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Insolvency professional attempts to siphon off crores from Mehul Choksi cos

The disciplinary committee of the IBBI has allowed payment of fee to Duff & Phelps for Gitanjali Gems, although it said in the order that “the engagement of D&P is illegal”.



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Mumbai/New Delhi, June 12 : There is more controversy around absconder Mehul Choksi’s companies Gitanjali Gems Limited (GGL), Nakshatra World Limited (NWL) and Nakshatra Brands Limited (NBL), as now the insolvency professional (IP), Vijay Kumar Garg, has been penalised for “attempt to siphon of crores” from the ailing companies.

The Insolvency and Bankruptcy Board of India (IBBI) passed an order on June 8 penalising Garg, a Gurgaon-based IP.

“Vijay Kumar Garg converted the noble insolvency profession to a business, converted professional client relationship to that of money lending and borrowing, manipulated the market for insolvency professional services, attempted to siphon off crores of rupees from the ailing corporate debtor to its partner in crime, acted under the influence of one creditor, and contravened every provision of the Code, Regulations and the Code of Conduct for ulterior purposes,” the order passed by Navrang Saini, whole-time member, IBBI, said.

The controversy relates to the appointment of Duff & Phelps India Private Limited (D&P) by Garg to provide support services during the corporate insolvency resolution process (CIRP) of GGL, NWL and NBL.

The findings in the order are: “Mr. Garg and D&P never had a professional-client relationship. The relationship between them is mysterious. It is observed that D&P has funded about Rs 1.62 crore to meet the various expenses of Mr Garg/CD. No professional-client relationship enables money lending, that too, of this order, to a client.

“The RP buys an insurance policy to cover himself and employees of D&P. The terms of appointment of D&P in GGL indicate that it would be paid Rs 23.75 lakh per month. The fee of Rs.1.6 crore for the CIRP period was prima facie considered exorbitant by the AA and the Expert Committee constituted by the IBBI.”

The order said that “engagement of D&P is only a facade to siphon off funds of the ailing CD”.

The disciplinary committee of the IBBI has allowed payment of fee to Duff & Phelps for Gitanjali Gems, although it said in the order that “the engagement of D&P is illegal”.

“Such conduct does not call for any leniency. However, in view of the directions of the AA and the recommendations of the IBBI Expert Committee about reasonableness of fee, the DC is inclined to allow payment of fee, as determined by the Expert Committee to D&P in the matter of GGL, even though the engagement of D&P is illegal”, the order said.

Garg has been asked to pay a penalty equal to 25 per cent of fee payable to him as per agreed terms and conditions in CIRP of GGL, NBL and NWL where he has acted as an IRP/RP.

The order said that Garg shall ensure that no amount beyond the reasonable fee, as determined by the Expert Committee, is paid to D&P. If any amount beyond this has been paid, Garg shall make it good to the CD within 45 days of this order and confirm the same to the Board.

He has also been asked to go back to school and build expertise as an IP. “Mr. Vijay Kumar Garg shall undergo pre-registration educational course from the IPA of which he is a member and pass the Limited Insolvency Examination again to build his capacity to take up assignments on his own,” the order said.

Garg may take any new assignment process under the Code, only after compliance with the three conditions.

The findings of the disciplinary committee said the fee payable to Garg is a handsome amount. He is expected to serve as IRP/RP and use his employees, if required, to assist him. The law enables him to use the services of an IPE of which he is a partner or director.

“It is not permissible for an IP to tie-up with a third party and bid for a work jointly, whereby the IP and the third party are collectively appointed on their collective strength. This amounts to converting a noble profession to a business and manipulating the market for insolvency professional services through anti-competitive, tie-in arrangement. An IP, who wishes to compete on his own merit and does not indulge in nefarious tie-in arrangements, would never get any assignment,” the order said.

“Policy in the nature of ”Professional Indemnity for IP during the CIRPs” was available from SBI General Insurance on the date of purchase of policy (i.e. February 8, 2019). Mr. Garg had no business to buy policy in the name of D&P and unnecessarily extend benefits to a third party i.e. D&P. This establishes the meeting of mind of RP and D&P.” the order said.

The law envisages appointment of an IRP by the adjudicating authority, which appointed Garg as IRP. It does not envisage a collective appointment, either by the adjudicating authority or the CoC; it empowers the IP to appoint a professional.

