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REGISTRATION OF INSOLVENCY PROFESSIONAL WITH THE INSOLVENCY & BANKRUPTCY BOARD OF INDIA

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REGISTRATION OF INSOLVENCY PROFESSIONAL WITH THE INSOLVENCY & BANKRUPTCY BOARD OF INDIA
By: Mr. M. GOVINDARAJAN
April 16, 2018
  • Contents

Introduction

The Insolvency and Bankruptcy Board of India (‘Board’ for short) made a regulation called as ‘Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (‘Regulations’ for short) which came into effect from 29.11.2016.  The Board prescribes the procedure in these regulations for registration of insolvency professionals with the Board. 

Regulation 4 prescribes the eligibility to become insolvency professional.  Regulation 5 provides the qualifications and experience for a person who desires to become an insolvency professional.

Registration with the Board

Regulation 6 and 7 provide the procedure for filing application before the Board to register as insolvency professional.  This Regulation provides that-

  • An individual enrolled with an insolvency professional agency as a professional member may make an application to the Board in Form A of the Second Schedule to these Regulations, along with a non-refundable application fee of ten thousand rupees to the Board.
  • The Board shall acknowledge an application made under this Regulation within seven days of its receipt.
  • The Board may require the applicant to submit, within reasonable time, additional documents, information or clarification that it deems fit.
  • The Board may require the applicant to appear, within reasonable time, before the Board in person, or through his authorized representative for clarifications required for processing the application.
  • If the Board is satisfied, after such inspection or inquiry as it deems necessary that the applicant is eligible under these Regulations, it may grant a certificate of registration to the applicant to carry on the activities of an insolvency professional in Form B of the Second Schedule to these Regulations, within sixty days of receipt of the application, excluding the time given by the Board for presenting additional documents, information or clarification, or appearing in person, as the case may be.
  • The registration shall be subject to the conditions that the insolvency professional shall-
  • at all times abide by the Code, rules, regulations, and guidelines there under and the bye-laws of the insolvency professional agency with which he is enrolled;
  • at all times continue to satisfy the requirements under Regulation 4;
  • undergo continuing professional education, as may be required by the Board;
  • not outsource any of his duties and responsibilities under the Code, except those specifically permitted by the Board;
  • pay a fee of ten thousand rupees to the Board, every five years after the year in which the certificate is granted;
  • not render services as an insolvency professional unless he becomes a partner or director of an insolvency professional entity recognized by the Board under Regulation 13, if he is not a citizen of India;
  • take prior permission of the Board for shifting his professional membership from one insolvency professional agency to another, after receiving no objection from both the concerned insolvency professional agencies;
  • take adequate steps for redressal of grievances;
  • maintain records of all assignments undertaken by him under the Code for at least three years from the completion of such assignment;
  • abide by the Code of Conduct specified in the First Schedule to these Regulations; and
  • abide by such other conditions as may be imposed by the Board.

Refusal to grant registration

Regulation 8 provides for refusal to grant registration by the Board.  This regulation provides that-

  • If, after considering an application, the Board is of the prima facie opinion that the registration ought not be granted, it shall communicate the reasons for forming such an opinion and give the applicant an opportunity to explain why his application should be accepted, within fifteen days of the receipt of the communication from the Board, to enable it to form a final opinion.
  • The communication shall be made to the applicant within forty five days of receipt of the application, excluding the time given by the Board for presenting additional documents, information or clarifications, or appearing in person, as the case may be.
  • After considering the explanation, if any, given by the applicant, the Board shall communicate its decision to-
  • accept the application, along with the certificate of registration, or
  • reject the application by an order, giving reasons thereof

within thirty days of receipt of the explanation.

Till this time the Board has refused four cases as detailed below-

  • Order dated 14.11.2017 -  In this case the Board found pendency of serious criminal proceeding, against the applicant (who registered through the Indian Institute of Insolvency Professionals of ICAI) adversely impacts his reputation and makes him not a person fit and proper for registration as an IP. Besides, as on the date of application, he is in employment and hence not eligible for registration as an IP. In exercise of the powers conferred on the Board under regulation 8(3)(b) of the Regulations.  Therefore, the Board rejected the application  for registration as an Insolvency Professional.  The Board further held that it would expect the IIIPI, which is a front-line regulator, to exercise the required due diligence in future while enrolling an individual as a member and recommending to the Board his registration as an IP.
  • Order dated 14.11.2017 – In this case the application was recommended by the IIIPI to the Board on 09.08.2017 for registration with an observation that some criminal proceeding u/s 138/141 of the Negotiable Instruments Act, 1881 and also some matters u/s. 420/34 of Indian Penal Code are pending against the applicant.  Further the applicant gave an undertaking that liabilities under Section 141 of Negotiable Instrument Act, 1881 is vicarious liability caused by the law and is understood to be fiction created by law to ensure proper and timely justice to the affected. In some of the cases High Courts have decided this to be technical offence and do not involve moral turpitude.  The Board considered the application, the recommendation of the IIIPI, the acceptance of the grounds for rejection of application of the applicant and material available on records.   The Board held that he is not a fit and proper person for registration as insolvency professional.  The Board rejected the application.
  • Order dated 26.02.2018 – In this case a criminal case was pending against the applicant in which the complainant vide her letter dated 16th July, 2007 had requested the Sr. Inspector of Police, Mumbai for registration of a FIR against one of the senior partners of for outraging her modesty with an intention to insult in front of clients, peers and others. She also made allegation that the applicant had aided and abetted the offence of outraging her modesty with an intention to insult her.  The Board formed a prima facie opinion that the registration ought not to be granted to the applicant, as he was not found to be a fit and proper person to be appointed as an IP.  The Board found that though the allegations are yet to be established before the Hon’ble Court, it is not an  authority to ascertain, if the charge leveled will sustain or not. Pendency of serious charge under section 509 of the IPC which attracts punishment of simple imprisonment for a term which may extend to one year, or with fine, or with both, is material.  The Board refused to register his application.
  • Order dated 26.02.2018 - While considering the application for registration as an IP, it was observed that a criminal proceeding had been initiated by CBI against the applicant. In this regard, the Board sought further information while processing the application vide e-mail dated 20th October, 2017. It formed a prima facie opinion that the registration ought not to be granted to the applicant, as he was not found to be a fit and proper person to be registered as an IP. The Board found that the offences allegedly against the accused are criminal conspiracy, cheating and dishonestly inducing delivery of property, forgery for purpose of cheating, using as genuine a forged document, etc. and each of these offences are punishable with imprisonment up to seven years.   The Board found that pendency of serious criminal proceeding, as noted above, against the applicant adversely impacts his reputation and makes him not a person fit and proper for registration as an IP.  The Board rejected the application for registration.

 

By: Mr. M. GOVINDARAJAN - April 16, 2018

 

 

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