The Insolvency and Bankruptcy Board of India (IBBI) will be the competent authority and not the National Company Law Tribunal (NCLT) to act against any resolution professional (RP) for dereliction of duty, the National Company Law Appellate Tribunal has stated in an order recently.
This will encourage professionals who find huge career opportunity in this new-age profession that plays a crucial role in the fight against bad loans.
At the same time, this could end the corporates’ delay tactics by levelling false allegations against the RPs.
“If there was any lapse on the part of the resolution professional which has come to the notice of the Adjudicating Authority (NCLT), he should have referred the matter to the Insolvency and Bankruptcy Board of India (IBBI) for taking appropriate action in accordance with law,” Judges SJ Mukhopadhaya and AIS Cheema said in their order.
IBBI is the competent authority to take any action, after seeking explanation from the RP, they said. IBBI recently introduced a bespoke professional course for insolvency professionals, a move that will burnish the appeal of the emerging profession amid growing popularity.
The matter relates to Dhinal Shah, an RP in the bankruptcy proceedings against shipbuilder Bharati Defence and Infrastructure, which defaulted repayments. The bankruptcy court ordered liquidation of the company.
NCLAT found NCLT’s adverse observations against Shah were made without issuing an individual notice to him.
“The latest NCLAT order will surely encourage more professionals to adopt insolvency resolution as a profession,” said Anil Goel, founder of AAA Insolvency Professionals.
“Insolvency professionals should be provided an opportunity to be heard before any adverse comments are passed is the most welcome part of this order.” On January 14, the NCLT’s Mumbai bench rebuked Dhinal Shah — a partner in the consultancy firm E&Y — citing various lapses. Allegations ranged from charging high monthly fees, modes of soliciting expressions of interest (EoIs) to the RP’s employment links with the resolution applicant — Edelweiss ARC.
“The RP and CoC (Committee of Creditors) have failed to ensure appropriate checks and balances and failed to implement the “Chinese wall” concept during the entire corporate insolvency resolution process,” member judges Ravikumar Duraisamy and VP Singh of the Mumbai NCLT said in the order.
The NCLT had removed Dhinal Shah citing conflict of interest and appointed another person to oversee the liquidation process.
Source: Economic Times