IRP held Guilty of acting in connivance with erstwhile management

INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

[Disciplinary Committee 

No. IBBVDC/05/2018 21^st May, 2018

ORDER

In the matter of Mr. Rakesh Wadhwa, Insolvency Professional under sub-regulations (7) and (8) of regulation 11 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016

Relevant Extract

5 Conclusion

1.1 An insolvency professional, as IRP / RP, exercises the powers of Board of Directors of a corporate debtor undergoing CIRP. He manages the affairs of the corporate debtor as a going concern. He is the custodian of the property of the corporate debtor and protects and preserves the value of such property. He conducts the entire CIRP and manages the operations of the corporate debtor during the CIRP period. Such duties require the highest level of integrity on the part of the IP.

The conduct of Mr. Wadhwa seen in the context of statutory responsibilities of an IRP and the objective of the Code leaves no doubt that he was acting in connivance with the applicant-creditor and the erstwhile management of the corporate debtor. In particular, Mr. Wadhwa –

(i) continued as IRP for more than 30 days, in breach of section 16(5) of the Code and clauses 10 and 13 of the Code of Conduct appended to the IP Regulations;

(ii) held the first meeting of the CoC with less than 7 days’ notice, in breach of section 208(2)(a) of the Code, regulation 19(2) of the CIRP Regulations and clauses 1, 5 and 13 of the Code of Conduct appended to the IP Regulations;

(iii) did not ensure appointment of RP, properly conduct CIRP, properly manage the affairs of the corporate debtor, prepare information memorandum, invite resolution plans, properly conduct the meeting of the CoC, act independently and thereby contravened provisions of section 17, 18(1)(a) and (b), 22, 23, 24, 25(2)(h), 29, and 30 of the Code and clauses 1, 5, 10, 13, 14, 15 and 24 of the Code of Conduct appended to the IP Regulations;

(iv) did not consider the claim of BoI and include BoI in the CoC in contravention of provisions of section 18(1)(a) and (b), 21(2), and 208(2)(a) of the Code, regulation 12(2), 36, and 39 of the CIRP Regulations, and clause 1, 12, 13 and 14 of the Code of Conduct appended to the IP Regulations; and

(v) acted in connivance with applicant-creditor and the corporate debtor to subvert the CIRP and frustrate the objective of the Code, and severely compromised his standing as a fit and proper person in breach of regulation 7(2) (a) and (b) read with regulation 4(g) of the IP Regulations and clauses 1 and 5 of the Code of Conduct appended to the IP Regulations.

5.3 In view of the above, Mr. Wadhwa has contravened provisions of –

(i) Sections 16(5), 17, 18(1)(a) and (b), 21(2), 22, 23, 24, 25(2)(h), 29, 30 and 208(2)(a) of the Insolvency and Bankruptcy Code, 2016;

(ii) Regulations 4(g), 7(2)(a) and (b), 12(2), 19(2), 36, 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016; and

(iii) Regulations 7(2)(a), 7(2)(b) of the IBBI (Insolvency Professionals) Regulations and clauses 1, 5, 10, 12, 13, 14, 15 and 24 of the Code of Conduct appended to said regulations.

6. Order

611 The Insolvency and Bankruptcy Code, 2016 provides for a process for insolvency resolution of corporate debtors in distress EThe process aims to rescue the corporate debtor from distress LE the instant matter, Mr. Wadhwa, in connivance with the applicant-creditor and the corporate debtor and in contravention of several provisions of the law, subverted the CIRP of Ved Cellulose Limited and thereby attempted to scuttle the life of the corporate debtor itself and frustrate the objective of the Code. Eh was the timely intervention of the Honlkle Adjudicating Authority that the CIRP was rescued by rejection of the ‘resolution plan’ submitted by Mr ITWadhwa and appointment of another IRP in his place A^phis CIRP ultimately ended up with a resolution plan, which was submitted by the resolution applicant-Kalka Energy Pvt. Ltd. and approved by the Hon’ble Adjudicating Authority vide its Order dated 14^th May, 2018. The approved resolution plan provides for a pay-out of Rs.14.47 crore to financial creditors as against Rs.83 lakh under the ‘resolution plan’ submitted by Mr. Wadhwa. The infractions of Mr  Wadhwa call for no leniency Elle has rendered himself a person not fit and proper to continue as an insolvency professional

6.2 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, hereby cancels the registration of Mr. Rakesh Wadhwa as Insolvency Professional having Registration Number IBBI/IPA-002/IP­N00159/2017-18/10428.

7. This Order shall come into force on expiry of 30 days from the date of its issue. However, Wadhwa shall not accept any assignment as IRP, RP or Liquidator for any process under the Code with immediate effect.

8. The Board shall apply to the Hon’ble Adjudicating Authority for replacement of Mr. Wadhwa in the processes, if any, where he is presently acting as IRP, RP or Liquidator, by another insolvency professional(s).

9. A copy of this order shall be forwarded to the ICSI Institute of Insolvency Professionals where Mr. Wadhwa is enrolled as a professional member.

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http://ibbi.gov.in/webadmin/pdf/whatsnew/2018/May/Order%20of%20the%20Disciplinary%20Committee%20in%20the%20matter%20of%20Mr.%20Rakesh%20Wadhwa_2018-05-21%2017:20:40.pdf