“If a particular creditor wanted the services of D&P, that creditor may engage him and bear the fee of D&P. That cannot be a part of the insolvency resolution process cost. In order to get the assignment, Mr. Garg mortgaged the interests of the CD to the creditor, by committing to engage D&P and transfer crore of rupees to D&P in the guise of fee,” the order found.

As claimed by Garg, the appointment of the IRP (Garg) and D&P was always envisaged collectively, and they were appointed on their collective strength and credentials of the RP and D&P.

“It makes it clear that he has been appointed not on his own strength or merit, but on the strength of D&P. This makes him beholden to D&P and explains his undue favour to D&P. This makes clear that Garg alone is not capable of discharging the responsibilities as an IP,” said the order.

Section 20(1) of the Code provides that the interim resolution professional shall make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. Section 23(2) reasserts this responsibility.

“Instead of preserving and protecting the value of the CD, Garg frittered away the resources of the ailing CD for unlawful purposes,” the order said.

Garg has claimed that he engaged D&P as a professional under Section 20(2) read with Section 25(2) of the Code. However, as per the scope of work (as indicated in the joint proposal dated September 6, 2018, submitted by Garg, an IP assisted by D&P, to ICICI Bank), its mandate was initial analysis and strategy, taking control of business, monitoring business and cash, assisting in development of business resolution plan, finalising the resolution plan, and approval of resolution plan.None of these services is a service of a professional. The first three are responsibilities of the RP himself and for this, he may need support services, for which he has the option to either use his employees or take assistance of an IPE, if he is a member of that IPE. Other services are the responsibilities of a resolution applicant. None of these services fall within the ambit of services of a professional. Procurement of services, other than services of a professional, is not permissible under Section 20(2), the order said.Garg claimed that he appointed D&P for professional services. “Since D&P is not a professional, having authorisation of a regulator of any profession to render any professional service, and its conduct and performance is not subject to oversight of any regulator of any profession, appointment of D&P is in contravention of section 20(2) of the Code. Further, by not appointing a professional and by appointing a person who is not professional, Garg deprived the CD of professional services,” the findings of the disciplinary committee said.


Newsprint paper manufactures voice concerns




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New Delhi, Aug 13 : Indiscriminate import and dumping of newsprint paper is threatening the very survival of the domestic newsprint industry, says the Indian Newsprint Manufacturers Association (INMA), the apex body of newsprint manufacturers in India.

In the first quarter of the current fiscal year, as much as 85 percent of domestic demand for newsprint paper was met by imports while the country has adequate manufacturing capacities to meet the demand both in terms of quality and quantity. In a SOS communication to the Prime Minister, INMA has asked for urgent remedial measures to safeguard the interests of the industry.

“The adverse impact of dumping is so serious that currently no good orders are in place to keep the plants running, resulting in severe financial stress, endangering the continuity of the mill operations and retaining employment,” INMA has said in a statement.

“Domestic newsprint production capacity was 2.6 million tonnes in FY 2014-15 but has come down to 2.2 million tonnes in view of continued challenging environment leading to closure of mills. However domestic capacities are still adequate to meet the domestic demand. There is an urgent need to curb dumping and other unfair trade practices operating in the industry,” states INMA.

Due to imports being cheaper than the domestically manufactured newsprint product, during FY18 and FY19, domestic sales of newsprint stood at 1.2 million tonnes per annum which reduced drastically to 0.7 million tonnes in FY20 in view of dumping.

According to INMA, against the import price of $800 per tonne of newsprint in FY18, the news print is currently being dumped by exporters at $390-400 per tonne which is almost $250-300 per tonne cheaper than their home country sales price. With Covid pandemic leading to demand reduction worldwide, market intelligence points to dumping of newsprint paper at $350 per tonne.

INMA says it is not against legal import by actual users but against unfair trade practice being adopted by the exporters. As an urgent measure, INMA has asked for imposition of a five-year moratorium on newsprint imports, among other asks.

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Pilot stays in hunt for bigger role, to be rewarded in 2021 by high command



Sachin Pilot

Jaipur/New Delhi, Aug 11 : The can may well have been kicked down the road in Rajasthan but the vexed leadership issue remains wide open. Contrary to popular perception, former Deputy Chief Minister Sachin Pilot, who camped in Gurugram these past few days, has not beaten a hasty retreat.

