Insolvency Professionals to act as Interim Resolution Professionals or Liquidators (Recommendation) Guidelines, 2018
Provisions in the Insolvency and Bankruptcy Code, 2016
1. Section 16(3)(a) of the Insolvency and Bankruptcy Code, 2016 (Code) requires the Adjudicating Authority (AA) to make a reference to the Insolvency and Bankruptcy Board of India (Board) for recommendation of an insolvency professional (IP) who may act as an interim resolution professional (IRP) in case an operational creditor has made an application for corporate insolvency resolution process (CIRP) and has not proposed an IRP. The Board, within ten days of the receipt of the reference from the AA, is required under section 16(4) of the Code to recommend the name of an IP to AA against whom no disciplinary proceedings are pending.
2. Section 34(4) of the Code requires the AA to replace the resolution professional, if (a) the resolution plan submitted by the resolution professional under section 30 was rejected for failure to meet the requirements mentioned in sub-section (2) of section 30; or (b) the Board recommends the replacement of a resolution professional to the AA for reasons to be recorded in writing. In such cases, the AA may direct the Board under section 34(5) of the Code to propose the name of another IP to be appointed as a liquidator. The Board is required under section 34(6) to propose the name of another IP within ten days of the direction issued by the AA.
3. When a reference or direction is received under section 16 or 34 of the Code from the AA for recommending / proposing the name of an IP, the Board has no information about the volume, nature and complexity of the CIRP or Liquidation Process and the resources available at the disposal of an IP. In such a situation, the Board is unlikely to add much value by recommending an IP for a CIRP / Liquidation. In fact, the bill titled “The Insolvency and Bankruptcy Code, 2015”, as introduced in Lok Sabha, provided that the Board shall recommend the name of an IP who has the relevant expertise for various processes under the Code. These provisions were dropped based on the recommendations of the Joint Parliamentary Committee, which observed that there are sufficient safeguards to ensure that the competent persons are enrolled as insolvency professionals.
4. Further, it takes some time for a reference or a direction from the AA to reach the Board. Thereafter, the Board is permitted to take up to ten days to identify an IP for the purpose. The Board used to invite expression of interest from eligible IPs and had an internal committee to appraise interests to identify an IP for recommendation to the AA. It takes some time also for the recommendation of the Board to reach the AA, after which the AA can appoint the recommended IP. In some cases, it may take 2-3 weeks, which could be saved if the AA has a ready panel of IPs recommended by the Board and it can pick up any name from the Panel while issuing the Order.
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