Regulator red-flags actions of IP Anil Goel again; lets him off with warning

Insolvency professional Anil Goel, who earlier also had a brush with the insolvency law, was once again under the insolvency regulator’s scrutiny, only this time he escaped scot-free.

Anil Goel was investigated by the disciplinary committee of the Insolvency and Bankruptcy Board of India (IBBI) for a couple of breaches.

The regulator found that Mr Goel had authorized an Insolvency Professional Entity (IPE) —  AAA Insolvency Professional LLP  — to raise invoices for his fee in the CIRPs of VISA Power Limited (VISA), Rasoya Proteins Limited (Rasoya), Loha Ispaat Limited (Loha), REI Agro Limited (REI), Rotomac Global Private Limited (Rotomac), Gujarat Oleo Chem Limited (Gujarat Oleo) and Charbhuja Industries Private Limited (Charbhuja).

The law requires that all IPs to raise invoices in their respective names and that payment to IP and IPE to be shown separately. Therefore, the Board was of the prima facie view that Mr Goel has violated sections 5(13), 208(2)(a) of the Code, regulation 7(2)(a) & (h) of the IP Regulations and clauses 2, 5 & 14 of the Code of Conduct under Schedule 1 of the IP Regulations.

In another alleged violation, the regulator found that Mr Goel took assistance of one of his associate firms — AAA Capital Services (AAACS) – in the CIRPs of LML Limited (LML), Gujarat Oleo, Loha, Rasoya, Charbhuja and Amar Remedies without prior approval of the Committee of Creditors. It also found that in the CIRP of VISA, Mr. Goel did not make relationship disclosure for AAACS.

Therefore, the Board was of the prima facie view that Mr. Goel has violated sections 28(1)(f) and 208(2)(a) of the Code, regulation 7(2)(a) & (h) of the IP Regulations and clauses 2, 3, 5 & 14 of the Code of Conduct under Schedule 1 of the IP Regulations.

Further, as per regulation 35(2) of the CIRP Regulations, the resolution professional should not provide the Liquidation and Fair value determined by the registered valuers to the members of the CoC upon obtaining a confidential undertaking from each member.

However, the Board found that in the insolvency case of VISA, Mr. Goel discussed the liquidation and fair value with the members of the CoC before taking the confidential undertaking. Therefore, the Board was of the prima facie view that Mr. Goel has violated section 208(2)(a) of the Code, regulation 35(2) of the CIRP Regulations, regulation 7(2)(a) & (h) of the IP Regulations and clauses 2, 5 & 14 of the Code of Conduct under Schedule 1 of the IP Regulations.

Goel’s defence

With regard to the issue of raising of invoices by IPE AAA, Mr Goel submitted that the fee paid to the respective IPE forms part of the IRPC as per regulations 33 & 34 of the CIRP Regulations, and that he had disclosed the fee which was payable to him, fee payable to the IPE and fee payable to professionals engaged by him.

The amendment in CIRP regulations, which required all IPs to raise invoices in their respective names and that payment to IP and IPE to be shown separately, was only effective from 1 April, 2018.

Mr Goel submitted that the said Circular was not applicable at the time of receipt of payments in the said CIRPs. The invoices raised by AAA were pertaining to support services provided by AAA in the said CIRPs.

On the issue of related party transactions, Mr Goel submitted that the expenditure incurred by AAACS while providing assistance to him was listed under the heads — expenditure incurred for taking control, custody, physical possession of the assets of the corporate debtors and expenses incurred for inspection of security guards deployed at the assets of the corporate debtors. Therefore, he contended that since the invoices raised by AAACS were solely in the nature of reimbursements, they did not fall under the term related party transaction and thus, does not attract the provisions of section 28(1)(f) of the Code.

On disclosure of liquidation and fair value, he said that he briefly explained the liquidation and fair value to the CoC only after no EoI was received 7 days before the completion of mandated 270 days. He also said that no copies of the valuation were provided to the CoC.

The disciplinary committee was convinced by the Mr Goel’s defence and disposed off the show cause notice without any punitive action. However, it advised Mr Goel to be more careful in the future.

Also read: Mistakes they make: Common violations that land insolvency professionals in trouble

It is to be mentioned here that Mr Goel was in October found in violation of a number of insolvency provisions including wrongful distribution of CD’s fund among creditors, blocking of employees salaries, and wrongful deduction of fees.

The disciplinary committee had chastised Mr. Goel for a very casual and lax approach in his conduct of liquidation proceedings of Varrsana Ispat Limited, and he was barred from taking any assignment as insolvency professional for three months.