IP Dinesh Gopal Mundada

  December 16, 2021

My advise to aspiring IPs would be to jump into it with a team of 4-5 people. Don’t pursue this profession with the idea of practising alone. 

(Mr. Mundada is a Pune-based IP)

  • Can you tell us a little bit about yourself and your professional background? What led you to choose to become an Insolvency Professional?

I am a Practicing Chartered Accountant by profession. Around 2015-17, there were massive financial sector reforms in the country where GST, IBC, all coming into existence. All these changes fascinated me, leading me to pursue IBC and become an Insolvency Professional (‘IP’). The assignments started to flow quite later, but eventually they did, and now I work full-time as an IP.

  • I see that you have undertaken nine assignments so far, including three voluntary liquidations. What were some of the most recurring or significant challenges that you faced, particularly in your initial few assignments?

You know, getting the assignments itself is challenging because IBC assignments would not come to you directly unless you have a good network. Unlike for an advocate or a chartered accountant, where a client will walk in with specific requirements, for an IP, there are no walk-in clients. And that is a major hurdle for new IPs in getting started. What helped me fare through the things was my own network that I had created over the last 10-12 years.

When you have 10+ years’ experience, you know many Company Secretaries and Advocates in practice whose clients may get involved in the IBC process, so they may require some advice on IBC or someone to take up an assignment. Could be the banks who initiate the process or if it is a voluntary liquidation or a Section 10 application, it could be the companies themselves. In such cases, their CFOs find IPs through their networks to handle the assignments. This is where your network plays a key role, and whoever grabs such opportunities, gets the assignments.

Also, if you come with only 1-2 years of professional experience in your field, you will at best be able to handle voluntary liquidations, where things are straightforward. For other assignments, it will be challenging to complete them without taking help from an experienced professional. 

  • That makes sense. The first challenge is getting the assignments, then there will be another set of challenges in carrying them out on a daily basis. In the variety of assignments you have handled, was there any memorable ones that you would like to share?

Two of the assignments that I am currently handling — Magna Research, and Aqua Marine, have been quite fascinating. In ‘Aqua’, they closed down their business in 2018 but had a huge amount of outstanding debt from banks, operational creditors, government, etc. When I visited the premises, there was nothing, and in fact the custody of the premises was with someone else. So, taking custody of the assets was very challenging. 

In the ‘Magna Research’,  it was very difficult to elucidate to the bankers what IBC is all about, as they were not aware of the process. So, in the first CoC meeting, the banks said that they did not understand anything. They came with their advocates in the next meeting, who were equally clueless, so I had to make them understand what was actually going on. Now the problem was that, IBC has various compliances — 7 day compliance, 14 day compliance, 21 day compliance,  and so on to the IBBI, IIIPI and the NCLT that have to be done by the IP.

Looking at the working style of Indian bankers, these strict compliances are incomprehensible to them and they do not understand this urgency at times. People are like, this person is not available, that person is not available, and would delay the process. They wouldn’t understand that IP has to form CoC, follow the compliances where failure on any compliance attacks penalty on the IP. What helped me handle these situations was my two years of reading the IBC, its processes, the kinds of penalties imposed by the NCLTs on the IPs, etc. After clearing the IBC exam and before getting my first assignment, there was a time gap, in which I did this studying, which really helped me to understand how to deal with the challenges in my early assignments, and make the stakeholders understand the process and its importance.

  • Delays are still a defining feature of how the Indian authorities function. So, how does that fit well with the current discussion around penalties on the IPs? If the stakeholders are not willing to co-operate on time and you can do only so much about that, how does the IP penalty discussion speak to you in that light?

Now, quite a few stakeholders understand the process, and have realised that this serious and they have started taking things seriously. I can see this from the rising numbers of voluntary liquidations. In the first three years, there were hardly any voluntary liquidation cases. Now, you also see that the financial and business newspapers, every other day, are reporting something on IBC. Consequently, the tier one and tier two cities are having good knowledge and awareness about the IBC and not just the immediate stakeholders.

