Board has amended Insolvency Professional Regulations (IPR), vide “Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Second Amendment) Regulations, 2020” notification dated 30th, June.2020, as follows;
2. In the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, in regulation 12, in sub-regulation (1), for clause (a), the following clause shall be substituted, namely: - “(a) its sole objective is to provide support services to insolvency professionals;”.
The concerned clause before amendment read as follows;
Recognition of Insolvency Professional Entities.
12. (1) A company, a registered partnership firm or a limited liability partnership may be recognised as an insolvency professional entity, if –
“(a) its sole objective is to provide support services to insolvency professionals, who are its partners or directors, as the case may be; The words highlighted have been dropped under the present amendments.
I am still of the view that the regulations creating the institution of “Insolvency Professional Entity” should have been dropped altogether, as the same are against the letter and spirit of the Code (IBC, 2016).
Institution of IPE has created aberrations in the insolvency ecosystem in the country. For details please refer my “representation to MCA” dated 21st. Feb. 2020.
The least, Board could have done, was to define “Support Services” to remove confusion, as lately in one of the disciplinary cases, Disciplinary Committee had observed that some of the support services, which were provided by the IPE falls within the duties of Insolvency Professional under the code, and as such ordered recovery of fees paid for such services to IPE.
And secondly, the Board should have specified that the appointment of IPE by the IRP / RP will be done at arm's length basis.
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In the matter of Mr. Vijay Kumar Garg (IBBI/DC/26/2020 8th June 2020)
Analysis of Disciplinary Committee under Contravention 3.1
“The services provided by D&P have been detailed by the RP in paragraphs 17 to 36 of the Affidavit in Rejoinder dated 12th September 2019 filed by the RP before the AA in MA No. 1520 of 2019 & MA No. 254 of 2018. A summary of the work carried out by D&P is represented below:
a. Liasioning with senior officials of the Enforcement Directorate, Mumbai (ED), Central Bureau of Investigation (CBI) and Serious Fraud Investigation Office (SFIO);
b. Filing of Intervention Applications, written synopsis, appeals before the National Company Law Appellate Tribunal (NCLAT), Prevention of Money Laundering Authority (PMLA);
c. Emails/Correspondences and meetings with erstwhile employees of the Corporate Debtor/Company Secretary/Chartered Accountants;
d. Back office, technology and infrastructural support;
e. Preparation and execution of action plans in respect of subsidiaries;
f. Liasioning for protection and preservation of International Assets;
g. Recovery efforts to recover dues from Domestic Debtors;
h. Claim verification, conduct of CoC meetings and initiation/follow-up of legal action.
Some of the services, as stated above, should have been provided by other professionals and some of the services like liasioning are those which should have been undertaken by the RP himself or his employees as a part of his professional services.
The AA vide its order dated 14th May, 2019, in the matter of ICICI Bank Ltd. vs. Gitanjali Gems Ltd. [MA 1520/2019 in MA 254/2019 in C.P. (IB) 3585(MB)/2018] referred the matter relating to fixation of CIRP cost to the Board. Pursuant to the directions of AA, the Board constituted an Expert Committee to examine and submit a report on the reasonableness of the IRPC involved in the CIRP of GGL.”
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Relevant points.In Vijay Kumar Garg case there was a simple scheme of skimming of funds by over billing of professional services.IPE has anyway lost its exclusivity and has to be careful if misuse it's status in the garb of over and unnecessary billing of Professional services. All are being watched
ReplyDeleteConsidering the complications and time involved in running a company as going concern,limits needs to be fixed on assignments which can be accepted by IP to say max2or 3 that too based upon stage of each assignment.
ReplyDeleteTill recently it is seen some IPs are having many assignments and most IPs are without assignments.
The relation between IP and IPE where he/she is a partner needs to be clarifed.Whether an IP who is a partner in an IPE can appoint them for his CIRP without endangering his professional independence.