IBBI debars Insolvency Professional for ten years as her husband assigned CIRPs of 15 CD and wife consented to act as IRP for exorbitant fees
ABCAUS Case Law Citation:
ABCAUS 2797 (2019) (02) IBBI
In the instant case, both husband and wife were insolvency professionals registered with the IBBI (Board).
While the husband, in the capacity interim resolution professional (IRP) filed applications for initiating Corporate Insolvency Resolution Process (CIRP) of corporate debtors (CDs), the wife, consented to act as IRP for CIRPs of all CDs for exorbitant fees.
The IBBI issued SCN on the allegation that she consented to act as IRP of 15 CIRPs for which applications were filed by a professional, who is her husband. In the process, she compromised her independence, integrity and impartiality and that she consented to act as IRPs of 15 CIRPs simultaneously, even though she had absolutely no experience whatsoever and no capacity.
The Disciplinary Committee found that in terms of section 17 of the Insolvency and Bankruptcy Code, 2016 (Code), the management of the affairs of the CD vests in the IRP and the powers of the Board of Directors of the corporate debtor is exercised by the IRP. For all practical purposes, the IRP is the alter ego of the CD undergoing CIRP.
It was noted that every decision of the CD and in respect of the CD was taken by the IRP, the wife dealt with her husband, the decision maker for the CD.
The DC stated that it was quite clear why the husband assigned CIRPs of 15 CDs to one IP, namely, her wife when 2000 IPs were competing for an assignment in the market. It was not a coincidence that 15 assignments from one source landed on her, when she could not have a single assignment otherwise. 15 assignments at one go from one source for an IP having absolutely zero experience establishes that the considerations were something other than merits and there was a deep-rooted conspiracy to bleed the ailing CDs for the benefit of Ruia family.
The DC noted that if the conspiracy had materialised, the wife would have acted as IRP / RP of CIRPs of 15 CDs and would have earned a professional fee of about ₹50 crore at one go.
The DC opined that when relationship triumphs over merits in professional matters, there is no place for independence, integrity and impartiality. A professional must be not only be impartial, but also appear to be impartial.
According to the DC, a professional does not appear impartial if she receives professional assignments for about ₹50 crore at one go from a CD which is under the custody of her husband. Neither the wife found any other professional suitable for any of the 15 CIRPs nor she could get a single CIRP in her career from any source other than her husband. Any conduct, whether explicitly prohibited in the law or not, is unfair if it impinges on independence, integrity and impartiality of an IP or inconsistent with the reputation of the profession.
The DC found that only if the wife had slightest regard for the rule of law, she would have immediately withdrawn or modified her consent / terms, when the Hon’ble Adjudicating Authority raised concern about her conduct in one case. But Instead of mending her ways, she continued to indulge in similar conduct for several CIRPs, as if there was no law in the land and in utter disregard of the strictures of the Adjudicating Authority. She continued on a consent spree with objectionable terms in at least seven CIRPs.
In view of the above, the Disciplinary Committee, in exercise of the powers conferred under section 220 (2) of the Code read with sub-regulations (7) and (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, cancelled registration of the wife as Insolvency Professional and debarred her from seeking fresh registration as an insolvency professional or providing any service under the Insolvency and Bankruptcy Code, 2016 for ten years.