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Insolvency resolution professionals (IRPs), who play a central role in resolution, may, in the coming days, find it difficult to resign midway during a corporate insolvency resolution process (CIRP) citing ad-hoc reasons or on flimsy grounds.
This is because the Insolvency and Bankruptcy Board of India (IBBI) proposes to debar IRPs from taking fresh assignments for five years if they opt out of an ongoing case for reasons other than exceptional circumstances of physical incapacitation. They may also be excused if they become legally ineligible to pursue a case.
This proposal is outlined in a new discussion paper released by the IBBI on Thursday and intends to help maintain the time-bound process, which is the essence of the Insolvency and Bankruptcy Code (2016). Comments and suggestions have to reach the IBBI by July 15.
Under the proposed plan, IRPs can seek discharge from a process only on one ground — when he is incapacitated to continue as interim resolution professional, resolution professional or liquidator.
He can be incapacitated only in two ways: physically, if suffering from health problems; and legally, if deemed ineligible under the law. In either case, the approval of the adjudicating authority may be necessary, the discussion paper added.
Saurav Kunar, Partner at law firm Induslaw, said the IBBI’s approach is very logical. If a resolution professional has accepted his appointment for a CIRP, there should not be any ad-hoc reasons for him to seek discharge.
“The IBBI has rightfully proposed to debar the resolution professional for five years if he seeks discharge from the process on any other grounds. This will ensure deterrence to the casual approach of the resolution professional,” he said.
Pankaj Mahajan, Head - Restructuring and Insolvency, Mazars, said that debarring a professional for five years just because he has sought discharge due to the reasons other than those mentioned in the discussion paper would be quite a harsh step. It would demoralise the resolution professionals who are already facing a lot of flak in spite of remarkable handling of stressed assets, he said.
‘A harsh step’
Daizy Chawla, Senior Partner, Singh & Associates, a law firm, said: “Even though the intention of the IBBI is to maintain the smooth functioning of the CIRP that has been initiated, it’s, however, harsh to put an IRP in such restrictions, considering the fact that the IRP takes the seat of management and, in a company, even a director has the right to resign.”
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