The Insolvency and Bankruptcy Board of India (IBBI) will now be the competent authority to act against erring resolution professionals instead of the National Companies’ Law Tribunal (NCLT), clarified the National Companies Law Appellate Tribunal in a recent order.
This is likely to provide relief to the professionals in this area who have been marred by multiple complaints being used by companies as a delaying tactic while those companies will have to face an empowered IBBI team when defending their own complaints.
“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 empowered to take action against a resolution professional, after seeking an explanation from the said RP, clarified the court. IBBI also launched a resolution course recently which is set to attract a lot of candidates to the emerging industry of bankruptcy resolution.
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, reported the Economic Times.
NCLAT found that NCLT observations against Shah were made without issuing an individual notice to him.
“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 NCLT had approved Shah and appointed another resolution professional to oversee the liquidation process.