IBBI slaps penalty on Electrosteel resolution professional for neglecting claims

Insolvency and Bankruptcy Board of India (IBBI) has penalised the Interim Resolution Professional (IRP) Dhaivat Anjaria of Electrosteel Steels Ltd for neglecting the claims of an operational creditor of the company.

IBBI has directed Anjaria to deposit one tenth of his total fee as resolution professional in the corporate insolvency resolution process (CIRP) of Electrosteel Steels within a month for "utterly" disregarding his statutory duty.

"I, therefore, in exercise of the powers conferred under section 220 (2) of the Code... hereby, impose a monetary penalty equal to one tenth of the total fee payable to him as IRP and RP in the CIRP of Electrosteel Steels Ltd," Mukulita Vijayawargiya, Disciplinary Committee (IBBI) and Whole Time Member said in the order.

IBBI further said that in such matters the code envisages a penalty which can be three times the amount of loss caused or likely to have been caused to the person concerned.

However, considering the fact Anjaria is new to the insolvency profession and the claim was ultimately admitted, the board went only for a penalty equal to one tenth of the total fee payable to him.

IBBI's order came over a complaint filed by one National Sales, which had submitted its claim in the Electrosteel matter on August, 16 2018. However, IRP did neither include its claim in the list of operational creditors nor responded to National Sales.

It resubmitted the same claim again on October 3, 2017 and met the same fate, following which National Sales approached IBBI by submitting a complaint seeking a direction over the issue.

IBBI sent mails to Anjaria seeking clarifications, however, he "failed and neglected to respond to three communications".

Following which the board issued show cause notice asking "as why disciplinary action should not be initiated against him for failure to respond to the clarifications sought through various mails by IBBI".

Later, Anjaria responded on February 5, 2018 stating that the claim of National Sales was a subject matter of an ongoing legal proceeding. Therefore, he filed an application on January 9, 2018 before NCLT seeking guidance on admission of disputed claims.

Based on NCLT's direction, a hearing to National Sales was granted and admitted the claim. He could not respond to the board previously as he was taking all steps to address concerns and issues raised by them, he said.

Rejecting it, IBBI said that CIRP (corporate insolvency resolution process) is a time bound process and any failure has severe consequences on stakeholders. It also needs to promptly communicate with all stakeholders.

"Anjaria, as IRP, did not consider the claim of the claimant. He did not even respond to him... As RP, he did neither consider the claim nor respond to the complainant. He utterly disregarded his statutory duty," the board said.

IBBI has also directed to forward a copy of its order to the Institute of Chartered Accountants of India, of which Anjaria is a professional member.