IBBI suspends Deloitte partner for 3 years, imposes penalty

K.R. Srivats | | Updated on: Aug 22, 2022

Disciplinary action against Savan Godiawala for withdrawal of excessive fees; wrongful hiring of related party Deloitte Touché Tohmatsu

Insolvency regulator IBBI has suspended Deloitte Touche Tohmatsu India LLP (DTTI) Partner Savan Godiawala three years on account of his contravention of IBC provisions in the liquidation cases of Lanco Infratech and Shirpur Power. Penalty has also been levied on Godiawala on this count.

The main charge against Godiawala was wrongful withdrawal of fees and hiring of related party — DTTI without proper identification of scope of work. There was “wrong manner of determination of fee” in case of his dealings in respect of Lanco Infratech Limited and laxity in filling application on avoidance transaction in respect of Shirpur Power Private Limited, the IBBI Disciplinary Committee concluded.

Savan Godiawala was Interim Resolution Professional/Resolution Professional/Liquidator for Lanco Infratech and Interim Resolution Professional/Resolution Professional for Shirpur Power. 

He had hired DTTI to provide support services to him and the IBBI’s Disciplinary Committee concluded that there was a clear case of conflict of interest between him and DTTI as he is a Partner in the firm.

The liquidator explicitly revealed his preference to hire the professional services from DTTI which is a related party at an unreasonable rate, the IBBI Disciplinary Committee said in its 16-pages order. 

EXCESSIVE FEES

It was observed that for the period between February 27, 2019 and August 27, 2019, due to wrong calculation of liquidation fee, Godiawala had drawn a fee of ₹ 83.04 lakh in excess of the fees that was payable to him in accordance with the Regulations. He had taken mitigating steps by refunding the amount of ₹ 92 lakh in the liquidation account of the CD but the IBBI Committee felt that that the fact remained that he had withdrawn the excess amount, whether it was unintentional or not is a subject matter of interpretation.

“Without due diligence, drawing excess amount as fee is akin to overcharging at the expense of all the creditors of Corporate Debtor (CD), whose liquidation estate he is holding as a fiduciary. Mere negligence, oversight or misinterpretation cannot be discernable possible reasons for this over-drawl”, the disciplinary committee said.

APPOINTING DELOITTE 

DTTI was appointed by Godiawala in August 2018 to assist him in taking control and managing affairs of the CD and other obligations as the Liquidator of the CD. 

“It is clear that the work which could have been done by DTTILLP for about ₹ 13 lakh per month, Godiawala paid initially ₹ 28 lakh per month and later about ₹ 20 lakh per month. DTTI was paid three different amounts for three different periods in the liquidation process without any change in scope of work. Further, the amount of fees paid to DTTI were more than double what was paid to Savan Godiawala as liquidator”, the order highlighted.

The IBBI order also noted that despite considerable time having elapsed, liquidation process in respect of both the CDs ( Lanco Infra and Shirpur Power) has not concluded yet.

Published on August 22, 2022
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