Contraventions and Findings
4. The DC observes that both the CIRPs are strikingly similar. Both CDs belong to the same group and are under the same management. Both CIRPs were triggered by the same operational creditor, around the same time. The CoC in both cases comprised the sole operational creditor. The conduct of Mr. Kejriwal was similar in both the CIRPs. He has provided similar response to the alleged contraventions. A summary of contraventions alleged in the SCN, Mr. Kejriwal’s written and oral submissions thereon and the findings of the DC are as under:
4.1 Contravention: The SCN makes broadly three allegations.
a. Mr. Kejriwal did not conduct CIRP as required under section 23 of the Code. He did not submit progress report to AA in time, make public announcement in time, appoint registered valuers, prepare and circulate information memorandum, invite resolution plans under section 25(2)(h) of the Code, convene the meetings of CoC with adequate notice, etc. Rather, he invited resolution plan only from the sole member of the CoC, without providing information memorandum, asking him to submit resolution plan in four days.
b. Mr. Kejriwal did not run the CDs as a going concern, as required under section 20 of the Code. He never took over the management of the CDs. He did not seek direction of the AA if he did not receive the required co-operation from the CDs.
c. Mr. Kejriwal resigned as RP in both the CIRPs, without prior permission of the AA, though he consented to act as IRP and as RP in both cases. After he offered himself for appointment as RP in both the CIRPs, the CoC appointed him as RP.
4.2 Submission: Mr. Kejriwal has broadly made three submissions: (a) he did not have funds to make public announcement; (b) he did not get co-operation from the CD; and (c) he was not well from 4th September, 2017 to 22nd October, 2017. As regards resignation, he has stated in the letter of resignation that he resigned on personal reason. He responded vide his mail dated 2nd January, 2018 that he resigned because he did not get fee and CD did not co-operate.
4.3 Finding: The DC finds that:-
a. Mr. Kejriwal has absolutely no defence as to why he did not conduct the CIRP. He has nothing to say as to, for example, why he did not invite resolution plan under the then provisions of section 25(2)(h) from prospective lenders, investors, and any other persons to put forward resolution plans. The sole purpose of CIRP is consideration and approval of resolution plan to resolve insolvency. The heart of the process is resolution plan. He did not invite resolution plans. He did not even prepare or provide the required information to prospective resolution applicants.
b. As regards his excuse of non-co-operation from CDs to manage the operations of the CDs as a going concern, there is absolutely no evidence that he wanted to take over management of the CDs. For the sake of formality, he wrote a few letters to the CDs seeking certain documents. He never brought it to the notice of the AA under section 19 of the Code that he was having any non-co-operation from the CDs. He did not make any effort whatsoever to run the CDs as a going concern.
c. One can consider illness as an excuse. But that does not justify him to cling on to the CIRPs indefinitely till he recovered. The CIRP of Maa Taara Industrial Complex Pvt. Ltd. was admitted on 8th September, 2017, while Mr. Kejriwal claims to be on bed since 4th September, 2017. He could have brought its to the notice of the AA which may have appointed another IRP.
d. His excuse for resignation has also no merit. He has been appointed by the AA with a solemn objective and a statutory responsibility. He cannot run away just because he did not receive fee. Despite having experience of 2-3 months as IRP in both CIRPs, he volunteered to be appointed as RP for both the CIRPs in the meetings of the CoCs held on 19th and 20th November, 2017.
4.4 Mr. Kejriwal has displayed utter misunderstanding of the provisions of the Code and
regulations. For example, the regulations required that the IRP shall appoint two valuers within seven days of his appointment. To the allegation that he did not appoint valuers, he has explained that the CoC would not approve resolution process cost, which includes the fees of valuers. The regulations required the IRP to appoint valuers much before the constitution of the CoC. Therefore, the apprehension that CoC would not approve the fee of valuers is misplaced. Similarly, Mr. Kejriwal claims that he resigned because the CD did not co-operate. It is difficult to appreciate that Mr. Kejriwal was having non-co-operation from CDs for the preceding three months before volunteering to be appointed as RP. In fact, it is unimaginable that an IRP, who is in control of the CD for the last four months, suddenly finds that the CD did not co-operate and he had to resign even without using section 19 of the Code. It is preposterous that Mr. Kejriwal invited resolution plans from only one operational creditor and allowed it only four days to submit resolution plan, as against statutory requirement of invitation of resolution plans form prospective lenders and investors.
5. An IP is not just another professional. He is dealing with a CD in distress. He needs to go beyond the call of duty to address the distress. The DC unfortunately finds that Mr. Kejriwal did not discharge any of his statutory responsibilities as IRP or RP either to manage the operations of the two CDs as going concern under section 20 of the Code or to conduct the resolution processes of the two CDs under section 23 of the Code. He has, therefore, violated provisions of sections 18, 20, 23, 25(2)(g), 25(2)(h), 29, 208(2)(a), and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016, regulations 6(1), 19(1), 27 and 36 of the IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016 and regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 1, 2, 3, 5, 10, 12, 13, 14, and 25 of the Code of Conduct under the said Regulations. It, however, finds in his favour two mitigating factors, namely, (a) Mr. Kejriwal was not well for some time during the relevant period, and (b) the CDs were practically not going concerns to start with.
6.1 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 Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, hereby:-
(a) imposes on Mr. Kejriwal a monetary penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRPs of Upadan Commodities Private Limited and Maa Taara Industrial Complex Pvt. Ltd. and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the Insolvency and Bankruptcy Board of India within 30 days of the issue of this order. The Board shall in turn deposit the said penalty amount in the Consolidated Fund of India.
(b) directs Mr. Kejriwal to undergo the pre-registration educational course specified under regulation 5(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 from his Insolvency Professional Agency to improve his understanding of the Code and the regulations made thereunder, before accepting any assignment under the Insolvency and Bankruptcy Code, 2016.