IBBI imposed penalty of Rs.5 lakh for Conducting CoC Meetings without Sole Financial Creditor

The Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India (IBBI) has recently imposed a penalty of Rs.5 Lakhs on Insolvency Professional Sonu Jain along with a probation period of four months. The Resolution Professional’s (RP) Authorization for Assignment (AFA) has likewise been suspended until the end of the specified probationary period.

Regarding four corporate debtors, the alleged violation of the Insolvency and Bankruptcy Code, 2016, provisions was brought up.

The appointment of a single valuer despite the fact that the Code and the Regulations made thereunder require the use of two registered valuers to conduct the valuation of the Corporate Debtor-I, the DC’s lenient stance due to the COVID-19 pandemic’s pervasiveness and the lack of valuers in Kutch may have prevented the Resolution Professional from abiding by the statute’s requirements, are additional grounds for misconduct brought forth.

The Disciplinary Committee saw the RP’s slowness in submitting progress reports as major negligence, although the high fees of the claimed CIRP Cost of Rs. 6,49,000/- (including of Rs. 1,50,000/- IRP fees) were determined to have not been paid by the Professional.

DC finds that Ms. Sonu Jain was conducting CIRP and Liquidation proceeding in a very casual and careless manner which is not at all expected from an Insolvency Professional. Ms. Jain was not only casual in keeping the records of the proceeding and submitting the same to IA, but she was careless in filing report also with AA.

The Code has carefully vested prominence to financial creditors in the CoC. Declaring the CoC being in order with aid of operational creditors, despite absence of sole financial creditor, is a serious contravention and can’t be overlooked. Meddling with the composition of the CoC is violative of the basic structure of the Code. No professional can afford to hide behind the argument that CoC without identified financial creditor has taken decisions which were of minor consequence as major decisions were put on hold, as convening such a meeting itself was void ab initio.

The Disciplinary Committee Ordered, “In exercise of the powers conferred under Section 220 of the Code read with Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016 and Regulation 13 of IBBI (Inspection and Investigation) Regulations, 2017, issues the following directions:-

(i) hereby imposes penalty on Ms. Sonu Jain for Rs. 5,00,000/- (Rupees Five Lakhs only) and directs him to deposit the penalty amount directly to the Consolidated Fund of India (CFI) under the head of “penalty imposed by IBBI” on https://bharatkosh.gov.in within 45 days from the date of issue of this order and submit a copy of the transaction receipt to the Insolvency and Bankruptcy Board of India.

(ii) In addition, she will be working as probationer for four months with other experienced IP so nominated by her IPA under which she is registered. Till completion of this probation, the Authorisation for assignment (AFA) of Ms. Sonu Jain will remain in suspended animation and she will not take any fresh assignment or service under the Code in the capacity of Insolvency Professional.

(iii) Ms. Sonu Jain is directed to be more careful and cautions while dealing with assignments under the Code and Regulations made thereunder and should be extremely careful while submitting report to AA and IBBI.”

For Official Order Download PDF Given Below: