18 August 2019

SBI - SOP for Punitive Action against Empanelled IP's

SBI vide circular dated 31.07.2019 has formalized Standard Operating Procedure for taking Punitive Action against Empanelled Insolvency Professionals. Now SBI Empanelled IP can be issued show cause notice by SBI also. 

The SOP covers requisite measures to be taken in a uniform manner across the Bank, and deals with the following:

(i) Grounds of Punitive Actions – Bank may initiate enquiry for investigation to proceed further, if needed, to take punitive actions against erring IPs in case bank receives any complaint or order or reporting regarding instances of misconduct, mischief, incompetence etc.

(ii) Complaint/Adverse Report – A complaint against IP may originate from our Branch or another member of CoC (Committee of Creditors) or from any other stakeholder / whistle-blower. Anonymous complaints shall not be entertained.

(iii) Preliminary Enquiry – On having reasonable grounds to believe that IP has engaged in acts of misconduct etc., GM(Ops-I) in SARG shall direct a preliminary enquiry into the actions of IP if deemed necessary. The enquiry shall be conducted by an officer not below the rank of AGM of the Branch concerned and the factual report shall be submitted to DGM(NCLT), SARG.

(iv) Show Cause Notice by Investigating Authority – On receipt of factual report from the Branch, DGM(NCLT) SARG shall issue a show cause notice to the IP, briefly describing the allegations made in the complaint, giving 21 days’ time to respond. On receipt of reply to show cause notice, DGM(NCLT), SARG will convene a meeting of the Disciplinary Committee and shall present the matter before the Committee to consider suitable punitive actions viz., de-empanelment, filing of civil/criminal action, reporting the act of misconduct etc to IBA, IBBI etc.

Now let’s see the provisions of the Code which deals with misconduct on the part of Insolvency Professionals.
# 217. Complaints against insolvency professional agency or its member or information utility. -
Any person aggrieved by the functioning of an insolvency professional agency or insolvency professional or an information utility may file a complaint to the Board in such form, within such time and in such manner as may be specified.
# 235A. Punishment where no specific penalty or punishment is provided. -
If any person contravenes any of the provisions of this Code or the rules or regulations made thereunder for which no penalty or punishment is provided in this Code, such person shall be punishable with fine which shall not be less than one lakh rupees but which may extend to two crore rupees.
# 236. Trial of offences by Special Court. -
(1) Notwithstanding anything in the Code of Criminal Procedure, 1973(2 of 1974), offences under of this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013 (18 of 2013).
(2) No Court shall take cognizance of any offence punishable under this Act, save on a complaint made by the Board or the Central Government or any person authorised by the Central Government in this behalf.

The job of insolvency professional is of specialised nature, and to ensure that Insolvency Professional may work without any undue influence & pressures whatsoever, of the interested parties, the code provide for special provisions to deal with the misconduct of Insolvency Professionals.

A full Chapter IV, under Part IV of the code deals with the complaints of any person aggrieved by the actions of Insolvency Professional. Further, to avoid frivolous filing of civil/criminal action against the Insolvency Professionals, Code provides that “No Court shall take cognizance of any offence punishable under this Act, save on a complaint made by the Board or the Central Government or any person authorised by the Central Government in this behalf. Thus SBI is not empowered / authorized to initiate any civil / criminal action against any Insolvency Professional.

IRP / RP in a resolution process is appointed by the Adjudicating Authority( NCLT) & IRP / RP functions under the directions & supervision of Adjudicating Authority. Code does not delegate or grants any supervisory role on any of the creditor of the CD.

Thus the threat of filing of civil / criminal action against the Insolvency Professionals (which SBI is not empowered under the Code), under the Standard Operating Procedure, circulated by the SBI is a very crude attempt to influence & pressurize the Insolvency Professionals to submit to the dictates of SBI during insolvency proceedings, for the interests of SBI, which  the Board (IBBI) should take note of it.

To maintain the professional integrity & dignity of Insolvency Professionals, I demand SBI to immediately withdraw the said circular, and tender public apology for the same.

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