IP agencies can now levy monetary penalty on insolvency professionals
The Insolvency and Bankruptcy Board of India (IBBI), the insolvency regulator, has allowed the Disciplinary Committee of an Insolvency Professional Agency (IPA) to impose monetary penalty on its professional members.
The order came through a circular issued by IBBI on 28 July 2021.
The Bankruptcy Law Reforms Committee had envisaged IP agencies will have the flexibility to impose a graduated system of penalties, where minor non-compliances will result in monetary fines, and major violations will result in expulsion from the agency.
The insolvency regulator, therefore, has in the interest of objectivity and uniformity, 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.
This order comes into force with immediate effect.
Contraventions and quantum of penalty
| Contraventions | Monetary Penalty |
| 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. |
| Accepts an assignment having conflict of interests with the stakeholders. | Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 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. |
| 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. |
| 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. |
| Outsources his duties and obligations. | Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000. |
| 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. |
| 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 |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
Also Read: How women insolvency professionals have fared in IBC: An analysis in numbers
