On 23rd August 2018, the IBBI issued a 19 page order signed by the WT Director and also by the Chairman of IBBI. It was dedicated to ONE man, Mukesh Mohan, who had contravened provisions of sections 17, 18(f), 20, 23, 25(2)(h) and (j), 29A, 43, 45, 50, 66, 196 (1)(g), 206, 208 (2)(a) and (e) of the Insolvency Code, 2016.

Not just that, he had also contravened regulation 7(2)(a)(h) and (i) of the IBBI IP Regulations. Furthermore, he was credited with contravention of clauses 1,2,3,5,9,10,11,12,13,14,15,16,17,19,24 and 25 of the Code of Conduct appended to IBBI IP Regulations. Lastly he was also found to have contravened Regulations 6(3), 13, 27(a) and 36 of the IBBI IRP for CP Regulations.

While most of us are unaware or don’t care about the numerals mentioned above, but it is important to understand the breadth of the achievements of man and the detailed extent to which the Board goes about in military precision to clean up the dirt created by one of its own. The success of the most ambitious reform is so critically dependent on the fulcrum of the Institution of the Insolvency Professional that it needs to be constantly guarded and protected from the few bad apples within.

Some of the statements/observations made in the 19 page report are subtle, while some are sharp, gives the nation an assurance that the men in charge mean business.

“There would be anarchy in the society if professionals responsible for upholding the law disregard the same.”

The strong statement was with regard to the NCLAT Order dated 09.02.2018, “we issue notice to on Mr Mukesh Mohan to state as to why a proceeding for contempt of court be not initiated against him.”

The NCLAT Order was of course issued as a consequence of direct disregard to its order dated 08.12.2017 by our protagonist.

Now the road to become a Insolvency Professional is strewn with hurdles that include test of Knowledge, Ability to Apply the Knowledge, besides mandating basic educational qualifications. And when the order, on page 4  itself makes a statement like,

“This poorly reflects on the professional competence of the IP”, then we know that inspite of all the hurdles on the path to become an IP, it is actually easier to become an Insolvency Professional rather than perform as an insolvency Professional.

Mukesh Mohan is a CA with decades of practicing experience. So when, in his defence he made w written submission before the Disciplinary Committee, that the Committee of Creditors had rejected a a proposal of the IBBI Board, then he betrayed a lack of knowledge and also an intense desire for trouble. And he got more than he asked as the Report mentions,

“The IBBI Board had issued the relevant directions in exercise of its powers u/s 196 (1)(g) of the Code. The Code itself does not contemplate anywhere that the directions of the Board are subject to approval of the COC. The COC is not the forum to take a view on the statutory directions given by the Board to a registered IP.”

And then it added,

“This poorly reflects the professional competence of Mr Mohan as an IP.”

In another contravention, Mr Mohan introduced a new requirement in the CIRP that is not enshrined in the Code. A certification from the Resolution Applicant itself that,

“Resolution Applicants also to submit an affidavit supported with CA certificate that they are eligible to be Resolution Applicants under IBC 2016, all amendments, Rules and Regulations made thereunder.”

Not just he amended the Code, he did it on his own without as much as informing or taking approval of the COC. The above line was inserted in the EOI that the IP issued overriding the draft EOI approved by the COC of Carnation Auto India.

And the Board came down heavily on Mr Mohan,

“Mr Mohan outsourced verification of eligibility of a resolution applicant to a CA who is not professionally qualified to undertake this responsibility.”

This has deeper implication and is a statement on the institution of Insolvency Professional vis a vis other professionals.

The comment, in the case of Athena Demwe Power, on Mukesh Mohan acting as a mere postman is even more scathing on the functioning of the IP, who is expected to lead the CIRP,

“It appears that Mr Mohan was acting as a post office among the COC, members of the suspended Board of Directors, and the forensic auditor. He received forensic report from forensic auditor, placed it before the COC, received comments of the members of the suspended Board, and forwarded those comments to the forensic auditor for comments. The Board (of IBBI) does not expect a RP to be a pass through as regard a forensic auditor is concerned.”

In another blatant display of ignorance of the Code provisions,

In his defence for not including the Liquidation Value in the Information Memorandum, he actually stated the valuers appointed were not approved by the COC, and hence matters were beyond his control.

Now this pleading of helplessness did not earn him any brownie points with the Disciplinary Committee. Nor the ignorance of the fact that under Regulation 27, of the CIRPR, the Insolvency Professional is mandated to appoint two Registered Valuers within seven days of his appointment. And at such point of time the COC is not even constituted. So there is no role envisaged by the Code for the COC in the appointment of the Valuers.

When questioned on the appointment of the same Valuer across the four insolvency cases that he was resolving, he defended his actions by providing the feeble argument that the same was ratified by the respective COC.

This the Disciplinary Committee found to be, “the submission that the COC has ratified the appointments of the valuers is amusing. Neither does the law envisage a role of the COC in the appointment of valuers nor does the COC exist at the time of the IRP is required to appoint valuers.”

Now it was discovered that the Insolvency Professional even missed out on the basic management etiquettes, which incidentally are also legally mandated in the Code, to send correspondences from his registered email id and his communications did not carry his address and Registration number as an IP.

There are many other minor and major contraventions that Mukesh Mohan was found guilty of.

Now the entire Insolvency and Bankruptcy Process is managed by a regulated and licensed professional namely the Insolvency Professional or an IP appointed by the Adjudicator. In an I&B process driven by law there are judicial decisions being taken by the Adjudicator. But there are also checks and accounting as well as conduct of due process that are carried out by the IP.

Insolvency Professionals form a crucial pillar upon which rests the effective, timely functioning as well as credibility of the entire edifice of the Insolvency & Bankruptcy Process.

As part of the disciplinary process, several lessons or principles were reiterated regarding the conduct of CIRP,

1. No single creditor, whether secured or unsecured, irrespective of its voting power or share, can substitute the COC. A RP must not engage in private conversations with a creditor irrespective of his voting power.

2. The IP must have approval of COC for laying down the eligibility criteria u/s 25 of the Code. This cannot be a post facto approval.

3. The IP is the sole authority for taking a view on irregular transactions and filing applications before the AA seeking appropriate relief. The COC has no authority to decide the merits of such transactions and whether to file and when to file the application before the AA. It can, however, raise a concern if the RP does not discharge his duties, including his duties in respect of irregular transactions, in accordance with the Code.

4. The work of a forensic auditor and a registered valuer have a substantial bearing on the outcome of a CIRP, particularly on maximization of value of the assets of the CD. The IP must ensure that the professionals, including forensic auditors and valuers, engaged by him in CIRP must not have conflict of interest.

5. An IP must perform his defined role under the Code and must not usurp other’s role nor allow others usurp his role.

To conclude, it is good to see the Guardians take a serious note of the infringements caused by one of their own. Instead of covering it up in the false notion that it might hurt its nascent reputation, the Board decided to pull up the cow boy, and penalize him for his contraventions. In doing so, the Board not just defended the Code from the internal enemies but also super enhanced the faith of India in the most ambitious reform of Post Liberalisation India.

Now in case we are wondering what happened of our protagonist, his registration as Insolvency Professional was cancelled and he was debarred from seeking fresh registration as an insolvency professional.

http://ibbi.gov.in/webadmin/pdf/order/2018/Aug/Order-%20Mukesh%20Mohan_2018-08-23%2018:18:58.pdf

Author Bio

More Under Corporate Law

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

June 2021
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
282930