Regarding the IP penalties, honestly speaking, it is annoying. Because you see, an IP has a mammoth load of compliances to complete. In our case (of  Chartered Accountants turned IPs), we have to inform the Indian Institute of Insolvency Professionals of ICAI. The CSs have another agency and the CMAs have yet another one. So, different IPs have to do these regular, rather fortnight compliances. Then you have to keep the IBBI and the NCLT informed on a regular basis, for which there are several compliances — 7 days compliances, 21 days compliances, etc. So, in essence, there are multi-layered compliances for an IP, failure on any one of them attracts 500 rupees fine per day. So, there is a need to integrate this unnecessary compliance burden on an IP to make the IBC process more effective. Say, if you have informed the NCLT regarding a matter, that information should have a free flow across the other agencies.

Another issue the IPs face is in a CIRP initiated by an operational creditor. Say, an operational creditor files an application, and it eventually gets admitted by the NCLT and an IRP is appointed. I personally know a few cases where after the process was initiated, the operational creditor who filed the petition vanished, and did not even show up for filing the claims. Once an IRP is appointed, he has to perform several immediate duties on which, say a cost of Rs. 1-1.5 lakhs is incurred. That cost and the IP’s fees are to be paid by the operational creditor, but what happens is that they become unreachable just to avoid paying any fees to the IP? You imagine a scenario where an IP has to spend the money instead of receiving professional fees at his very first assignment(s).

  • Inter-agency coordination is certainly the need of the hour. Now, building on that, given all these challenges that you face as an IP, how far have the NCLTs been considerate towards these concerns? Do they hear such day-to-day issues or are they dismissive about these?

In my experience, the NCLTs do not appear to be accommodative of these concerns. Each case gets hardly 1-2 minutes of hearing before the NCLTs. The NCLT environment is such that people are stacked in the courtrooms and you’ve got only 1-2 minutes to put your points. I come prepared with a 400-page document over the last one month, how can I be expected to put it forth in 1-2 minutes? However, the NCLTs do hear the applicants in detail if the corporate debtor is a large, listed company, but with the rest, they are not very accommodative. I think, at least 10 minutes’ time should be given to us to explain our points. But NCLTs are always in a hurry. They just give further dates, and the process gets delayed. In one of my liquidation assignments, the NCLT gave me a date 180 days away. Now, once the date approaches, will I remember what all happened 180 days back? And then they will ask me why I don’t do this, that and whatnot, which in turn just causes unnecessary delays.

  • That takes me to some recent developments under the IBC. What are your thoughts on having a code of conduct for the committee of creditors, now that the IBBI has also released a discussion paper on that?

Discussion Paper accessible here]

More awareness among the CoC is important. Definitely, the recent discussion and amendment regarding a code of conduct is a great step. In one of my assignments, there were no financial creditors in the CoC, only operational creditors. They were not paying any money, they just used to attend the meetings hoping to receive some money. And when I said that if you are not paying the money, then at least permit liquidation. Then they started stalling, saying that they need to talk to their counsels. They just came to meetings hoping to receive some money in the meetings. When I said that if you are not paying any money, at least give me the permission for liquidation. Then they started stalling the process, saying that they needed to talk to their legal team. So, this is another big problem, we need decision-makers to be present in the CoC meetings. But currently, hardly any CoC member who holds the decision-making authority, and even if they do, they do not want to risk anything and just pass the ball.

I also feel that the CoC members are not from professional backgrounds like CA, CS, or law. They are generally MBAs who do not understand the intricacies of IBC in time and take time to grasp these things. So, these issues with the CoC need to be resolved. Things will take time, certainly.

  • Coming to another recent development, recently, the Supreme Court has said that a resolution plan, once approved, cannot be withdrawn by the resolution applicant. How does this judgment speak to you?

[Judgment accessible here –EBIX Singapore v Committee of Creditors of Educomp Solution]

In my opinion, this provision has to be there in the law regardless of the judgment passed by the Supreme Court. A successful resolution applicant is chosen through an elaborate process. How can he then come one day and say that he wants to withdraw his plan? This is a mockery of the law. It should not be allowed. So definitely, it’s a good step and a great judgement. 

  • On a parting note, any advice you would like to leave for the aspiring IPs?

My advice would be, don’t pursue this profession with the idea of practising alone. Gather a team of 4-5 people, and divide the work. Someone can track the judgments, because the law keeps changing every single day, and an IP has to be aware of such changes at all times. Another person can work on some other aspect. So, they should clearly define and divide the scope of their task once they come into this field. In the absence of a well-structured plan, all you will do is voluntary liquidations, and hardly any other assignment under the IBC. So, that would be my advice for the aspiring IPs.

(This interview was conducted by Kumari Saloni and has been edited and condensed for clarity.)

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