#IBBI DIRECTS RESOLUTIONB PERSON TO PASS THE IP EXAM ONCE AGAIN#
Channel: R V Seckar
Date: 16/06/2020

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 the CIRP of GGL, NWL and NBL. 
Section 20 (2) (a) of the 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 
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 the CIRP 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 reasonable
. Fee 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 shall