuties of Resolution Professional - Disciplinary Action - non-disclosure to his IPA - filing of application by RP for avoidance of transactions in accordance with Chapter III of the Code - allegation is that the RP abdicated his authority in favour of the Committee of Creditors (CoC) and allowed the CoC to usurp his authority - CIRP process - HELD THAT:- Since the RP has not been able to provide any satisfactory justification for not acting in adherence to the provisions of the Code and the Circular, his act of non-disclosure to his IPA about taking services from BDO Restructuring Advisory India LLP (of which RP was a partner) is in violation of Section 208(2)(a) of the Code and Regulation 7(2)(a) and 7(2)(h) of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016, read with clause 12, 13 and 14 of the Code of Conduct as given in the First Schedule of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016. In view of admission by RP of having charged lender's legal counsel (CAM) fee of ₹ 12,09,90,185/- from IRPC and specifically for the services rendered prior to the Insolvency Commencement date (i.e. period from 17th June 2017 to 25th July 2017) of CD, RP has contravened Section 208 (2) (a) of the Code and also Regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with Clause 3 and 5 of the Code of Conduct as given in the First Schedule of the IBBI (Insolvency Professionals) Regulations, 2016. The role of IP is vital to the efficient operation of the insolvency and bankruptcy resolution process. A well-functioning system of resolution driven by a competent IP plays a significant role in cementing together the interests of the CD with those of the creditors. It is for this reason that the need of specialized professionals to complete the resolution processes has been unequivocally emphasized - The Code also requires an IP to play a catalytic role in CIRP which requires a right combination of experts acting under the overall supervision of the IP. He is the backbone of the resolution process under the Code and success thereof hinges on the conduct and competence demonstrated by him. Also, a CD undergoing CIRP is a representation of interests of several stakeholders who pin their hopes on the outcome of CIRP. During CIRP, it is the utmost responsibility of an IP to run the company of CD as a going concern and conduct the entire CIRP in a transparent manner without creating additional insolvency resolution process costs. Thus, Mr Mahender Kumar Khandelwal has displayed utter misunderstanding of the provisions of the Code and Regulations made thereunder. He has, therefore, contravened provisions of Sections 5(13) and 208(2)(a) of the Code, Regulation 33 and 34 of IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016; and Regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 3, 5, 12, 13 and 14 of the Code of Conduct under the said Regulations. The DC hereby imposes on Mr Mahender Kumar Khandelwal a monetary penalty of ₹ 29,24,167/- [which is ten percent of the RP Fee (₹ 2,92,41,667 X 10 percent) forming part of IRPC] and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the 'Insolvency and Bankruptcy Board of India' within 30 days of the issue of this Order - It is a fact that the CD has unduly suffered, the Creditors has been unduly benefitted and the RP has deliberately allowed such unlawful gain and loss (i.e. payment of ₹ 12,09,90,185/- to legal counsel of CoC forming part of IRPC) in contravention of the provisions of the Code and Regulations. Therefore, the DC directs the RP to make good the loss by securing reimbursement as minuted in the minutes of 19th Meeting of CoC (Resolution No. 7) held on 10th October, 2018 and produce evidence to the Board of deposit of amount of ₹ 12,09,90,185/- in the account of CD within 30 days of issue of this order. Mr Mahender Kumar Khandelwal shall not accept any new assignment either as IRP or RP till produces evidence to the Board of deposit of ₹ 12,09,90,185/- (Twelve Crores Nine Lacs Ninety Thousand One Hundred and Eighty Five only) in CD's Account. SCN disposed off.
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