The Role of Insolvency Professionals in Corporate Insolvency Resolution Process (CIRP)

 Introduction

 

The implementation of the Insolvency and Bankruptcy Code (IBC) in 2016 revolutionized how corporate insolvency and bankruptcy issues are managed in India. At the heart of the Corporate Insolvency Resolution Process (CIRP) under this framework is the Insolvency Professional (IP). These professionals are key to ensuring that the CIRP is conducted efficiently, lawfully, and with a focus on resolution over liquidation.

 

 Appointment and Responsibilities of Insolvency Professionals

 

Insolvency professionals are designated as Interim Resolution Professionals (IRP) or Resolution Professionals (RP) according to Sections 16 and 22 of the IBC. Once a corporate debtor is admitted into insolvency under Sections 7, 9, or 10, the appointment of the IRP takes place. As per Section 17, the IRP assumes control over the corporate debtor’s management, including its assets and business activities.

 

Following the formation of the Committee of Creditors (CoC), the committee can either ratify the appointment of the IRP as the RP or select a new RP (Section 22). The RP is entrusted with managing the corporate debtor’s operations, reviewing resolution plans submitted by applicants, and ensuring that the insolvency process adheres to IBC-mandated timelines.

 

 Key Responsibilities and Authority of Insolvency Professionals:

 

1. Moratorium and Asset Control (Sections 14 and 18): 

   Upon initiation of the CIRP, a moratorium is declared under Section 14, halting any legal proceedings against the corporate debtor. The IP ensures compliance with the moratorium and takes control of the corporate debtor’s assets as per Section 18, preserving them for the resolution process.

 

2. Establishment and Facilitation of Committee of Creditors (Section 21): 

   One of the key functions of the IP is to form the Committee of Creditors (CoC), comprising financial creditors. The CoC plays a critical role in deciding the corporate debtor’s future, including voting on resolution plans. The IP coordinates the CoC’s meetings and ensures that decisions are made transparently.

 

3. Soliciting Resolution Plans (Section 25): 

   The RP is responsible for inviting resolution plans from prospective applicants interested in reviving the corporate debtor. The RP evaluates these plans for legal compliance and presents them to the CoC for approval.

 

4. Managing Corporate Debtor as a Going Concern (Section 20): 

   During the CIRP, the RP ensures that the corporate debtor remains operational as a going concern, managing the day-to-day business to maintain value and protect the interests of stakeholders.

 

5. Supreme Court Rulings and Judicial Interpretation: 

   The Supreme Court has reiterated the essential role of insolvency professionals in several landmark rulings. For instance, in Swiss Ribbons Pvt. Ltd. v. Union of India [(2019) 4 SCC 17], the Court stressed the importance of adhering to CIRP timelines and prioritized resolution over liquidation, reinforcing the role of IPs in managing CoC meetings and ensuring compliance with the law.

 

   In ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta [(2019) 2 SCC 1], the Court emphasized the RP’s duty to protect the corporate debtor’s and creditors’ interests by ensuring resolution plans meet all statutory requirements outlined in Section 30(2) of the IBC.

 

6. Compliance and Reporting (Section 208): 

   IPs are expected to adhere to a professional code of conduct and report to the Insolvency and Bankruptcy Board of India (IBBI). Section 208 outlines their responsibility to act with integrity, impartiality, and diligence while ensuring no conflicts of interest throughout the CIRP.

 

 Challenges Faced by Insolvency Professionals:

 

Despite their critical importance, IPs face significant challenges, including managing tight timelines, resistance from corporate debtor management, navigating complex creditor structures, and addressing litigation from aggrieved parties. In the case of Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta [(2020) 8 SCC 531], the Supreme Court upheld the decision-making power of the CoC on commercial matters but also recognized the RP’s pivotal role in maintaining fairness and legal compliance.

 

 Conclusion

 

Insolvency professionals are fundamental to the successful conduct of the CIRP. Their role as managers, facilitators, and custodians of the insolvency process is emphasized through various provisions under the IBC and key Supreme Court rulings. By promoting transparency, fairness, and efficiency, insolvency professionals help achieve timely resolution of distressed assets, contributing to the stability and integrity of India's corporate insolvency system.



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