IBBI directs IP to pay 10% of fee as penalty and undergo pre-registration course from IPA for contravening section 208

Case Details: Ms. Kumudini Paranjape, In re - [2021] 130 taxmann.com 396 (IBBI)

Judiciary and Counsel Details

• • Dr. Mukulita Vijayawargiya, Member

Facts of the Case

It is incumbent upon an Insolvency Professional (IP), under section 208(2) of the Insolvency and Bankruptcy Code, 2016, to take reasonable care and diligence while performing his functions and duties and even for a layman ignorance of the law is not an excuse for any non-compliance or contravention. In the case of a professional, ignorance and negligence are serious lapses though not malpractices, and adversely affect professional competence.

In the instant case, Circular No. IP/004/2018, dated 16-1-2018 was issued by IBBI clarifying that an insolvency professional shall render services for a fee which is a reasonable reflection of his work, raise bills/invoices in his name towards such fees, and such fees shall be paid to his bank account.

The Applicant – Insolvency Professional (IP), in respect of her role as a liquidator in a matter of voluntary liquidation of six corporate persons did not raise invoices for work in her name but in name of her firm even when Circular was issued. Hence, show cause notice was issued to the applicant alleging contravention of section 208 of the Code.

IBBI Held

It was found that the applicant’s work was negligent as she did not take reasonable care and due diligence and there was non-compliance of Circular by her and it was not only in one matter but it continued in all six matters.

Therefore, there is a contravention of provisions of IP regulations and non-compliance of Circular No. IP/004/2018, dated 16-1-2018, a show-cause notice was to be disposed of, directing the applicant to undergo a pre-registration educational course from IPA of which she was a member and to pay a penalty equal to ten percent of the fee as she had received in six assignments of voluntary liquidations.

In addition to further ongoing, she shall not accept any new assignment as an IP till she deposited penalty amount with Board and completed pre-registration educational course and produced evidence to Board of such deposit and educational course.