Updated: Sep 12, 2020
Section 149 of the Companies Act, 2013 which deals with Independent Directors and Regulation 6 of the Insolvency and Bankruptcy Board Of India (Voluntary Liquidation Process) Regulations, 2017 deals with eligibility of liquidator. There is a conflict between these to provisions which had resulted in an anomaly for Company Secretaries, when compared to other fellow professionals.
The Regulation 6 of the Insolvency And Bankruptcy Board Of India (Voluntary Liquidation Process) Regulations, 2017 which deals with eligibility of Liquidator, which reads as follows:-
(1) An insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director is independent of the corporate person:
Explanation: A person shall be considered independent of the corporate person, if he-
(a) is eligible to be appointed as an independent director on the board of the corporate person under section 149 of the Companies Act, 2013 (18 of 2013), where the corporate person is a company;
(b) is not a related party of the corporate person; or
(c) has not been an employee or proprietor or a partner-
(i) of a firm of auditors or [secretarial auditors] or cost auditors of the corporate person; or
(ii) of a legal or a consulting firm, that has or had any transaction with the corporate person contributing ten per cent or more of the gross turnover of such firm, at any time in the last three years.
(2) An insolvency professional shall not be eligible to be appointed as a liquidator if he, or the insolvency professional entity of which he is a partner or director is under a restraint order of the Board.
(3)A liquidator shall disclose the existence of any pecuniary or personal relationship with the concerned corporate person or any of its stakeholders as soon as he becomes aware of it, to the Board and the Registrar.
(4) An insolvency professional shall not continue as a liquidator if the insolvency professional entity of which he is a director or partner, or any other partner or director of such insolvency professional entity represents any other stakeholder in the same liquidation.
It may be noted that in the explanatory part of the Sub Regulation (1) of Regulation 6, words “Company Secretaries” has been substituted by Notification No. IBBI/2019-20/GN/REG039, dated 15th January, 2019 (w.e.f. 15-01- 2019) with the word “Secretarial Auditors”. The intention of the drafter while replacing the words, was to permit the “Firm of Companies Secretaries” other than “Secretarial Auditors” of the Corporate Person to act as Liquidator. Through the said amendment, an Insolvency Professional, who is a Company Secretary shall be considered as “ineligible