Date of issue of Guidelines: 2nd June, 2020
Applicability: with effect from 1st July, 2020.
There are two types of the Insolvency
1. Corporate Insolvency
2. Individual Insolvency
Corporate Insolvency:
The IBBI is required under IBC, 2016 to recommend the name the name of Insolvency Professional for appointment as-
1. Interim resolution Professional, or
2. Liquidator.
Relevant Sections: Section 16 & Section 34 of the IBC, 2016
Section: 16 of IBC, 2016
1. As per section 16(3)(a) of the code requires the Adjudicating Authority to make a reference to the board for recommendation of an IP, who may act as an IRP where an operational creditor made an application for CIRP and has not proposed an IRP.
2. The Board is required under section 16(4) of the Code to recommend the name of an IP against whom no disciplinary proceedings are pending, within 10 days from the receipt of the reference from Adjudicating Authority.
Section 34 of the IBC, 2016
1. The Adjudicating Authority 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 section 30(2); or
(b) The Board recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded in writing; or
(c) The resolution professional fails to submit written consent under section 34(1). For the purposes of clause (a) and clause (c) of section 34(4),
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.
2. The Board is required under section 34(6) to propose the name of another IP along with written consent from him, within ten days of the direction issued by the Adjudicating Authority under section 34(5)
Recommendation of Penal of IPs
Relevant Cases:
Innovsource Private Limited vs. Getit Grocery Private Limited
1. The Adjudicating Authority, in its order dated 8th January 2018 in above case, observed: “The Insolvency and Bankruptcy Board of India vide its letter dated 01.01.2018 has recommended a Panel of Insolvency Professionals for appointment of Insolvency Resolution Professional in compliance with Section 16(3)(a) of the Code in order to cut delay.
2. The list of recommended Insolvency Professionals provides instant solution to the Adjudicating Authority to pick up the name and make appointment.
3. It helps in meeting the time line given in the Code and the unnecessary time wasted firstly in asking the Insolvency and Bankruptcy Board of India to recommend the name and then to appoint such Interim Resolution Professional by the Adjudicating Authority”.
Sandeep Kumar Gupta, Resolution Professional Vs. Stewarts & Lloyds of India Ltd. & Anr.
1. The NCLAT, in its order dated 28th February, 2019 in above case, Observed: “ . Further, the list of ‘Resolution Professionals’ being made available by the ‘Board’ to the Adjudicating Authorities, any person is appointed out of the said list submitted by the ‘Board’,
2. it should be treated to be an appointment of ‘Resolution Professional’/‘Liquidator’ on the recommendation of the ‘Board’.”
Individual Insolvency
The Board is also required under the Code to recommend the name of an IP for appointment as resolution professional (RP) or bankruptcy trustee (BT) as under:
Relevant Sections: Section 97, Section 98, Section 125, Section 146 & Section 147 of the IBC, 2016.
Section 97 of IBC, 2016
Section 97(3) requires the Adjudicating Authority to direct the Board to nominate a resolution professional (RP) for an insolvency resolution process, where an application under section 94 or 95 is filed by the debtor or the creditor, as the case may be, and not through a RP. The Board is required under section 97(4) to nominate a RP within ten days of the receiving the direction from the Adjudicating Authority under Section 97(3).
Section 98 of IBC, 2016
1. Section 98(2) of the Code requires the Adjudicating Authority to make a reference to the Board for replacement of a RP in an insolvency resolution process,
2. Where in pursuance of Section 98(1), the debtor or the creditor is of the opinion that the RP appointed under section 97 is required to be replaced.
3. The Board is required under section 98(3) to recommend the name of an RP, against whom no disciplinary proceedings are pending, within ten days of the receipt of the reference from the Adjudicating Authority under Section 98(2).
Section 125 of IBC, 2016
1. Section 125(3) of the Code requires the Adjudicating Authority to direct the Board to nominate a bankruptcy trustee (BT) for the bankruptcy process, where a BT is not proposed by the debtor or creditor under section 122 or 123.
2. The Board is required under section 125(4) to nominate a BT, within ten days of receiving the direction of the Adjudicating Authority under Section 125(3).
Section 146 of IBC, 2016
1. Section 146(2) of the Code requires the Adjudicating Authority to direct the Board for replacement of the BT on his resignation in a bankruptcy process.
2. The Board is required under section 146(3) to recommend another BT as a replacement, within ten days of the direction of the Adjudicating Authority under Section 146(2).
Section 147 of IBC, 2016
1. Section 147(2) of the Code requires the Adjudicating Authority to direct the Board for replacement of a BT in a bankruptcy process in the event of occurrence of a vacancy in the office of the BT for any reason other than his/her replacement or resignation.
