India: Insolvency Professionals To Act As Interim Resolution Professionals Or Liquidators (Recommendation) Guidelines, 2018

Under the I&B Code, an Insolvency Professional (hereinafter referred as 'IP' or 'IRP') plays a vital role during Corporate Insolvency Resolution Process (CIRP). The IRP or RP steps in the shoes of the Management as the management of the Corporate Debtor remains suspended during the CIRP. A whole array of statutory and legal duties and power is vested with IRP/RP. Section 20 of the I&B Code require him to makes every endeavor to protect and preserve the value of the property of the corporate debtor and manage its operation as a going concern.

With respect to appointment of IRP/RP, under Section 16 and 34 of the I&B Code, the Adjudicatory Authority can request the Insolvency and Bankruptcy Board of India (hereinafter referred as "the Board") to recommend an IRP/RP/Liquidator for appointment. The time period within which the Board has to give recommendation as provided under the Code is 10 days. At times there are problems been faced by the Board to recommend the names which results in delay in appointing a Resolution Professional.

Furthermore, the Board lacked the information about the volume, nature and complexity of the CIRP or liquidation Process and resources available at the disposal of an IRP/IP recommended by it. In such situation, the Board is unlikely to add much value by recommending an IP for a CIRP/ Liquidation.

In the interest of avoiding administrative delays, the Board had recently on 31st May 2018 issued guidelines w.r.t preparing a Panel of IPs/Liquidators for the purpose of section 16(4) and 34(6) from the Registered IPs.

Panel of lPs

The Board will prepare a Panel of IPs for appointment as IRP or Liquidator and share the same Panel list with the AA from where the AA can choose name for appointment of IRP/RP/Liquidator. The Panel will have Bench wise list of IPs based on the registered office of the IP. The list will be valid of six months and new panel will replace the earlier after every six months.

Eligibility Criteria to be on the Panel

An IP will be eligible to be in Panel, if

  1. there is no disciplinary proceeding;
  2. not been convicted in the last three years and
  3. expresses his interest to be included in the Panel.

Expression of Interest

As per the guidelines issued the Board will invite the expression of Interest from time to time for the empanelment of IPs. The interested IP will be required to express the interest in Form A by the specified dates.

The Board will prepare the list of eligible IPs (Panel) in order of the volume of ongoing process they have in hand. The IP who has the lowest volume of ongoing process will get a score of 100 and will beat the top of the Panels. The IP who has the highest volume of ongoing process will get a score of O and other IPs will get score between O and 100 depending on volume of their ongoing assignment. In case of tie, the IP registered earlier will be placed above.

Resignation as IP

The guidelines provide that an IP included in the Panel cannot refuse to act as an IRP or Liquidator, if appointed. He cannot withdraw his interest to act as an IRP/RP and cannot surrender his registration during the validity of the Panel.

Now, as the Code of Conduct require that an IP must adhere to the time limits prescribed in the Code and must carefully plan his actions and promptly communicate with all stakeholders involved for the timely discharge of his duties. The law does not envisage any discontinuity or break in a process. It does not envisage any break for an IP in a process; nor does it provide time for switchover from one IP to another. When the life of a person undergoing resolution is at a stake, the process cannot have a break by resignation or otherwise. This is why section 16(5) of the Code mandates the IRP to continue in office till the date of appointment of RP under section 22 of the Code.

Discharge from the responsibility as IRP/RP/Liquidator

On 21st June 2018, the Insolvency and Bankruptcy Board of India had published a discussion paper on discharge from the responsibility as Interim Resolution Professional, Resolution Professional or Liquidator of the Corporate Process under the Code. The motive of the discussion paper was to invite the comments of the stakeholders on what could be the ground on which the IP should be discharge from responsibility.

The discussion paper proposes to allow an IP to seek discharge from a process only on the ground that is he is incapacitated to continue as IRP, RP or Liquidator. Here, incapacitated is defined as:

  1. If he suffers from health problems rendering him unable run the process, to the satisfaction of the Adjudicating Authority, and
  2. If he becomes ineligible under the law.

In either case, the approval of the Adjudicating Authority will be necessary. If an IP seeks discharge from process on any other ground, it proposed that he may be debarred from taking any fresh assignment for a period of five years.

Many feels that this proposal of giving discharge on only two grounds is harsh as this will mean that an IP will be forced to perform the duties.

The comments/suggestions from the stakeholders with respect to the grounds on which the RP can be discharge from the responsibility were invited till 15th July, 2018.

One has to wait and watch what will be the final guidelines with respect to the grounds on which the IRP/RP/Liquidator can seek discharge.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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