Penalty Insolvency Professional under IBC regulations.

  • 29 Jul, 2022
  • IBC

Penalty Insolvency Professional under IBC regulations.

  • Section 70(2)
  • If an IP deliberately contravenes the provisions of this Part he shall be punishable with imprisonment for a term which may extend to six months, or with fine which shall not be less than one lakh rupees, but may extend to five lakh rupees, or with both. Similar provision in Sec. 185
  • Section 220(3)
  • Where any  IPA  or IP or IU has contravened any provision of this Code or rules or regulations made there under, the disciplinary committee may impose penalty which shall be –
    • three times the amount of the loss caused, or likely to have been caused, to persons concerned on account of such contravention; or
    • three times the amount of the unlawful gain made on account of such contravention,
    • whichever is higher. 
    • Provided that where such loss or unlawful gain is not quantifiable, the total amount of the penalty imposed shall not exceed more than one crore rupees.
  • Section 235A
    • If any person contravenes any of the provisions of this Code or the rules or regulations made thereunder for which no penalty or punishment is provided in this Code, such person shall be punishable with fine which shall not be less than one lakh rupees but which may extend to two crore rupees. (added w.e.f 23.11.2017)

Monetary Penalties by IPA

  • IBBI Circular  No. IBBI/IPA/43/2021 28th July, 2021
  • Two broad groups of non-compliance for Penalty
  • Up to ₹ 1,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 50,000. (.e.g non filing, incorrect filing etc.)
  • Up to ₹ 2,00,000 or 25% of fee, whichever is higher, subject to a minimum ₹ 1,00,000.

Board’s Power for Disciplinary Action

  • Sec 217 Any person aggrieved by the functioning of an IPA or IP or IU may file a complaint to the Board in such form, within such time and in such manner as may be specified.
  • Sec 219 : IBBI may, after inspection or investigation u/s 218, issue a show cause notice to IPA or IP or IU, and carry out inspection of such IPA or IP or IU, for giving reply.
  • Sec 220 (1) Board shall constitute a disciplinary committee (DC) to consider the reports of the Investigating Authority (IA) submitted u/s 218 (6).
  • Sec 220 (2) Empowers the DC to impose penalty  or suspend or cancel the registration of the IP or IPA or IU.

Confidentiality of Information relating to processes

  •   Sec 29 (2) The resolution professional shall provide to the resolution applicant access to all relevant information in physical and electronic form, provided such resolution applicant undertakes—
  • (a) to comply with provisions of law for the time being in force relating to confidentiality and insider trading;
  • (b) to protect any intellectual property of the corporate debtor it may have access to; and
  • (c) not to share relevant information with third parties unless clauses (a) and (b) of this sub-section are complied with".

Insolvency Professional under the IBC Regulations

  •  Regu. 7 (2) The registration shall be subject to the conditions that the insolvency professional shall –

(a) at all times abide by the Code, rules, regulations, and guidelines there under and the bye-laws of the IPA with which he is enrolled;

(b) at all times continue to satisfy the requirements under Regulation 4 (Eligibility);

 (ba) undergo continuing professional education, as may be required by the Board;

  • CPE Requirements:
  • minimum of 10 hours in each calendar year
  • Minimum of 60 hours in each rolling block of three calendar years
  • Not required to undertake any CPE in the calendar year in which registered

 (bb) not outsource any of his duties and responsibilities under the Code, except  those specifically permitted by the Board.(w.e.f. 01.04.2018)

(c) pay to the Board a fee of ₹ 10,000, every five years after the year in which the certificate is granted; {Reg. on 02.02.18, next fee payable on or before 30.04.23}

(ca) pay to the Board, a fee calculated @ of 0.25% of the of the professional fee earned for the services rendered by him as an IP in the preceding financial year, on or before 30th April every year along with a statement in Form E; (w.e.f. 11.10.18)

(d) not render services as an IP unless he becomes a partner or director of an IPE recognised by the Board, if he is not a citizen of India;

(e) take prior permission of the Board for shifting his professional membership from one IPA to another, after receiving no objection from both the concerned IPAs;

(f) take adequate steps for redressal of grievances;

(g) maintain records of all assignments undertaken by him under the Code for at least three years from the completion of such assignment; (for 8 years in electronic form - Circular IBBI/CIRP/38/2021 dt. 06.01.2021)

(h) abide by the Code of Conduct specified in the First Schedule to these Regulations; and

(i) abide by such other conditions as may be imposed by the Board.

Regu 7A. An IP shall not accept or undertake an assignment after 31.12. 2019 unless he holds a valid authorisation for assignment (AFA) on the date of such acceptance or commencement of such assignment, as the case may be:

Provided that provisions of this regulation shall not apply to an assignment which an IP  is undertaking as on-

(a) 31.12 .2019 or

                           (b) the date of expiry of his AFA {w.e.f. 23.07.2019}

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