corporate law
The Insolvency and Bankruptcy Board of India (IBBI) has issued an order concerning Mr. Subhash Chand Agrawal, an insolvency professional, due to allegations of non-compliance during the Corporate Insolvency Resolution Process (CIRP) of Dream Land Realtor Pvt. Ltd. (CD-1) and P K Sales Company Pvt. Ltd. (CD-2). Mr. Agrawal initially served as the Interim Resolution Professional (IRP) and later as the Resolution Professional (RP) for both entities until liquidation orders were issued. He declined to continue as the liquidator, prompting the appointment of Mr. Rakesh Bhatia.
This matter was investigated under Section 218 of the Insolvency and Bankruptcy Code, 2016 (the Code), which scrutinized Mr. Agrawal’s management of assets and record-keeping. The Disciplinary Committee (DC) identified discrepancies in his statements and noted that he improperly granted symbolic possession of assets to the suspended board's directors without requisite authorization. This misstep delayed control transfer to the liquidator and allegedly led to asset depreciation. Mr. Agrawal defended his actions by asserting that symbolic possession implied control, referencing a legal precedent the DC found irrelevant, and argued that there were no clear legal guidelines at the time.
The DC emphasized the obligations of a Resolution Professional under the Code, which include the custody and management of assets. It concluded that Mr. Agrawal violated several provisions of the Code and its regulations. This order highlights the significant responsibility of insolvency professionals in maintaining compliance and protecting assets during insolvency proceedings.
The National Company Law Tribunal (NCLT), New Delhi Bench, admitted the application under Section 10 of the Code for initiating CIRP of Dream Land Realtor Pvt. Ltd. (CD-1) on 21.11.2017. Mr. Agrawal was appointed as IRP and subsequently confirmed as RP. Liquidation for CD-1 was ordered on 13.09.2018, but Mr. Agrawal declined to continue as Liquidator. Mr. Rakesh Bhatia was appointed as the liquidator on 10.10.2018.
Similarly, P K Sales Company Pvt. Ltd. (CD-2) was accepted into CIRP on 21.11.2017, with Mr. Agrawal also acting as IRP and later RP. Liquidation was similarly ordered, and Mr. Bhatia was designated as Liquidator on 10.10.2018 due to Mr. Agrawal’s refusal to continue.
The IBBI, under its authority per Section 218 of the Code, appointed an Investigating Authority (IA) to examine Mr. Agrawal's actions concerning CD-1 and CD-2. Notices were issued under Regulation 8(1) requesting documentation and responses, which Mr. Agrawal submitted. The IA's investigation reports were submitted in January 2024.
Based on the investigation, an SCN was issued to Mr. Agrawal, who requested a 7-day extension to respond. Upon his response submission, the case was referred to the DC for consideration.
Mr. Agrawal is accused of multiple contraventions detailed as follows:
Contravention I: Failed to take control of the assets of CD-1 and CD-2 after liquidation orders were issued, improperly allowing symbolic possession to be held by directors of the suspended board without authorization or direction from the NCLT.
Mr. Agrawal claimed he maintained custody of the assets through symbolic possession and that the suspended directors acted under his direction. He also referenced a judgment to support his argument; however, the DC finds this judgment to be inapplicable.
He contended that following the liquidation orders, his role concluded, leaving him without duties until the liquidator was appointed. He argued that at the time, Section 34(1) of the Code did not stipulate asset handover protocols, leading to ambiguity.
Mr. Agrawal also claimed he cooperated with the liquidator post-appointment.
The DC found that Mr. Agrawal failed to uphold his responsibilities to take control and custody of the assets:
In accordance with its authority under Section 220 (2) of the Code and relevant IBBI regulations, the DC has suspended Mr. Agrawal’s registration for a period of two years.