Hiring services for carrying out operational work does not require CoC nod

  • Blog|News|Insolvency and Bankruptcy Code|
  • 2 Min Read
  • By Taxmann
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  • Last Updated on 3 June, 2022

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SCN; IBBI

Case Details: Anil Goel, In re - [2022] 138 taxmann.com 384 (IBBI)

Judiciary and Counsel Details

    • Dr. Mukulita Vijayawargiya, Member

Facts of the Case

In the instant case, IBBI issued a show-cause notice (SCN) to the applicant. An Insolvency Professional, alleging that he hired services of associate concern for carrying out surprise inspection of security guards without approval of the Committee of Creditors (CoC), and thus, there was a contravention of provision of section 28.

It was also alleged that applicant, being custodian of assets of the corporate debtor collected his fees from assets of the corporate debtor, which formed part of liquidation estate and accordingly, there was a breach of fiduciary duty prescribed under Code and duty to preserve and protect assets of the corporate debtor in contravention to section 208(2)(a) and (h) and regulation 7(2) of IP Regulations.

IBBI Held

IBBI observed that since watch and ward security expenses of the corporate debtor were operational expenses for protection and preservation of assets of the corporate debtor, same did not require any specific approval from CoC.

IBBI stated that since the applicant had taken mitigating actions by remitting his entire fee along with interest to the account of the corporate debtor before the issuance of SCN, no contravention could be made out. therefore, SCN was to be disposed of without any directions to applicant

List of Cases Referred to

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