2022 (12) TMI 150 - HC - Insolvency and Bankruptcy

Failure on the part of IRP to discharge his duties or not - levy of penalty on IRP - HELD THAT - Prima facie having read the provisions of Sec.12 (2) of the I.B.C and the contents of the order under challenge which extensively quoted the observations of the adjudicating authority it is evident that there cannot be any negligence attributed to the petitioner who was to follow the provisions of Sub-sec.2 of Sec.12 of I.B.C. On this count on a condition that the petitioner deposits Rs.2 lakhs as envisaged under the order by way of a penalty in the registry on or before 09.12.2022 issue notice to the respondents returnable on 17.01.2023. There shall be ad-interim relief in terms of para 49(c) till then.

Summary

Issues:
Challenge to order of Insolvency & Bankruptcy Board regarding lapse in conduct of C.I.R.P, Interpretation of Sec.12 of I.B.C regarding extension of C.I.R.P period, Allegations against the petitioner, Impugned order imposing penalty and probation period.

Analysis:

1. The petition challenges the order of the Insolvency & Bankruptcy Board concerning a lapse in the Corporate Insolvency Resolution Process (C.I.R.P) conducted by the petitioner. The Board found the petitioner to have committed a lapse in the matter of Brain Master's Classes Private Limited for not filing a necessary application for approving the resolution plan or liquidation within the stipulated time frame of 180 days from the admission of the application, as mandated by Sec.12 of the I.B.C.

2. The petitioner's counsel argued that as per Sec.12(2) of the I.B.C, the responsibility of applying for an extension of the C.I.R.P period lies with the resolution professional only if instructed by a resolution passed by the Committee of Creditors (C.O.C) with a 66% majority. The counsel contended that the petitioner was not obligated to call for a C.O.C meeting unless authorized by the C.O.C as per the statutory provisions.

3. The order reflects that the petitioner had intentions to conduct the C.O.C meeting but faced challenges due to lockdown restrictions, leading to delays. The adjudicating authority noted that the C.O.C did not take efficient measures to complete the C.I.R.P, and there were no allegations of misconduct against the petitioner. Despite these findings, the impugned order penalized the petitioner with a fine of Rs.2 lakhs and imposed a probation period of four months.

4. Upon perusal of Sec.12(2) of the I.B.C and the observations of the adjudicating authority, it appears that there was no negligence on the part of the petitioner, who was expected to adhere to the statutory provisions. The court, prima facie, found no grounds to attribute negligence to the petitioner based on the order's contents and the legal framework.

5. Consequently, the court directed the petitioner to deposit the penalty amount of Rs.2 lakhs as per the impugned order before a specified date and issued notice to the respondents for further proceedings. Ad-interim relief was granted until the next hearing date, allowing direct service in the matter.