In the light of the increase in the number of professional misconduct cases against the Insolvency Professionals, the Insolvency and Bankruptcy Board of India ( IBBI ) has issued a Charter prescribing the responsibilities of the Insolvency Professionals and the Committee of Creditors (CoC).
The Insolvency Professionals (IPs) and the Committee of Creditors (CoC) constitute key institutions of public faith under the Insolvency and Bankruptcy Code, 2016 (Code). The Code read with Regulations made thereunder has demarcated responsibilities of an IP and of the CoC in the corporate insolvency resolution process (CIRP) and also assigned certain responsibilities to them jointly. The emerging jurisprudence is bringing further clarity about their roles in a CIRP.
An IP, when acting as an Interim Resolution Professional or Resolution Professional, is vested with an array of statutory and legal duties and powers. He exercises the powers of the board of directors of the corporate debtor undergoing resolution. He manages operations of the corporate debtor as a going concern, protects the value of its property and complies with applicable laws on its behalf. In fact, he conducts the entire CIRP. The stakeholders are required to co-operate with him in the discharge of his functions.
The Code shifts the control of a corporate debtor when it is admitted into CIRP on its failure to service debt, to creditors represented by a CoC for resolving its insolvency. The CoC holds the key to the fate of the corporate debtor and its stakeholders. Several actions under the Code require the approval of the CoC.
The charter issued by the Board pointed out that there are certain matters where both the IP and the CoC have defined roles.
“Various actions under section 28 are taken by the IP only with the prior approval of the CoC. In the judgment cited in Para 3 above, the Hon’ble Supreme Court held: “The CoC is called upon to consider the resolution plan under section 30(4) after it is vetted and verified by RP as being compliant with all the statutory requirements specified under section 30(2).” While specifying their roles, the Code does not envisage one assuming the role of the other. In the said judgment, the Hon’ble Supreme Court observed: “The Resolution Professional is not required to express his opinion on matters within the domain of the financial creditors, to approve or reject the resolution plan, under section 30(4) under the I&B Code,” it said.
“It is, therefore, necessary that the IP and the CoC have a complete and clear understanding of their roles and responsibilities in a CIRP under the Code. A charter of their responsibilities prepared in consultation with the three insolvency professional agencies is at Annexure for guidance. This charter is only indicative and meant for the sole purpose of educating the stakeholders. A stakeholder must refer to the Code and Rules/Regulations made thereunder or seek professional advice if he intends to take any action or decision in any matter under the Code,” the Charter said.To Read the full text of the Charter CLICK HERE