INTERIM RESOLUTION PROFESSIONAL UNDER IBC
Nearly all discussions and coverages on the Insolvency and Bankruptcy Code, 2016 (“Code“), highlight the process of Resolution of Corporate persons, which is the first objective of the Code. The preamble of the Code also speaks for the importance of the resolution process. It is for this reason that the resolution professional are appointed to complete the resolution professional. They allow for conducting a fair and un-biased resolution process.
IRP- Eligibility and Qualifications
The eligibility criteria for any individual to be a resolution professional is that he should be a major, of sound mind, resident in India and not declared insolvent. There shall lie no conviction against him for an offence punishable with imprisonment for a term exceeding 6 months[1]. 12 months prior to the application for enrolment with the insolvency professional agency, he shall clear the Limited Insolvency Examination conducted by the Board. He must have completed a pre-registration educational course, National Insolvency Programme and Graduate Insolvency Programme as approved by the Board. After obtaining a Bachelor’s degree, he shall have 15 years of experience in management or, have 10 years of experience as a chartered accountant or company secretary or cost accountant or advocate.[2] On the Boards satisfaction after they have inspected the documents provided by the applicant, they shall grant certificate of registration to the applicant.[3]
Appointment of the Interim-Insolvency Resolution professional
After admission of an application for insolvency resolution process, the Tribunal shall appoint an interim resolution of Section 16 of the Code mandates appointment of an interim resolution professional by the Tribunal within 14 days from the date of the initiation of the insolvency process. The resolution professional shall issue public announcement informing his appointment, within 3 days of his appointment in Form A[4] and as specified under section 15 of the Code. There shall be no pending disciplinary proceedings against him. The term of the interim resolution professional shall not exceed 30 days from his appointment date. However when when a financial creditor files an application for initiation of CIRP against a corporate debtor under Section 7 of the Code, then along with such application, the financial creditor has to provide the name of the insolvency professional proposed to act as an IRP of the corporate debtor.
A resolution professional must make disclosures at the time of his appointment in accordance with the code of conduct which lists down various requirements such as demanding an insolvency professional to necessarily act with objectivity in his professional dealings, ensuring that his decisions are made without the presence of any bias, conflict of interest, coercion, or undue influence of any party, whether directly connected to the insolvency proceedings or not. This code of conduct has been provided under the First Schedule to the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (IP Regulations).
Duties of the Interim- Resolution professional
The profession shall have the duty to:
- To determine the financial position of the corporate debtor, collect all information in relation to the assets, finances and operations
- Receive and collect all claims submitted by creditors
- Constitute a committee of creditors (comprising of all financial creditors)
- Take control and custody of the assets and, manage the operation of the company
He shall have all powers vested in him to preserve and protect the value of the property and operations of the corporate debtor. From the date of his appointment, he shall be vested with the powers of managing the affairs of the corporate debtor. He shall have the powers of the board of directors or partners of the corporate debtors.
Appointment of the IRP
The committee of creditors, having majority vote of atleast 75%, shall either appoint the interim resolution professional as resolution professional or replace the interim resolution professional by another resolution professional[5]. Where the committee has resolved to replace the interim-resolution professional, they shall file an application to the tribunal. The tribunal shall refer the name of the proposed resolution professional to Insolvency and Bankruptcy Board of India for its confirmation. It is only after the Board has given the confirmation for the proposed name of the resolution professional, the tribunal shall make appointment. If the confirmation from the Board is not received within 10 days, the tribunal shall order the interim resolution shall continue until further appointment.
Role of the Resolution Professional
The resolution professional shall conduct the entire corporate insolvency resolution process and manage the operations of the corporate debtor during the corporate insolvency resolution process period. He shall exercise powers and perform duties as vested in interim resolution professional[6].
In the matter of Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta & Ors.[7]the Hon’ble Supreme Court of India elucidated upon the role of the resolution professional and observed that it is the responsibility of the resolution professional to manage the affairs of the corporate debtor as a going concern, appoint and convene meetings of the committee of creditors to decide upon resolution plans, and collect, collate and finally admit claims of all creditors, which must be examined for payment by the resolution professional and be finally negotiated by the committee of creditors.
The Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union Of India[8] held that the resolution professional has the duty to receive and collate all the claims submitted by the creditors. However, the court observed that the resolution professional does not have quasi-judicial powers, but only administrative powers. Even when she exercises her discretion in verifying claims, it is only in her administrative capacity. This means that she cannot decide to reject the submitted claims.
The resolution professional shall prepare an information memorandum containing all relevant information required to prepare resolution plan.[9] The resolution plan shall provide for measures for insolvency resolution of the corporate debtor for maximization of its assets[10] and shall contain all components as mentioned under rule 38 of the Regulation. Only after reviewing the plans provided by the creditors, the resolution professional shall present it to the committee of creditors for its approval. Section 30 of the Code mandates that the resolution plan must have the consent of at least 75% of voting share of the financial creditors.
The approved resolution plan shall be submitted by the resolution professional to the NCLT. Upon NCLT’s satisfaction with the resolution plan as approved by the committee of creditors, it shall by order approve the resolution plan which shall be binding on the company, else order time for another resolution plan or order liquidation of the Company.[11]
Conclusion
The role of IRP/RP is critical to the entire Insolvency Resolution process and the IBC regime has laid down comprehensive safeguards to ensure that the Corporate Insolvency Resolution Process is conducted by a fair and unbiased IRP/RP.
[1] Rule 4 of Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.
[2] Rule 5 of Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.
[3] Rule 7 of Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.
[4] Rule 6 of Insolvency And Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations, 2016.
[5] Section 22 of Bankruptcy and Insolvency Code, 2016.
[6] Section 23 of Bankruptcy and Insolvency Code, 2016.
[7] 2019 SCC Online SC 1478
[8] AIR 2019 SC 739
[9] Section 29 of the Insolvency and Bankruptcy Code, 2016.
[10] Rule 37 of Insolvency And Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations, 2016
[11] Section 30 of the Insolvency and Bankruptcy Code, 2016.