2. The Board is required under section 147(3) to recommend a BT as a replacement, within ten days of the direction of the Adjudicating Authority under section 147(2).
Relevant Rule: Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019
1. Rule 8 (2) enables the Board to share a Panel of IPs, who may be appointed as resolution professionals, with the Adjudicating Authority for the purposes of section 97(4) and section 98(3).
2. Rule 8 (2) enables the Board to share a Panel of IPs, who may be appointed as bankruptcy trustee, with the Adjudicating Authority for the purposes of section 125(4) and section 146(3) and section 147(3) of the Code.
Guidelines to be followed:
The Board may take up to ten days to identify an IP for the purpose. It also takes some time for the recommendation of the Board to reach the AA, after which the AA could appoint the recommended IP. The process of appointment may entail 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 for appointment while issuing the Order itself.
Given that every IP is equally qualified to be appointed as the IRP, Liquidator, RP or BT of any corporate or individual insolvency resolution, liquidation or bankruptcy process, as the case may be, if otherwise not disqualified, and in the interest of avoiding administrative delays, Page 3 of 7 the Board considers necessary to have these guidelines to prepare a Panel of IPs for the purpose of section 16(4), 34(6), 97(4), 98(3), 125(4), 146(3) and 147(3).
Panel of IPs
1. The Board will prepare a common Panel of IPs for appointment as IRP, Liquidator, RP and BT and share the same with the AA in accordance with these Guidelines.
2. The Panel will have Zone wise list of IPs based on the registered office (address as registered with the Board) of the IP.
3. Keeping in view, the issuance of large number of AFAs by the IPAs in last week of November and December 2019, to facilitate maximum possible coverage, instead of two six monthly panels, now for 2020-21, the first Panel under this guidelines will have a validity of 4 months and 25 days and upon its expiry, a new Panel having validity of 7 months and 5 days will replace it . For example, the first Panel under the Guidelines will be valid for consideration for appointment during 1 st July, 2020 – 25th November, 2020, and the next Panel will be valid for being considered for appointment during 26th November, 2020 – 30th June, 2021.
4. The NCLT may pick up any name from the Panel for appointment of IRP, Liquidator, RP or BT, for a CIRP, Liquidation Process, Insolvency Resolution or Bankruptcy Process relating to a corporate debtors and personal guarantors to corporate debtors, as the case may be.
5. The DRT may pick up any name from the Panel for appointment as RP or BT, for an Insolvency Resolution or Bankruptcy Process for personal guarantors to corporate debtors, as the case may be.
Obligations of IPs in the Panel
1. It must be explicitly understood that an IP, who is included in the Panel based on his expression of interest, shall not:
(a) withdraw his interest to act as IRP, Liquidator, RP or BT, as the case may be;
(b) decline to act as IRPs, Liquidator, RP or BT, as the case may be, if appointed by the AA; or
(c) surrender his registration to the Board or membership or AFA to his IPA during the validity of the Panel.
2. It must be explicitly understood that:
(a) the AA may require the Board to recommend an IP from or outside the Panel and in such cases, the Board shall accordingly recommend an IP;
(b) an IP in the Panel can be appointed as IRP, Liquidator, RP or BT, at the sole discretion of the AA;
(c) the submission of expression of interest is an unconditional consent by the IP to act as an IRP, Liquidator, RP or BT of any process relating to a corporate or individual debtor, as the case may be;
(d) an IP who declines to act as IRP, Liquidator, RP or BT, as the case may be, on being appointed by the AA, shall not be included in the Panel for the next five years, without prejudice to any other action that may be taken by the Board.
Inclusion of IPs in the Panel
An IP will be eligible to be in the Panel of IPs, if –
(a) There is no disciplinary proceeding, whether initiated by the Board or the IPA of which he is a member, pending against him;
(b) He has not been convicted at any time in the last three years by a court of competent jurisdiction;
(c) He expresses his interest to be included in the Panel for the relevant period;
(d) He undertakes to discharge the responsibility as IRP, Liquidator, RP or BT, as he may be appointed by the AA;
(e) He holds an Authorization for Assignment (AFA), which is valid on the date of expression of interest and remains valid till the validity of Panel. For example, the IP included in the Panel for appointments during 1 st July, 2020 – 25th November, 2020 should have AFA valid up to 25 th November, 2020
Author Bio
Sir,
Can Financial Creditors pick up the Insolvency Professional from IBBI website for nomination as IRP in the application to be filed before AA as per section 10 (3)(b) of I&B Code?
Thankyou