Optically, he may have lost the skirmish, but he is very much in the game. This was a battle in a long drawn-out war. A war based on principles and one of anger over maltreatment.

Sources close to developments told IANS that his meeting with the Gandhi siblings – Rahul and Priyanka – at the former’s residence was one where he did not merely reveal his state of mind and reservations but was equally given cast iron assurances about the future.

Pilot, it is believed, didn’t hanker for any position but told them that belittling him by levelling charges of sedition was nothing short of outrageous. The Special Operations Group and Anti-Corruption Bureau charges were a travesty and he was pained and appalled at the charges levelled against him.

IANS has gathered that Pilot did not want to be a Deputy CM with a car and a bungalow for he had worked hard on the ground over the last six and a half years to help the Congress storm back to power in the state in the late 2018 election. To be viciously targeted by his own government was an abomination, according to him.

Apparently, he was given a fair hearing and while a decision on the party leadership in Rajasthan may have been kept in abeyance for the time being, a view will be definitely taken on this issue in early 2021. This assurance was given to him.

What is more is that Pilot has managed to get a fair and equitable settlement for all his followers, particularly those who camped with him in the last few days when they went underground. In a mockery of democracy, these MLAs were spied upon by the state CID which kept them under daily surveillance under Chief Minister Ashok Gehlot’s orders. This was intolerable for Pilot.

These things rankled with Pilot and while he was adamant that he won’t join the BJP from the outset, he was clear that he would stay with the Congress. All he wanted was a proper hearing and a just recourse to the problems and issues that he and his followers were facing in Rajasthan.

The Gandhi siblings have also come to realise that their footprint continues to shrink with the BJP trying to topple their state governments, the most recent case being Madhya Pradesh.

They didn’t want the BJP to take advantage of the fluid situation and hence sought closure. Once Pilot had given his side of the story, it was appreciated by the siblings.

It is clear that the Congress will want to hit the ground running with a young Pilot at the helm in the race for the state in 2023. It appears that Pilot may well become Chief Minister of Rajasthan in early 2021 to prepare for the battle in late 2023.

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Political circles mourn Rahat Indori’s demise



Rahat Indori

New Delhi, Aug 12 : Condolences have poured in for noted Urdu poet Rahat Indori, who passed away on Tuesday after suffering a cardiac arrest. The poet had also tested positive for Covid-19.

Offering his condolences, Defence Minister Rajnath Singh tweeted in Hindi, “I am deeply saddened by the news of the demise of noted poet Rahat Indoriji. He was an ardent personality of Urdu admiration. He has left an indelible mark on the hearts of people by his memorable poetries. It is a great loss for the literary world. I extend my condolences to his loved ones in this hour of grief.”

“My heart sank after I got to know about your demise. It has created a vaccum in the literary world which will be difficult to fill,” Madhya Pradesh Chief Minister Shivraj Singh Chouhan tweeted in Hindi.

Quoting pne of Indori’s couplets, Congress leader Rahul Gandhi tweeted, “Ab na main un na baki hai zamane mere, phir bhi mashhoor hai shahron mein fasane mere… Alvida Rahat Indori sahab.”

Leader of Opposition in the Upper House, Ghulam Nabi Azad, said in his condolence message, “He will be remembered for his free, fair and fearless poetic expressions.”

“India has lost a great Urdu poet; I salute the departed soul of Rahat Indori, the voice of millions of Indians,” Azad tweeted.

Indori, a poet and painter, taught Urdu literature at the Indore University before foraying into Bollywood as a lyricist.

Among the many memorable verses he created for Hindi films are “Neend churayi meri” and “Dekho dekho jaanam” (“Ishq”), “Chori chori jab nazrein mili” (“Kareeb”), “M bole toh” and “Chhan chhan” (“Munna Bhai MBBS”), “Dil ko hazaar baar” (“Murder”), “Tumsa koi pyaara” (“Khuddar”) and the title song of “Sir”.

His popular books include “Do Kadam Aur Sahi”, “Maujood”, “Chand Pagal Hai”, “Mere Baad” and “Naraz”.

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