How Ignoring Spam E-mail Landed Insolvency Professional In Trouble

(The Corner Office Journal) -- Insolvency professionals (IPs) must adhere to the guidelines issued by the Insolvency & Bankruptcy Board of India (IBBI) to discharge their duties efficiently, as failure to do so could land them in trouble with the bankruptcy regulator.

The IBBI expects IPs to be vigilant and alert in checking communications sent to them, including the “spam folder” in their e-mail. Ignoring this could draw the ire of the regulator, as it recently happened with Coimbatore-based Rajagurusami Maheswaran in the corporate insolvency resolution process (CIRP) of Sandhhya Shipping Services Private Ltd.

The Beginning

The Chennai bench of the National Company Law Tribunal (NCLT) admitted Sandhhya Shipping Services into CIRP on 14 March 2019 following an application by its operational creditor Trans Asian Shipping Services Private Ltd., and appointed Maheswaran as an interim resolution professional (IRP) of the company.

The NCLT also directed its registry and the company’s operational creditor to send a copy of the order to Maheswaran through an e-mail, which was mentioned in the judgment.

The Twist

The NCLT’s registry sent an e-mail on 19 March 2019 informing Maheswaran about his appointment as an IRP of Sandhhya Shipping Services. However, the e-mail went to the “spam folder” of his e-mail account and as a result, he wasn’t aware of his appointment as an IRP of the company.

Maheswaran came to know about his appointment as an IRP for the first time on 27 November 2019 after getting information from the advocate of Sandhhya Shipping Services.

The Hassle

After realizing the faux pas, Maheswaran filed an interim application with the NCLT, supported by an affidavit dated 13 December 2019, and prayed for exclusion of 275 days from the timeline and extension of Sandhhya Shipping Services’ CIRP. He said the NCLT order was not communicated to him by the operational creditor, while the registry’s e-mail went to the “spam folder” of his e-mail account.

The NCLT, however, didn’t accept Maheswaran’s argument. In an order on 9 March 2020, the tribunal held that all the facts point out to an all-around “dereliction of duty and are absolute negligence” on the part of the operational creditor and as well as the IRP.

The NCLT also didn’t accept Maheswaran’s pleading that there has been no dereliction and no fault on his part. In an order on 3 May 2021, the tribunal reiterated its observations. It, however, allowed the withdrawal of the CIRP as Sandhhya Shipping Services and Trans Asian Shipping Services reached a settlement as the amount involved was only 573,423 rupees ($7,036).

The Probe

The IBBI appointed an inspecting authority on 25 April 2022 to conduct an inspection of Maheswaran. The authority sought his comments and later prepared an inspection report.

The bankruptcy regulator on 19 September 2022 issued a show cause notice to Maheswaran, alleging contraventions of provisions of the Insolvency and Bankruptcy Code (IBC), the IBBI (Insolvency Professionals) Regulations 2016 (IP Regulations) and the Code of Conduct under regulation 7(2).

Maheswaran replied to the notice on 3 October 2022 via an e-mail and also reiterated the submissions in a personal hearing before the IBBI’s disciplinary committee on 6 January 2023.

The Acceptance

Maheswaran submitted that previously he had not been appointed as a resolution professional and any such previous experience would have helped. Maheswaran also acknowledged that he could have acted diligently, but there is no dishonesty or any other malicious reason or any omission on account of any mala fide.

Maheswaran expressed his unconditional apology and prayed for pardon and taking a lenient view considering into account his undertaking that he will carry out his duties more diligently and carefully.

The Admonishment

The disciplinary committee said Maheswaran’s reply that the e-mail resided in “spam folder” of his e-mail account cannot be considered as a valid justification and he is duty bound to check his e-mail boxes, including spam, to ensure that no relevant communication is missed out.

The committee also said the delay caused in the matter is excessive and cannot be ignored as by not taking control of Sandhhya Shipping Services for 275 days, Maheswaran allowed the company to be run by the suspended management and therefore, acted against the objective of the Insolvency and Bankruptcy Code (IBC).

The IBBI prepares a panel of IPs, who are qualified and agree to discharge their responsibilities, and they are duty bound to keep on checking their email, including the “spam folder,” the committee said. Therefore, Maheswaran cannot take the plea that since e-mail sent by the registry landed in the “spam folder” of his e-mail and he did not get intimation about his appointment as IRP by the NCLT, it added.

“It is a reasonable professional expectation from an IP to be more vigilant, cautious and alert in discharge of his duties and verify and check the communications sent to him,” the committee said. Thus, the submission of Maheshwaran that the email had got itself lodged in the “spam folder,” does not hold good, it noted.

The Reprieve

The disciplinary committee disposed of the show cause notice issued to Maheswaran after noting his unconditional apology and assurances that he will carry out his duties more diligently and carefully.

The operational creditor Trans Asian Shipping was directed to pay 10,000 rupees to PM CARES Fund.

The committee, however, cautioned Maheswaran to be more careful in future and directed him to strictly comply with the applicable provisions of the IBC and its underlying regulations while performing his duties.

The order was passed by IBBI Whole Time Member Jayanti Prasad on 25 January 2023.

The Conclusion

If you are a resolution professional, then do keep a tab on the “spam folder” of your e-mail in order to avoid the IBBI’s admonishment and possible penalty.

Note: $1 = 81.5003 Indian rupees

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