IP Served SCN for His Inaction in Dissolving CD Even When There Were Insufficient Assets to Cover Liquidation Cost | IBBI

Case Details: Ms. Sonu Jain, In re - [2023] 152 taxmann.com 631 (IBBI)

Judiciary and Counsel Details

• • Sudhaker Shukla, Whole Time Member, IBBI

Facts of the Case

In the instant case, the IBBI issued a show cause notice (SCN) to the applicant. The Insolvency Professional (IP), on the basis of the investigation report, in respect of its role as the liquidator of the corporate debtor.

It was found that the corporate debtor had invested Rs. 10 crores however, no action had been taken by the liquidator for the realization of investments made by the corporate debtor.

It was also noted that the liquidator failed to open a bank account of the corporate debtor as required under Regulation 41(1) of Liquidation Regulations.

The IBBI observed that one can’t shield behind the non-availability of funds as a valid reason for not opening the account and, thus, the liquidator was duty-bound to open an account and for facilitating the same, the liquidator should have persuaded the operational creditor for contributing this token amount.

IBBI Held

The IBBI held that no substantial action was taken by the liquidator during the liquidation process, except for issuing public announcements, and notices to five unlisted companies for the realization of investments.

Further, the IBBI held that no effort had been made on the liquidator’s part for early dissolution, even when the realizable properties of the corporate debtor were insufficient to cover the cost of the liquidation process. Thus, the liquidator had contravened section 35(1)(o), and Regulation 7(2) of the IP Regulations.

List of Cases Referred to

• • Cognizance for Extetsion of Limitation, In re [2022] 134 taxmann.com 307/441 ITR 722 (SC) (para 5.5).