The insolvency resolution professionals are recognized experts in the domain of insolvency. They have to qualify the prescribed examination to attain the tag of an insolvency resolution professional and thereafter are brought to the affiliation of IBBI.
The insolvency resolution professionals need to take utmost care while performing their duty. This is because they occupy and hold an important position during the insolvency proceedings against a company. If the insolvency resolution professional is found indulging in any malpractices then it such a scenario serious action may be taken against the concerned insolvency resolution professional.
In this article, we will discuss in detail the legal actions that may be taken in the course when an insolvency resolution professional is found to be a part of malpractices in violation of his duties.
First question rises who is Insolvency resolution Professional & How is he appointed?
The Interim resolution professional is appointed by the adjudicating authority within fourteen days from the insolvency commencement date. The resolution professional as proposed respectively in the application under section 7 & section 10 of the Insolvency and bankruptcy code shall be appointed as interim resolution professional if no disciplinary proceeding is pending against the resolution professional.
If the application for corporate insolvency resolution process is made by the operational creditor then the proposal for an interim resolution professional is made under subsection (4) of section 9, the resolution professional as proposed, only if no disciplinary proceedings are pending against him.
Within 10 days of the receipt of a reference from Adjudicating Authority under Sub-section (3), the board recommends the name of an insolvency professional to the Adjudication Authority against whom no disciplinary proceedings are pending.
The interim resolution profession term continues till the date of appointment of the resolution professional under Section22 of the insolvency and bankruptcy code.
For the first time it has happened in India the CBI has arrested Adjudicating Authority (National Company Law Tribunal) appointed insolvency resolution professional in corruption charges. The resolution professional allegedly demanded the bribe of Rs. 5 lakhs from a contractor. The Contractor was threatened by the resolution professional that if the bribe is not paid to the resolution professional then a criminal case would be lodged against his wife.
What happened and how?
The contractor who is the complainant and his wife were appointed as consultants by FRTech, Hyderabad which became insolvent under insolvency and bankruptcy code. The work was done primarily through emails between March and November 2017 and the couple raised an invoice of Rs 18lakhs towards the company out of which the company paid Rs 15.20 lakhs while the sum of Rs 2.8 lakhs remained outstanding. The interim resolution Professional was appointed by the Adjudicating Authority that is the national company law tribunal of Mumbai on November 14, 2019. With him the complainant raised the issue of the outstanding amount. The resolution professional allegedly demanded further details relating to the appointment of the complainants wife.
The FIR alleged that a phone call was made to the complainant by the resolution professional on December 30th saying that a criminal case will be filed against his wife and asked him to meet at his friend Paresh Kumar’s office in Laxmi Nagar area who is the CEO of New Delhi based Multimax Assets Reconstruction Pvt Ltd. During that meeting, the resolution professional assured the complainant that he would hush up the cases in the court if the payment of Rs 5 lakhs is made to him. Resolution Professional said that he will send a notice to the complainant in this regard but he will also help in getting the suitable reply prepared. The complainant recorded conversations and phone calls exchanged between him and the resolution professional. It was verified by the CBI that the claims of the complainant in clandestine operation where the amount was being negotiated with Kumar and brought down to Rs 4 lakhs.
Now the question arises what will happen now?
In such circumstances, there can be the replacement of resolution professionals under Section 89 of the insolvency and bankruptcy code. As per section 89 of the insolvency and bankruptcy code if the debtor or the creditor is of the opinion that the resolution professional appointed is required to be replaced then they may apply to the adjudicating authority for the replacement of the resolution professional. After that, the adjudicating authority within seven days of the receipt of the application make the reference to the board for replacement of the resolution professional and after that within ten days of the receipt of the reference from the adjudicating authority that the board will recommend the name of the insolvency professional to the adjudicating authority against whom no disciplinary proceedings are pending. Then the adjudicating authority will appoint another resolution professional for the purpose of the fresh start process on the basis of the recommendations made by the board.
Then the adjudicating authority will give the direction to the resolution professional replaced to share all the information with new resolution professional in respect of fresh start process and to cooperate with the new resolution professional as may be required.
And the insolvency professional who has deliberately contravened the provisions of the Insolvency and bankruptcy code, if proved he will be punished with imprisonment for the term which may extend to six months or with a fine which shall not be less than one lakh rupees but may extend to five lakhs rupees or with both under section 185 of the insolvency and bankruptcy code.
From the above case discussion, it is quite clear that if the insolvency resolution professional is found guilty of committing malpractices he will be penalized and also IBBI can take back from his the hard-earned tag of an insolvency resolution professional. Therefore the insolvency resolution professionals should act wisely and diligently.
Hope that the article was informative in providing insight into penal actions that may be taken against the insolvency resolution professionals.
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