Insolvency Professionals to follow Code of conduct

A supreme court decided case on Insolvency professional guiding him to follow Code of Conduct

1. Insolvency Professionals to
Follow Code of Conduct
Adv. Abhay Jindal
Head-Legal Ways -Mumbai
[email protected]
7021113005
Ca Manmohan Jindal
Ex-Banker and RV-SFA
[email protected]
8850385224

2. Show Cause Notice (SCN)
•TheShowCauseNotice(SCN)No.IBBI/IP/INSP/2021/103/4150/635
dated10.10.2022issuedtoInsolvencyProfessionalwasdisposedof
on03.02.2023bypenalizingtheIPonthefollowinggrounds.

3. Violations
•Violationsofsection17(2)(e),208(2)(a),208(2)(e)oftheCode,Regulation
13(1),36,36A(2)(iii)and
•40BofIBBI(InsolvencyResolutionProcessforCorporatePersons)
Regulations,2016(CIRPRegulations),
•Regulation4(4)and4(7)ofIBBI(InspectionandInvestigation)Regulations,
2017(InspectionRegulations),
•Regulation7(2)(a)and7(2)(h)ofIBBI(InsolvencyProfessionals)
Regulations,2016(IPRegulations)readwithclauses1,2,3,5,10,13,14,
18,19,24and25oftheCodeofConductspecifiedthereunderand
•BoardCircularNo.IP/003/2018dated03.01.2018,BoardCircularNo.
IP/005/2018dated16.01.2018and
•BoardCircularNo.IBBI/IP/013/2018dated12.06.2018

4. Violations of Code of Conduct
•Regulation7(2)(a)and7(2)(h)ofIBBI(InsolvencyProfessionals)
Regulations,2016(IPRegulations)readwithclauses1,2,3,5,10,13,14,
18,19,24and25oftheCodeofConduct
•Certificate of registration of an IP-
The registration shall be subject to the conditions that the IP shall
•7(2)(a)-AtalltimesabidebytheCode,rules,regulations,andguidelines
thereunderandthebye-lawsoftheinsolvencyprofessionalagencywith
whichheisenrolled;
•7(2)(h)-abidebytheCodeofConductspecifiedintheFirstScheduleto
theseRegulations;and

5. CODE OF CONDUCT FOR INSOLVENCY PROFESSIONALS
Under Regulation 7(2) (h)]
•Integrityandobjectivity.
•1.Aninsolvencyprofessionalmustmaintainintegritybybeinghonest,
straightforward,andforthrightinallprofessionalrelationships.
•2.Aninsolvencyprofessionalmustnotmisrepresentanyfactsorsituations
andshouldrefrainfrombeinginvolvedinanyactionthatwouldbring
disreputetotheprofession.
•3.Aninsolvencyprofessionalmustactwithobjectivityinhisprofessional
dealingsbyensuringthathisdecisionsaremadewithoutthepresenceof
anybias,conflictofinterest,coercion,orundueinfluenceofanyparty,
whetherdirectlyconnectedtotheinsolvencyproceedingsornot.

6. Contd..
•[3A.Aninsolvencyprofessionalmustdisclosethedetailsofany
conflictofintereststothestakeholders,wheneverhecomesacross
suchconflictofinterestduringanassignment.]
•4.Aninsolvencyprofessionalappointedasaninterimresolution
professional,resolutionprofessional,liquidator,orbankruptcytrustee
shouldnothimselfacquire,directlyorindirectly,anyoftheassetsof
thedebtor,norknowinglypermitanyrelativetodoso.

7. Independence and impartiality.
•Independenceandimpartiality.
•5.Aninsolvencyprofessionalmustmaintaincompleteindependenceinhis
professionalrelationshipsandshouldconducttheinsolvencyresolution,
liquidationorbankruptcyprocess,asthecasemaybe,independentof
externalinfluences.
•6.Incaseswheretheinsolvencyprofessionalisdealingwithassetsofa
debtorduringliquidationorbankruptcyprocess,hemustensurethatheor
hisrelativesdonotknowinglyacquireanysuchassets,whetherdirectlyor
indirectlyunlessitisshownthattherewasnoimpairmentofobjectivity,
independenceorimpartialityintheliquidationorbankruptcyprocessand
theapprovaloftheBoardhasbeenobtainedinthematter.

