Code (IBC) provides an elaborate system of inspection, investigation of complaints & disciplinary procedures for service providers, stakeholders & other participants involved in insolvency/liquidation processes. Besides the Board (IBBI), Bye-Laws of an Insolvency Professional Agency (IPA) empowers IPA to issue show cause notice & take disciplinary action against its professional members.
In the present context lets analyse the disciplinary action taken by the Board & IIIPI in the matter of Mr. Vasudeo Agarwal.
Chronology of events
1. Action at the Board (IBBI) Level.
- Board issues show-cause notice (SCN) to Mr. Vasudeo Agarwal on 28.07.2018.
- Mr. Vasudeo Agarwal, responded to the SCN vide letter dated 16.08.2018
- Mr. Vasudeo Agarwal, appeared for personal hearing along with the learned Advocate, Mr. Alok Dhir, before the Disciplinary Committee constituted by the Board on 23.10.2018 and made oral submission.
- Disciplinary Committee constituted by the Board vide orders dated 07.01.2019, imposed on Mr. Agarwal monetary penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRP of Upadan Commodities Private Ltd.
2. Action at the IIIPI Level.
- IIIPI, based on the orders of DC of IBBI, issued SCN dated 01.07.2019.
- Mr. Vasudeo Agarwal replied to the SCN of IIIPI, vide letter dated 9th July, 2019, and availed the opportunity for personal hearing before the Disciplinary Committee constituted by the IIIPI on 23rd October, 2019.
- Disciplinary Committee constituted by the IIIPI, on 17.12.2019 passed the following orders;-
“# 2.0 …………… The Disciplinary Committee of IIIPI issued SCN to respondent , based on the order passed by the IBBI in respect of his role as an interim resolution professional (IRP) or resolution professional (RP) in corporate insolvency resolution process (CIRP) of Upadan Commodities Private Limited…….
# 4.0 Taking an overall view of the aforesaid, the Disciplinary Committee, in exercise of the powers conferred under Regulation 24(1) (c) of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 read with clause 15(B) of the Disciplinary Policy of IIIPI, hereby issues a warning and advise Respondent to exercise due caution and be more careful while handling any assignments".
In the above matter of Mr. Vasudeo Agarwal was penalized twice, firstly by the Board & later on by the Insolvency Professional Agency. The question here is whether the “Doctrine of Double Jeopardy” is not applicable for disciplinary proceedings under IBC,2016.
“Doctrine of Double Jeopardy”
Article 20(2) of “Constitution of India” provides that no person shall be prosecuted and punished for the same offence more than once. It has been enshrined as a part of the “Fundamental Rights” under Part III, of the “Constitution of India”.
# Article 20(2) No person shall be prosecuted and punished for the same offence more than once.
This issue has another aspect also. Let’s look at the relevant provisions of Bye Laws of IIIPI & Disciplinary Policy of IIIPI.
Disciplinary Policy of the Indian Institute of Insolvency Professionals of ICAI (IIIPI)
# 15. Orders by Disciplinary Committee
1. On consideration of documents available on record and after affording an opportunity of hearing to the complainant and the professional member, where, the Committee holds that the professional member is not guilty of misconduct, the Committee shall dispose of the show-cause notice by recording reasons in writing within thirty days of passing such order in writing and may also impose cost on the complainant, if the Committee is of the opinion that the complaint was frivolous.
2. However, if the member is found guilty of major or minor misconduct as detailed in Section 12, after considering the case in issue, the Disciplinary Committee may pass any of the following order, as it deems reasonable in view of the seriousness of the breach of the Code of Conduct:
# 15 A. Penalties for Major Misconduct may extend to:
a. Monetary penalty of not less than Rs.10,000/- upto a maximum amount of Rs.50,000,
b. Suspension from practice for a specific term which may not be less than 15 days up to a maximum period of 10 Years as decided by the Committee,
c. Removal from membership, or
d. Reference of the matter to the Board, which may include ,in appropriate cases, recommendation of the amount or compensation that may be enforced by the Board,
e. Directions relating to costs,
f. A combination of the above or other appropriate penalty, as determined by the Committee.
Bye Laws of the Indian Institute of Insolvency Professionals of ICAI (IIIPI)
# 24. (1) IIIPI shall have a Disciplinary Policy, which shall provide for the following-
(a) the manner in which the Disciplinary Committee may ascertain facts;
(b) the issue of show-cause notice based on the facts;
(c) disposal of show-cause notice by a reasoned order, following principles of natural justice;
(d) timelines for different stages of disposal of show cause notice; and
(e) rights and obligations of the parties to the proceedings.
(2) The orders that may be passed by the Disciplinary Committee shall include-
(a) expulsion of the professional member;
(b) suspension of the professional member for a certain period of time;
(ba) cancellation of authorisation for assignment;
(c) admonishment of the professional member;
(d) imposition of monetary penalty;
(e) reference of the matter to the Board, which may include, in appropriate cases, recommendation of the amount of restitution or compensation that may be enforced by the Board; and
(f) directions relating to costs.
From the provisions of Bye Laws of IIIPI & Disciplinary Policy of IIIPI, it is clear that wherever the Disciplinary Committee of IIIPI is of the opinion that penalty more / other than as provided in the Bye Laws is required to be imposed, the DC will pass orders for reference of the matter to the Board (IBBI).
Further, if the DC constituted by the Board (IBBI) is of the opinion that penalty more / other than as provided in the sub-section (2), (3) & (4) of section 220 should be imposed, the DC constituted by the Board (IBBI will pass orders for reference of the matter to the Board (IBBI) to take any action under sub-section (5) of section 220 or sub-section (2) of section 236. (Regulation 13(1)(d) of “Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017”)
From the above it is quite clear that once an issue has been considered by the DC constituted by the Board, the matter goes beyond the purview of consideration of the IPA (Insolvency Professional Agency).
Thus in the aforesaid cases, SCN issued by IIIPI, was beyond the authority of IIIPI & was in infringement of the concerned IP’s “Fundamental Rights” enshrined under Article 20(2) of the Constitution of India.
Reference;-
1. Bye - Laws of Indian Institute of Insolvency Professional of ICAI (IIIPI).
2. Disciplinary Policy of the Indian Institute of Insolvency Professionals of ICAI (IIIPI).
3. Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017.
4. eBook "Offences & Penalties in IBC" by Arvind Mangla, a publication of Amazon Kindle Store.
Disclaimer: The sole purpose of this blog is to create awareness on the subject and must not be used as a guide for taking or recommending any action or decision. A reader must do his own research and seek professional advice if he intends to take any action or decision in the matters covered in this blog.
Informative
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