IBC- Hefty Monetary Penalties to be imposed by an IP Agency
The Insolvency and Bankruptcy Board of India (IBBI) vide circular no. No. IBBI/IPA/43/2021 dated 28th day of July 2021, has issued circular on the topic “Monetary Penalties to be imposed by an Insolvency Professional Agency” in the exercise of powers under section 196 of the Insolvency and Bankruptcy Code, 2016.
IBBI’s move seeks to ensure insolvency professionals remain compliant with the letter and spirit of IBC and conduct themselves ethically.
- Applicability: With immediate effect i.e. 28th day of July 2021.
Key Highlights:
The Disciplinary Committee of an Insolvency Professional Agency (IPA) may impose monetary penalty on its professional members under Clause 24(2)(d) of the Schedule to the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016.
In the interest of objectivity and uniformity, it has been decided that an IPA shall amend its Bye-laws to provide for the maximum and minimum monetary penalty, where the Disciplinary Committee decides to impose such penalty on its professional members, under Clause 24(2)(d) of the Schedule to the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, as under:
| Sl. | Contravention | Monetary Penalty |
| 1. | Fails to submit disclosures, returns, etc. to IPAs or submits inadequate or incorrect disclosures, returns, etc., relating to any assignment, as required under the Code and Regulations made
thereunder or Bye-laws of the IPA or called upon by the Board or the IPA. |
Up to ₹ 1,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 50,000. |
| 2. | Accepts an assignment having conflict ofinterests with the stakeholders. | Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 3. | Fails to maintain records properly relating to any of his assignments. | Up to ₹ 1,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 50,000. |
| 4. | Rejects a claim(s) without giving any proper reason while undertaking an assignment or fails to exercise due diligence in claim verification. | Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 5. | Fails to comply with directions issued by
Adjudicating Authority or the Appellant Tribunal. |
Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 6. | Outsources his duties and obligations. | Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 7. | Fails to appoint registered valuers, wherever
required, under the Code or Regulations made thereunder, for conducting valuation. |
Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 8. | Fails to supply the information called for or to comply with the requirements of information sought by the IPA, Board, Adjudicating Authority or the Appellant Tribunal or does not cooperate with the inspection or investigating
authority. |
Up to ₹ 1,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 50,000. |
| 9. | Fails to make public announcement in the manner provided for in the relevant Regulations. | Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 10. | Fails to provide notice regarding meetings of
creditors. |
Up to ₹ 1,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 50,000. |
| 11. | Fails to reject resolution plan from ineligible
resolution applicants. |
Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 12. | Fails to take action in respect of Preferential, Undervalued, Fraudulent or Extortionate transactions. | Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 13. | Enters into contract or agreement with professionals in an incomplete and improper manner. | Up to ₹ 1,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 50,000. |
| 14. | Contravenes any provision of the Bye-laws, or Regulations for which no specific penalty has
been provided. |
Up to ₹ 1,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 50,000.” |
Source: Circular no. IBBI/IPA/43/2021
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