Insolvency Professional Entities are qualified to Appoint as Resolution Professionals: NCLT Holds in Favour of Piramal Capital [Read Order]
It was observed that the IBBI recognizes IPEs under the IBBI (Insolvency Professionals) Regulations, 2016 and is empowered under Section 240(2)(zzi) of the IBC to make regulations regarding the categories of professionals or persons, their qualifications, and experience.
NCLT – IBBI – Insolvency and Bankruptcy Board of India – National Company – Law Tribunal – TAXSCAN
NCLT – IBBI – Insolvency and Bankruptcy Board of India – National Company – Law Tribunal – TAXSCAN
The National Company Law Tribunal( NCLT ) held that Insolvency Professional Entities ( IPEs ) are qualified to be appointed as Resolution Professionals ( RPs ) under the Insolvency and Bankruptcy Code, 2016. Further viewed that the Insolvency and Bankruptcy Board of India ( IBBI ) has the authority to regulate and recognize IPEs as resolution professionals.
Piramal Capital & Housing Finance Limited, the Financial Creditor applied the NCLT, praying for the replacement of the Interim Resolution Professional (“IRP”) with a new Resolution Professional (“RP”).
The RP suggested by Piramal was an Insolvency Professional Entity (“IPE”), under Section 22(3)(b) of the IBC. The Committee of Creditors (“CoC”) submitted that the appointment of the proposed IPE to replace the IRP had been passed by 100% voting of the CoC and was in accordance with the IBBI (Insolvency Professionals) Regulations, 2016.
The NCLT sought clarification on whether the appointment of IPEs as RPs was in consonance with the scheme of IBC. It was clarified that although the IBC prima facie recognises only three entities — (a)Information Utility, (b) Insolvency Professional, and (c)Insolvency Professional Agency — as professional service providers, IPEs are also recognized and regulated under Regulation 12 of the IBBI (Insolvency Professionals) Regulations, 2016. These regulations grant certificates of registration to IPEs.
The CoC further submitted that the definition of 'Insolvency Professional' under Section 3(19) of the IBC, is that a person enrolled with an insolvency professional agency as its member and registered with the Board as an insolvency professional under Section 207. The term 'Resolution Professional' is defined under Section 5(27) of the IBC as an insolvency professional. The term "person" includes a limited liability partnership (LLP) under Section 3(23)(f) of IBC. The proposed IPE is an LLP.
The two-member bench of Shri Sanjiv Dutt (Technical Member) and Shri K.R. Saji Kumar (Judicial Member), observed that the IBBI recognizes IPEs under the IBBI (Insolvency Professionals) Regulations, 2016 and is empowered under Section 240(2)(zzi) of the IBC to make regulations regarding the categories of professionals or persons, their qualifications, and experience.
The Tribunal further noted that the IBBI has registered IPEs as IPs and issued them valid authorizations for assignments. The IBBI has also issued Circulars and Clarifications regarding their eligibility to be engaged as RPs. Hence, the appointment of an IPE as RP was held to be valid in law. While upholding the power, the NCLT appointed M/s Incorp Restructuring Services LLP as the new Resolution Professional in place of the IRP.
To Read the full text of the Order CLICK HERE
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