IBBI wants only market to decide resolution professionals’ fees

Insolvency regulator IBBI has no intent to regulate the fees charged by resolution professionals (RP) under the IBC process and wants the market to decide such fees, its Chairman MS Sahoo said on Monday.

However, if the market fails to determine such fees, then the IBBI’s discussion paper proposed default mechanism could be adopted, Sahoo said. He was speaking at the National Conference on Resolving Insolvency in India, which was organised by the CII.

“To avoid decision in each disputed case, there can be guidelines for a default mechanism, and this is what the discussion paper provides. Whether default mechanism should be provided, and if so what should be the default mechanism, that issue is still open. The aspect of the regulator fixing the fees is certainly not open,” Sahoo later told BusinessLine .

Home buyers

At the conference, Sahoo also said that home buyers — as financial creditors — should come forward to give information to ‘information utility’, as mandated in the law.

This would enable NCLT to get authentic data from the IU, and they need not struggle to establsh if there is a default or not. The RP too can similarly verify the claims and would not be required to struggle for it.

“If there is a default by the corporate debtor, then IU tells the creditors that there is a default. If a home buyer is listed as a creditor, then he too will get information,” Sahoo said.

NBFC blowouts

Asked whether failing financial services providers would be brought under IBC code, Sahoo told reporters that it is entirely for the Government to decide whether Section 227 of Insolvency and Bankruptcy Code (IBC) should be invoked or not, and that such decisions have to be taken in consultation with the financial regulators (like the RBI).

IBC gaining strength

At the CII conference, Sahoo said that IBC is a dynamic law, which was evolving to meet emerging needs of the stakeholders to further the objective of the code. “The Code has passed the Constitutional muster and with every challenge, it has come out with stronger roots,” Sahoo said.

“The impact of the IBC is not only what happens in the Code, but also what happens on account of and under the shadow of the Code,” he said. “The IBC has won the credibility of all categories of stakeholders,” he added.

Bahram N Vakil, Founder & Senior Partner, AZB & Partners, a law firm, elaborated that since the introduction of the IBC Code, India has made continuous progress in the insolvency process, in terms of its speed, recovery and cost. He said that India was now at par with similar economies in this respect. The IBC has brought about significant behavioural change and responsibility in the attitudes of the borrowers and promoters.

“The Financial Service Providers have also become more responsible and careful in analysing the due diligence and financial viability of their debtors,” he said.

Piruz Khambatta, Chairman, CII Task Force on Ease of Doing Business credited the Code with the drastic improvement in the position of India in the Ease of Doing Business ranking awarded by the World Bank.

COMMENT NOW