Role of a Resolution Professional in Insolvency and Bankruptcy

Who is a Resolution Professional?

A resolution professional has been provided with a certified license to exercise the entire process of insolvency and bankruptcy. He shall be qualified under the Limited Insolvency Examination, enrolled in the Insolvency Resolution Agency, and registered with the Board. As per the code, a resolution professional conducts the insolvency resolution process which involves an interim resolution professional who works with expertise to revive the company.

How is Resolution Professional Appointed?

An interim resolution professional is appointed by the Committee of Creditors before the appointment of Resolution Professional. He is appointed by the Committee of Creditors. He acts as a Liquidator in cases of liquidation, a Bankruptcy Trustee in individual insolvency cases etc. According to Section 22 of the Insolvency and Bankruptcy Code 2016, a resolution professional is appointed within seven days of the constitution of the Committee of Creditors by conducting a meeting. In the meeting, with the majority of votes, the interim resolution professional can be continued as a resolution professional. The same information is communicated further. The COC appoints the RP within 30 days from the date of commencement of the Corporate Insolvency Resolution Process.

Roles and Duties of Resolution Professional

In the final report of the Bankruptcy Law Reforms Committee, it stated how Resolution Professional has an important role and acts as a pillar with effectiveness, efficiency and timely function in the insolvency and bankruptcy resolution process.

• According to Section 23 of the Insolvency and Bankruptcy Code 2016, a Resolution Professional has a duty to conduct the process of Corporate Insolvency Resolution and operate the management of the Corporate Debtor during the process. The Resolution Professional has to continue to exercise the power until and unless the order is passed. He shall exercise the power and perform the duties of an Interim Resolution Professional.
• According to Section 17 of the Insolvency and Bankruptcy Code 2016, the affairs of Corporate Debtors have to be managed by the Interim Resolution Professional after the order is passed for the commencement of the Corporate Insolvency Resolution Process. Since the date of his appointment, he has been vested with the management of the affairs of the Corporate Debtor. All the powers of the board or the partners shall be suspended and exercised by the Interim Resolution Professional. All the officers and managers are obliged to provide all the necessary documents, records and reports to him. Nonetheless, financial institutions shall act according to his instructions. The Interim Resolution Professional shall act and execute in the name or on behalf of the Corporate Debtor where access to electronic records for financial information, books of accounts, records and other documents which is available with the government and statutory auditor.
• According to Section 24(2) of the Insolvency and Bankruptcy Code 2016, a meeting with a committee of creditors shall be conducted by the Resolution Professional.

• To create a resolution plan, the Resolution Professional must create and submit the information memoranda. He must also give the resolution applicant all pertinent information. The information memorandum must include the details, according to Regulation 36(2). The definition of “information memorandum” in the Explanation to Section 29 is defined as information that the resolution applicant needs in order to create a resolution plan for a corporate debtor. It contains details about the financial situation, disagreements, and any other issue pertaining to a corporate debtor.
• According to Section 30 of the Insolvency and Bankruptcy Code 2016, the Resolution Professional shall examine the plan submitted by the applicant on the basis of information provided through a memorandum. He shall examine the payment specified by the board, the payment specified by the board for operational creditor, provide for the management of affairs, the implementation and supervision and don’t contravene to any law. After the approval from the Resolution Professional, he shall present it in front of the Committee of Creditors for their approval that shall not be less than 60%.
• According to Section 25 of the Insolvency and Bankruptcy Code 2016, the Resolution Professional has a duty to preserve and protect the assets of the Corporate Debtor.
• According to Section 25(2) of the Insolvency and Bankruptcy Code 2016, the Resolution Professional shall undertake the custody of business and assets, act on behalf of the Corporate Debtor with the third party, raise interim finance after the approval from the COC, appoint an accountant or legals, maintain an updated list of all claims, attend a meeting with the COC, prepare the information memorandum, present all the resolution plants with the COC and file an application for avoidance of transactions.

Limitation on Resolution Professional

According to Section 28 of the Insolvency and Bankruptcy Code 2016, the Resolution Professional can’t take any action for certain things without the approval of the COC such as raising an interim finance, creating any security interest over any assets, changing the capital structure of the Corporate Debtor, recording any change in the ownership interest, giving instructions to financial institutions, amending any document, delegating its authority, transferring rights, undertaking any related party transactions and making any change in the amendment.

In ESIL vs. Satish Kumar Gupta, the court held that a Resolution Professional can only give an opinion that will act as a prima facie for the Committee of Creditors. In Dinal Shah vs. Bharti Defence Infrastructure Ltd. NCLAT held that any misconduct committed by the Resolution Professional shall be reported to the appropriate authority. In Swiss Ribbon Pvt. Ltd. vs. Union of India, the Supreme Court observed that the Resolution Professional is only a facilitator and can’t act against the Committee of Creditors. In Arcelor Mittal India vs. Satish Kumar Gupta, the court observed that the Resolution Professional’s sole responsibility is to review and verify that every resolution plan compiles as per the Section 30(2) requirements. He doesn’t have to act as an adjudicator.

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The blog has been written by Sakshi Jain, B.A. LLB(Hons.) student in Manav Rachna University. The blog contains information about the Resolution Professional which covers the cases also.