#IBBI DIRECTS RESOLUTIONB PERSON TO PASS THE IP EXAM ONCE AGAIN#

IBBI DIRECTS RESOLUTIONB PERSON TO PASS THE IP EXAM ONCE AGAIN
AND TO PAY A FINE OF 25% OF HIS FEE FOR ACTING BEYOND HIS AUTHORITY

INSPECTION ORDER AGAINST VIJAY KUMAR GARG , RP UNDER IBC

IBBI  vide Order dated
5 th September 2019 appointed an Inspecting Authority (IA) to conduct an
inspection of Mr. Vijay Kumar Garg, an IP on having reasonable grounds to
believe that the IP had contravened provisions of the Code, Regulations, and
directions issued thereunder.

Allegation Against IRP

Contravention No. 1:

RP appointed Duff & Phelps India Private
Limited (D&P) to provide support services during theCIRP of GGL, NWL and
NBL.

Section 20 (2) (a) of IBBI Code states that the
IRP shall have the authority to appoint accountants, legal or other
professionals as may be necessary. However, appointment of D&P by the RP
was finalized in violation of the provisions since

 D&P
cannot be considered a professional

. Therefore, the Board is of the prima facie
view that RP has violated  various
sections of Insolvency Code.

Whooping Fees  payable
to IRP

It was observed by DC the fact of the matter is
that D&P was engaged in all three CIRPs (GGL, NWL, NBL) for providing
infrastructure, personnel, and back office support at a fee of Rs. 23,75,000/-
per month for GGL and Rs. 6,87,500/- per month each for its two subsidiaries
i.e, NWL and NBL.

D&P was only engaged to provide
infrastructure, personnel and back office support services which cannot be
classified as „professional services‟ involving skill or even a „profession‟

D&P CANNOT BE
REGARDED AS AN IPE

Further, D&P cannot be regarded as an IPE
since it has not been recognized by the Board under

Regulation 12 of the IP Regulations

. Thus, D&P does not fall within the
definition of the term „professional‟.

High Amount of
Professional Fee Paid to D&P

It has been observed from the minutes of 1st
CoC meeting that D&P was engaged for providing infrastructure, personnel
and back office support at a fee of Rs. 23,75,000/- per month (excluding taxes
and out of pocket expenses) for GGL and Rs. 6,87,500/- per month (excluding
taxes and out of pocket expenses) each for NWL and NBL. The total fee payable
to RP was Rs. 1, 25,000/- per month in theCIRP of GGL

. It is observed that the payment agreed to be
paid to D&P in GGL is 19 times of the fee payable to RP. It is
inconceivable that the cost of providing infrastructure, personnel and back
office support services in GGL is 19 times of the fee payable to the RP.

ICICI BANK Ltd Vs
Gitanjali Gems Ltd

 In this
regard, the RP has submitted that given the peculiarities, complexities, and
the work to be undertaken for meeting the objectives of the CIRP in the present
case, the professional fee charged by D&P was commensurate and reasonable
WTM by referring ICICI Bank Ltd. vs. Gitanjali Gems Ltd.  observed that 
the amount recommended to be paid to D&P by the Committee is  Rs. 48,34,312/- (including GST)

RP already aware that the assets of the
Corporate Debtor were already attached by various investigation authorities and
could not be taken over. This shows that the engagement of D&P for NBL and
NWL (subsidiaries of GGL) at an exorbitant rate of Rs. 6,87,500 per month each
(plus taxes and out of pocket expenses) was nothing but a way of siphoning off the money of the
Corporate Debtor.

Findings:

D&P is not a professional and hence its
appointment of D&P is in contravention of section 20(2) of the Code. Fee of
Rs. 23,75,000/-(excluding taxes) per month to D&P in the matter of GGL
which is 19 times of the fee payable to the RP cannot be said to be reasonableFee of Rs. 6,87,500 /-(excluding taxes and out
of pocket expenses) per month each in case of NBL and NWL to D&P also
cannot be said to be reasonable.

Thus there is contravention of Code of Conduct
by RP.

Contravention No. 2:

 In the
matter of GGL, RP received approval from the CoC members to get insurance for
himself during the course of CIRP. However, the RP purchased two insurance
policies from ICICI Lombard General Insurance Company Limited and made D&P
a beneficiary in the same. The RP provided unnecessary benefits to D&P even
though it was stated in the engagement agreement between the RP and D&P
that D&P would act independently of the RP. Costs incurred by RP in
providing insurance to D&P was done in violation of section 5(13) of the
Code, Therefore, the Board is of the prima facie view that RP has acted beyond
his authority.

Findings:

Conducting two meetings of the CoC beyond the
CIRP period and discussing agendas other than as directed by AA i.e.
ratification of IRPC, are beyond the provisions of the Code and the directions
of the AA..

Order

1.    Mr. Vijay Kumar Garg converted the noble
insolvency profession to a business, converted professional client relationship
to that of money lending and borrowing, manipulated the market for insolvency
professional services, attempted to siphon off crores of rupees from the ailing
CD to its partner in crime.

(i)                
Mr.Vijay Kumar Garg  IRPm shall pay a penalty equal to 25% of fee payable
to him  .

(iii)             
Mr. Vijay Kumar Garg shall ensure that no
amount beyond the reasonable fee, as determined by the Expert Committee, is
paid to D&P.

(iv)             
Mr. Vijay Kumar Garg shall undergo
pre-registration educational course from the IPA of which he is a member and
pass the Limited Insolvency Examination again to build his capacity to take up
assignments on his own.

ICICI BANK Ltd Vs Gitanjali Gems Ltd

From the Synopsis of the Order passed by
Disciplinary Committee of IBBI, it is shockingly revealed that IP of Geetanjali
Gems Ltd and its two subsidiaries had manipulated regulations and paid
substantial amount to D&P who could not be engaged as per IBBI Regulations
and burdened the ailing companies.