IBBI debars CA from practicing as an Insolvency Professional

The disciplinary committee of IBBI debars a CA (hereinafter ‘IP’) from practicing as an Insolvency Professional. 

Earlier, vide an interim order dated 18th March, 2018, the disciplinary committee of the Insolvency and Bankruptcy Board of India (IBBI), had debarred a Chartered Accountant from practicing as an Insolvency Professional.

Please note that Insolvency Professional (IP) can be any professional (i.e. Company Secretary, an advocate, a cost accountant and a CA with requisite experience) and IBBI has debarred the said CA from practicing as IP only. This order does not debar the CA from practicing as a chartered accountant.

ABCAUS Case Law Citation:
ABCAUS 2303 (2018) (04) IBBI

The Board, in exercise of its powers under section 218 of the Insolvency and Bankruptcy Code, 2016 (Code) read with the IBBI (Inspection and Investigation) Regulations, 2017, vide its order dated 04.01.2018, had appointed the Inspecting Authority (, IA) to conduct an inspection of CA, Insolvency Professional, on having reasonable ground to believe that he had contravened the provisions of the Code, regulations made, and directions issued by the Board thereunder.

An insolvency professional is required to quote in all his communications, his address and email, as registered with the Board, and his Registration Number as an insolvency professional granted by the Board. However, the CA did not comply with this requirement in the advertisement for EoI despite direction given to him vide email. Thus, he contravened clause (i) of sub-regulation (2) of regulation 7 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.

The said IP did not comply with directions of the Board issued under section 196(1)(g) of the Code to issue a fresh advertisement after removing the three deficiencies observed by it in the advertisement for EoI.

The said IP misled the AA and the Board regarding the cost of fresh advertisement in contravention of clauses 1, 2, 9, 12 and 14 of the Code of Conduct under the first schedule of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulation, 2016.

The said IP misled the Board and the AA by stating that the advertisement made by him was in accordance with the best market practice. However, none of the advertisements provided by him required a certificate from a CA to provide a certificate of eligibility of resolution applicants.

Section 25(2)(h) of the Code requires a resolution professional to lay down criteria with the approval of the Committee of Creditors (CoC). The CA stated in the application before the AA and in the letter to the Board that the CoC has approved the advertisement for EoI. However, the advertisement approved by the CoC did not require a certificate from a CA.  Thus, he added the requirement of a certificate from a CA without approval of the CoC and thereby contravened section 25(2)(h) of the Code.

The CoC as a collective body of financial creditors has certain powers and responsibilities under the Code. No individual creditor has a specific power or responsibility. Section 21(8) of the Code requires that all decisions of the CoC shall be taken by a vote of not less than seventy-five per cent of voting share of the financial creditors. However, the CA sought approval of the EoI from only from one creditor.

Section 23(1) of the Code requires an insolvency professional to conduct entire resolution process. In this case, The said IP  asked an interested party, i.e., resolution applicant, to perform the task of certifying its eligibility through certificate of a CA engaged by such applicant and thereby contravened section 23(1) of the Code and compromised the integrity of the process in contravention of clauses 1 and 14 of the said Code of Conduct. He brought in a requirement not envisaged under the Code adding cost in terms of time and money in contravention of clause 13 of the Code of Conduct.

The said IP made false statements in his letter and contravened the provisions of the Code and regulations under section 70 (2) read with section 235A

The said IP sought approval of the Board for advertisement for EoI. Such approval is not envisaged under the Code. In the process, he tried to avoid responsibility cast on him under the Code and delayed the resolution process in contravention of clause 13 of the Code of Conduct. It is the duty of the resolution professional to conduct the entire resolution process.

Thus, as per the interim order, the said IP had attempted to mislead the CoC, the AA, and the Board, outsourced his responsibilities to a third person, acted beyond his authority without the approval of the CoC, acted for and on behalf of one of the creditors, and thereby contravened provisions of the Code and regulation.

As per the interim order, the said IP  was debarred from undertaking any new assignment, either as an Interim Resolution Professional, Resolution Professional, Liquidator or otherwise for  a period of 90 days.

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