TMI Blog2020 (6) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... is the utmost responsibility of an IP to run the company of corporate debtor as a going concern and conduct the entire CIRP in a transparent manner without creating additional insolvency resolution process costs. The DC is conscious of the fact that the insolvency regime in India is at its infancy. Also, the insolvency profession is new and emerging. Further, it is also recognised that the role of an IP in India is significantly different as compared to other matured jurisdictions. These facts may call for some leniency as long as these are not mala fide - the DC, in exercise of the powers conferred under Regulation 13 (3) of the IBBI (Inspection and Investigation) Regulations, 2017 and section 220 (2) of the Code read with sub-regulations (7) and (8) of Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, disposes of the SCN with certain directions. - NO. IBBI/DC/17/2020 - - - Dated:- 26-2-2020 - Dr. Navrang Saini, Whole Time Member, IBBI ORDER 1. Background 1.1 This Order disposes of the Show Cause Notice (SCN) dated 4th December 2019 issued to Ms. Kavitha Surana, SUS Bhawan, No. 2, Vimala Street, Ayyavoo Colony, Aminjikarai, Chennai- 600029, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons alleged in the SCN, Ms. Kavitha Surana's written and oral submissions thereon and their analysis with findings of the DC are as under: 3.1 Contravention: Pursuant to regulation 27 of the CIRP Regulations, it is the duty of the IP to appoint registered valuers to determine the fair value and liquidation value of the Corporate Debtor. It has been observed from the appointment letter(s) of the valuers that the RP directed the valuers to conduct valuation of three properties of guarantors along with the properties of the Corporate Debtor. Further, not only were properties of guarantors valued but the cost for the same was also included in the insolvency resolution process costs (IRPC). Submission: RP submits that the Bank of India, being sole member of the Committee of Creditors (CoC) had communicated by letter dated 3rd May 2018, their intention to get valuation done for all properties of the Corporate Debtor including that of the guarantors, as those properties had been provided as security to them for the term loan. Since the Bank of India wished to consider value of all properties together in order to take a decision regarding either a resolution plan or a compromise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment, but not later than forty-seventh day from the insolvency commencement date, appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35: Provided that the following persons shall not be appointed as registered valuers, namely: (a) a relative of the resolution professional; (b) a related party of the corporate debtor; (c) an auditor of the corporate debtor at any time during the five years preceding the insolvency commencement date; or (d) a partner or director of the insolvency professional entity of which the resolution professional is a partner or director. The RP appointed two valuers, M/s Hi-Tech Valuers Private Limited and Mr. V Selvaraj, and directed them to value the assets of the Corporate Debtor along with the assets of the personal guarantor, Mrs. Rajashree Maheshwari. Admittedly, this was done at the instructions of the CoC in accordance with the letter dated 3rd May 2018 from the sole CoC member, Bank of India to the RP. Clause 5 of the Code of Conduct as given in the First Schedule of IP Regulations provides: 5. An insolvency professional must maintain co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor have been included in the IRPC by the RP. The RP has submitted that, although it has not been recorded in the minutes of the CoC meetings, she had verbally appraised the CoC that such costs should not be included in the IRPC and there has been no financial burden on the Corporate Debtor. However, it is evident from the documents provided by the RP that the route of payments to the two valuers has been through: (1) Payment made by the sole CoC member, Bank of India to the personal account of the RP as reimbursement of IRP expenses; and (2) Payment made by the RP, personally, to the two valuers by way of issuance of cheques. It is observed that the payments have not been directly made by the CoC but through the personal account of the RP. Thus, there is reason to believe that the RP has acted on the directions of the CoC, thereby compromising her independence in favour of the CoC. This is in violation of clause 5 of the Code of Conduct. Findings: There has been a procedural lapse on the part of the RP by directing the valuation of the properties of the personal guarantor which were not under the control and custody of the RP as well as including the cost of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P further submits that, there is email confirmation from sole CoC member, Bank of India dated 18th December 2018 approving the appointment and fees of M/s Kaliannan Associates, Chartered Accountants. During the personal hearing, it was submitted that post the Third meeting, the RP received a quote from M/s Kaliannan Associates vide letter dated 23rd November 2018 and a letter of intimation of appointment was sent to them on 18th December 2018, post email approval of the appointment (along with the fees) from the sole CoC member. Further, no fee has been paid so far to them and there has been no burden on the Corporate Debtor due to their appointment. Analysis: Regulation 34 of the CIRP Regulations provides: Resolution professional costs. The committee shall fix the expenses to be incurred on or by the resolution professional and the expenses shall constitute insolvency resolution process costs. Explanation. - For the purposes of this regulation, expenses include the fee to be paid to the resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will ensure not only the effective and efficient conduct of the proceedings and but also that there is confidence in the insolvency regime. The BLRC, the recommendations of which has led to the enactment of the Code, in its Final Report, has also laid emphasis on the role of an IP as follows: 'The Insolvency Professionals form a crucial pillar upon which rests the effective, timely functioning as well as credibility of the entire edifice of the insolvency and bankruptcy resolution process. In administering the resolution outcomes, the role of the IP encompasses a wide range of functions, which include adhering to procedure of the law, as well as accounting and finance related functions. The latter include the identification of the assets and liabilities of the defaulting debtor, its management during the insolvency proceedings if it is an enterprise, preparation of the resolution proposal, implementation of the solution for individual resolution, the construction, negotiation and mediation of deals as well as distribution of the realisation proceeds under bankruptcy resolution. In performing these tasks, an IP acts as an agent of the adjudicator. In a way the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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