An insolvency professional (IP) may not find it easy to wriggle out of an existing transaction because of the difficult situations faced during the corporate insolvency resolution or liquidation process.

This is because the insolvency regulator, IBBI, has advised the Insolvency Professional Agencies (IPAs) — who register the IPs with them — not to ordinarily accept ‘temporary surrender’ of professional membership of an IP while doing the CIRP or individual insolvency resolution and individual bankruptcy.

“The idea is when somebody has taken up an assignment and wants to surrender, he should not be allowed to surrender ordinarily. We just don’t want an IP to run away during a transaction. If there is a genuine reason, then he can go. IPA should do some due diligence,” sources in Insolvency and Bankruptcy Board of India (IBBI) said.

There have been couple of instances where the IP had sought to use the “temporary surrender” route to get away from difficult situations and later return when things are quite sorted out, sources said.

Sumit Batra, a corporate lawyer, said the IBBI circular is in a direction to bring more accountability to IPs considering the fact that recently the National Company Law Tribunal (NCLT) has come down heavily on resolution professionals for various reasons. “To escape such rigours, IPs have been seeking temporary suspension,” Batra told BusinessLine .

Alka Kapoor, Chief Executive Officer, ICSI Institute of Insolvency Professionals, said IBBI’s latest circular on this front will ease the process of temporary surrender and revival.

It is a proactive measure of IBBI to discourage the surrenders while an IP is handling an insolvency resolution case or involved in such case in different capacity, she said.

“It is a welcome move since, it streamlines the process and prescribes the formats. It also avoids inconveniences that are being faced during CIRP,” she added.

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