IP not eligible to undertake assignments without Authorization

INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
(Disciplinary Committee)

No. IBBI/DC/36/2020

29th October, 2020

In the matter of Mr. Dushyant C Dave, Insolvency Professional (IP) under Regulation 11 of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 read with section 220 of the Insolvency and Bankruptcy Code, 2016.

This Order disposes of the Show Cause Notice (SCN) No. IBBI/IP/MON/2020/107/409/213 dated 14th July, 2020 issued to Mr. Dushyant C Dave, 1101, Dalamal Tower, B Wing, Free Press Journal Marg, Nariman Point, Mumbai, Maharashtra – 400021, who is a Professional Member of the Insolvency Professional Agency of Institute of Cost Accountants of India (IPA) and an IP registered with the Insolvency and Bankruptcy Board of India (IBBI) with Registration No. IBBI/IPA-003/IP-N00061/2017-18/10502.

Background

1.1 The IBBI on 14th July, 2020 had issued the SCN to Mr. Dushyant C Dave, based on material available on record in respect of his role as interim resolution professional (IRP) and/ or resolution professional (RP) in corporate insolvency resolution process (CIRP) of Topworth Steels and Power Private Limited (CD). The SCN alleged contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and the Code of Conduct under regulation 7(2) thereof. Mr. Dave replied to the SCN vide letter dated 24th July, 2020 and submitted additional responses vide letter dated 25th September, 2020.

1.2 The IBBI referred the SCN, responses of Mr. Dave to the SCN and other material available on record to the Disciplinary Committee (DC) for disposal of the SCN in accordance with the Code and Regulations made thereunder. Mr. Dave availed an opportunity of personal e-hearing before the DC on 22nd September 2020.

Show Cause Notice

2. The IBBI has taken on record the order dated 29th January, 2020 of the Hon’ble National Company Law Tribunal, Mumbai Bench (AA) in the matter of State Bank of India vs. Topworth Steels & Power Private Limited vide which Mr. Dave was appointed as Interim Resolution Professional (‘IRP’) of CD. It was observed that Mr. Dave had issued public announcement in the matter on 29th February, 2020. Mr. Dave was also called upon to submit his reply vide email dated 25th April, 2020 and the reply was submitted on 28th April, 2020. The contraventions alleged in the SCN are summarized as follows:

2.1 The CIRP in the matter of Topworth Steels and Power Private Limited was commenced vide order dated 29th January, 2020 of AA but the same was communicated to Mr. Dave on 28th February, 2020 and thereafter public announcement was made on 29th February, 2020. On 28th February, 2020, Mr. Dave applied to IPA seeking Authorization for Assignment (AFA) which was issued on 20th March, 2020 with a validity of one year. However, in the meantime, Mr. Dave issued public announcement in the CIRP of the CD on 29th February, 2020 i.e. while not holding a valid AFA. Therefore, the IBBI prima facie held the view that Mr. Dave has violated Section 208(2)(a) & (e) of the Code and Regulation 7(2)(a), 7(2)(h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations), read with clauses 1, 2, 12 and 14 of the Code of Conduct as given in the First Schedule of the IP Regulations.

2.2 The IBBI has taken on record Consent Form-2, dated 2nd April, 2018 wherein Mr. Dave agreed to accept the appointment of IRP in the matter of CIRP of CD. In the Form, Mr. Dave certified that there are no disciplinary proceedings pending against him with the IBBI or IPA. Subsequently, the IBBI issued a SCN (SCN-1) on 31st October, 2019 in a different matter which was disposed of vide order dated 27th February, 2020. Hence, DC proceedings were pending on 29th January, 2020 when the CIRP of CD was admitted by AA. Further, Circular no. LA/010/2018 dated April 23, 2018 issued by IBBI also states that an IP shall not accept any fresh assignment as IRP, RP, liquidator, or a bankruptcy trustee under the Code, if a SCN is pending against him. Since, Mr. Dave certified in Consent Form 2 in the year 2018, that no disciplinary proceedings were pending against him with the IBBI, it was his responsibility to inform all the stakeholders and the AA about the latest development, i.e., concurrent DC proceedings going against him on the date of commencement of CIRP of CD. However, Mr. Dave failed to inform the stakeholders and the AA about the same. Therefore, the IBBI prima facie held the view that Mr. Dave has violated Section 208(2)(a) & (e) of the Code and Regulation 7(2)(a) and 7(2)(h) of the IP Regulations, read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct as given in the First Schedule of the IP Regulations.

Submissions by Mr. Dave

3. Mr. Dave vide reply dated 24th July 2020 had submitted that the SCN is issued without sending the draft inspection report in accordance with Regulation 6 of the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017.

3.1 Further, with respect to the allegations in the SCN, he had submitted that the appointment of an IRP by an AA requires that the IRP does not have any pending disciplinary proceedings against him. Hence, once his appointment is made by the AA, and since there are no pending disciplinary proceedings as of February 28, 2020 (i.e. the date of communication of admission order dated January 29, 2020), he was to take charge of the affairs of the CD and comply with the order passed by AA.

3.2 The written consent by way of Form 2 in the matter of CD was provided by Mr. Dave on 2nd April, 2018 i.e. two years before the admission order passed by AA dated 29th January, 2020 which was delivered to Mr. Dave only on 28th February, 2020. Until 28th February, 2020, Mr. Dave was not even aware about the fact that the application of the CD was admitted by the AA since the applicant, i.e., State Bank of India (SBI), never informed him about the status of the same or any developments in the matter. In fact, the application from SBI was rejected by AA and there was no way to know that the application would be admitted. However, SBI had approached Hon’ble National Company Law Appellate Tribunal and got its application admitted again after prolonged litigation and Mr. Dave was unaware about the same. Therefore, in the best interests of the CD, Mr. Dave immediately commenced the CIRP process with a public announcement the very next day, i.e., on 29th February, 2020 which if not done, would have been in violation of the Code and in contempt of the order of AA.

3.3 Mr. Dave submitted that the SCN-1 disposal date, the NCLT order date, and the NCLT Order delivery dates are not under his control and hence there is no violation whatsoever and it is completely a figment of imagination to cast aspersions of doubt on the IP and seek explanation from him by way of issue of the SCN thereby subjecting him to the disciplinary proceedings.

3.4 Mr. Dave had submitted that he has already filed an application before the AA regarding change of the Insolvency Commencement Date from 29th January, 2020 to 28th February, 2020 and the order is awaited. As on 28th February, 2020, there were no pending disciplinary proceedings against him and therefore, no regulations or provisions of the Code and its applicable rules and regulations have been violated.

3.5 SCN-1 was issued to Mr. Dave in a different matter on 31st October, 2019 (SCN 2) which was disposed by the DC vide order dated 27th February, 2020. The very next day, on 28th February, 2020, Mr. Dave applied for seeking the AFA which was provided on 20th March, 2020. The consent form for this assignment (Form 2) was taken on record by the IBBI on 2nd April, 2018 while SCN-1 was issued 19 months later on 31st October, 2019 and hence, no disciplinary proceedings were ongoing or pending against him when Form 2 was taken on record, nor were there any such proceedings ongoing or pending on February 28, 2020 when he commenced the CIRP for the CD upon receipt of the order passed by AA.