8. Independence and impartiality.
•7.Aninsolvencyprofessionalshallnottakeupanassignmentunderthe
Codeifhe,anyofhisrelatives,anyofthepartnersordirectorsofthe
insolvencyprofessionalentityofwhichheisapartnerordirector,orthe
insolvencyprofessionalentityofwhichheisapartnerordirectorisnot
independent,intermsoftheRegulationsrelatedtotheprocessesunder
theCode,inrelationtothecorporateperson/debtoranditsrelated
parties.
•8.Aninsolvencyprofessionalshalldisclosetheexistenceofanypecuniary
orpersonalrelationshipwithanyofthestakeholdersentitledto
distributionundersections53or178oftheCode,andtheconcerned
corporateperson/debtorassoonashebecomesawareofit,bymakinga
declarationofthesametotheapplicant,committeeofcreditors,andthe
personproposingappointment,asapplicable.

9. Contd…
•[8A.Aninsolvencyprofessionalshalldiscloseastowhetherhewasan
employeeoforhasbeeninthepanelofanyfinancialcreditorofthe
corporatedebtor,tothecommitteeofcreditorsandtotheinsolvency
professionalagencyofwhichheisaprofessionalmemberandthe
agencyshallpublishsuchdisclosureonitswebsite.]
•9.Aninsolvencyprofessionalshallnotinfluencethedecisionorthe
workofthecommitteeofcreditorsordebtor,orotherstakeholders
undertheCode,soastomakeanyundueorunlawfulgainsfor
himselforhisrelatedparties,orcauseanyunduepreferenceforany
otherpersonsforundueorunlawfulgainsandshallnotadoptany
illegalorimpropermeanstoachieveanymala-fideobjectives.

10. Professional competence.
•Professionalcompetence.
•10.Aninsolvencyprofessionalmustmaintainandupgradehisprofessional
knowledgeandskillstorendercompetentprofessionalservice.
•Representationofcorrectfactsandcorrectingmisapprehensions.
•11.AninsolvencyprofessionalmustinformsuchpersonsundertheCodeas
mayberequired,ofamisapprehensionorwrongfulconsiderationofafact
ofwhichhebecomesaware,assoonasmaybepracticable.
•12.Aninsolvencyprofessionalmustnotconcealanymaterialinformation
orknowinglymakeamisleadingstatementtotheBoard,theAdjudicating
Authorityoranystakeholder,asapplicable.

11. Timeliness.
•Timeliness.
•13.Aninsolvencyprofessionalmustadheretothetimelimits
prescribedintheCodeandtherules,regulationsandguidelines
thereunderforinsolvencyresolution,liquidationorbankruptcy
process,asthecasemaybe,andmustcarefullyplanhisactions,and
promptlycommunicatewithallstakeholdersinvolvedforthetimely
dischargeofhisduties.
•14.Aninsolvencyprofessionalmustnotactwithmalafideorbe
negligentwhileperforminghisfunctionsanddutiesundertheCode.

12. Information management.
•Informationmanagement.
•15.Aninsolvencyprofessionalmustmakeeffortstoensurethatall
communicationtothestakeholders,whetherintheformofnotices,
reports,updates,directions,orclarifications,ismadewellinadvanceand
inamannerwhichissimple,clear,andeasilyunderstoodbytherecipients.
•16.Aninsolvencyprofessionalmustensurethathemaintainswritten
contemporaneousrecordsforanydecisiontaken,thereasonsfortaking
thedecision,andtheinformationandevidenceinsupportofsuchdecision.
Thisshallbemaintainedsoastosufficientlyenableareasonablepersonto
takeaviewontheappropriatenessofhisdecisionsandactions.
•17.Aninsolvencyprofessionalmustnotmakeanyprivatecommunication
withanyofthestakeholdersunlessrequiredbytheCode,rules,regulations
andguidelinesthereunder,orordersoftheAdjudicatingAuthority.

13. Contd..
•18.Aninsolvencyprofessionalmustappear,co-operateandbe
availableforinspectionsandinvestigationscarriedoutbytheBoard,
anypersonauthorisedbytheBoardortheinsolvencyprofessional
agencywithwhichheisenrolled.
•19.Aninsolvencyprofessionalmustprovideallinformationand
recordsasmayberequiredbytheBoardortheinsolvency
professionalagencywithwhichheisenrolled.
•20.Aninsolvencyprofessionalmustbeavailableandprovide
informationforanyperiodicstudy,researchandauditconductedby
theBoard

14. Confidentiality.
•Confidentiality.
•21.Aninsolvencyprofessionalmustensurethatconfidentialityofthe
informationrelatingtotheinsolvencyresolutionprocess,liquidation
orbankruptcyprocess,asthecasemaybe,ismaintainedatalltimes.
However,thisshallnotpreventhimfromdisclosinganyinformation
withtheconsentoftherelevantpartiesorrequiredbylaw.

