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The Insolvency and Bankruptcy Board of India (IBBI) has come up with a charter of responsibilities for Insolvency Resolution Professionals (IRPs) and Committee of Creditors (CoC) so that stakeholders have a complete and clear understanding of their roles and responsibilities in a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC).
This charter, which is not mandatory, has been prepared in consultation with the three insolvency professional agencies that have been set up by the CA Institute, the Institute of Company Secretaries and the Cost Accountants Institute.
“This charter is only indicative and meant for the sole purpose of educating the stakeholders,” said an IBBI official.
While specifying their roles, the IBC does not envisage one assuming the role of the other.
It may be recalled that the Supreme Court had, in a recent decision, observed that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timeline prescribed by the IBC.
The legislature consciously has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority, the National Company Law Tribunal (NCLT), the apex court had ruled. “That is made non-justiciable,” it said.
Expert-take
Saurav Kumar, Partner at law firm Induslaw, said the charter of responsibilities is a beneficial step and will help to overcome any duplication in the roles and responsibilities between an IRP and the CoC, to smoothen the CIRP.
The Supreme Court has already clarified that an IRP is not required to provide his/her opinion on a resolution plan and has to bring such a resolution plan before the CoC
“Since the charter is only indicative and not mandatory, the Board appears to give primacy to the Code if there are differences between the two,” Kumar added.
Who can initiate CIRP
Meanwhile, the government has clarified who can represent a financial creditor and initiate a CIRP under the Code. So now a guardian, an executor or administrator of an estate of a financial creditor, a trustee (including debenture trustee) and a person duly authorised by the board of directors of a company can file an application for initiating CIRP on behalf of the financial creditor.
Sumit Naib, Director-Regulatory, Nangia Advisors (Andersen Global), said the move would address the existing ambiguity.
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