15. Occupation, employability and restrictions.
•Occupation,employabilityandrestrictions.
•22.Aninsolvencyprofessionalmustrefrainfromacceptingtoomany
assignments,ifheisunlikelytobeabletodevoteadequatetimetoeachof
hisassignments.
•[Clarification:Aninsolvencyprofessionalmay,atanypointoftime,not
havemorethantenassignmentsasresolutionprofessionalincorporate
insolvencyresolutionprocess,ofwhichnotmorethanthreeshallhave
admittedclaimsexceedingonethousandcrorerupeeseach.]
•[23.Aninsolvencyprofessionalmustnotengageinanyemploymentwhen
heholdsavalidauthorisationforassignmentorwhenheisundertakingan
assignment

16. Contd…
•23A. Where an insolvency professional has conducted a corporate
insolvency resolution process, he and his relatives shall not accept
any employment, other than an employment secured through open
competitive recruitment, with, or render professional services, other
than services under the Code, to a creditor having more than ten
percent voting power, the successful resolution applicant, the
corporate debtor or any of their related parties, until a period of one
year has elapsed from the date of his cessation from such process.
•23B. An insolvency professional shall not engage or appoint any of his
relatives or related parties, for or in connection with any work relating
to any of his assignment.

17. Contd…
•23C.Aninsolvencyprofessionalshallnotprovideanyservicefororin
connectionwiththeassignmentwhichisbeingundertakenbyanyof
hisrelativesorrelatedparties.
•Explanation.-Forthepurposeofclauses23Ato23C,“relatedparty”
shallhavethesamemeaningasassignedtoitinclause(24A)of
section5,butdoesnotincludeaninsolvencyprofessionalentityof
whichtheinsolvencyprofessionalisapartnerordirector.]
•24.Aninsolvencyprofessionalmustnotconductbusinesswhichinthe
opinionoftheBoardisinconsistentwiththereputationofthe
profession.

18. Remuneration and costs
•25.Aninsolvencyprofessionalmustprovideservicesforremuneration
whichischargedinatransparentmanner,isareasonablereflection
oftheworknecessarilyandproperlyundertaken,andisnot
inconsistentwiththeapplicableregulations.39[25A.Aninsolvency
professionalshalldisclosethefeepayabletohim,thefeepayableto
theinsolvencyprofessionalentity,andthefeepayableto
professionalsengagedbyhimtotheinsolvencyprofessionalagencyof
whichheisaprofessionalmemberandtheagencyshallpublishsuch
disclosureonitswebsite.]
•26.Aninsolvencyprofessionalshallnotacceptanyfeesorcharges
otherthanthosewhicharedisclosedtoandapprovedbythepersons
fixinghisremuneration.

19. Contd…
•27.Aninsolvencyprofessionalshalldiscloseallcoststowardsthe
insolvencyresolutionprocesscosts,liquidationcosts,orcostsofthe
bankruptcyprocess,asapplicable,toallrelevantstakeholders,andmuste
•Giftsandhospitality.
•28.Aninsolvencyprofessional,orhisrelativemustnotacceptgiftsor
hospitalitywhichunderminesoraffectshisindependenceasaninsolvency
professional.
•29.Aninsolvencyprofessionalshallnotoffergiftsorhospitalityora
financialoranyotheradvantagetoapublicservantoranyotherperson,
intendingtoobtainorretainworkforhimself,ortoobtainorretainan
advantageintheconductofprofessionforhimself,endeavourstoensure
thatsuchcostsarenotunreasonable.

20. Decision -
•Repeatednon-cooperationandseriesofnon-compliancesisnot
justifiable,whatsoever,seriousnatureoftrauma,atpersonallevel
onemaybesuffering.Incase,circumstancesweresocompellingthat
hewasnotabletodischargehisduties,insteadofremaininggainfully
engagedonregularbasisinconnectionwithCD,hehadoptionto
approachtoCoCorAAforpresentingacaseforhisreplacement.
•ForfulldetailskindlyreferthewebsiteofIBBI.
•IPshouldfollowthefullcodeofconduct.

21. Thanks
•Adv. Abhay Jindal –
•CEO –Legal Ways -Mumbai
•[email protected]\
•7021113005
•Ca Manmohan Jindal
•Ex-Banker and RV-SFA-Mumbai
•[email protected]
•8850385224