Almost two years and a half have passed and the The Insolvency and Bankruptcy Code, 2016 (IBC) has shown that the legislature wants no stone unturned to resolve the debt stuck in the NPA. It is also interesting to note that the progress has been stupendous. But, the protagonist of the show ‘Insolvency Professional ’(IP)has been subject to so many litigations that the

IP so cautious to accept assignment and also stern messages have been given to them by IBBI and NCLT that  errant IP will not be left. Hence, this article culls out the interesting legal aspects wherein something between white and black has to be tackled.

After recent amendment in The Insolvency and Bankruptcy Code, 2016 (“IBC”) The IP have been cast with responsibility of complying with the requirements under all law on behalf of the corporate debtor for the time being in force. Insolvency Professional is appointed as Resolution Professional under IBC.

Sub Section (2) of Section 17 of IBC, Management of affairs of corporate debtor by interim resolution professional is amended by insertion of new provision as statedbelow: –

“Section 17 (2) The interim resolution professional vested with the management of the corporate debtor, shall-

(e) [be responsible for complying with the requirements under any law for the time being in force on behalf of the corporate debtor.]”

Even before this amendment the Insolvency and Bankruptcy Board of India (IBBI) had underlined the same by CIRCULAR dated 3 January 2018.

A corporate person undergoing insolvency resolution process, fast track insolvency resolution process, liquidation process or voluntary liquidation process under the Insolvency and Bankruptcy Code, 2016 (Code) needs to comply with provisions of the applicable laws (Acts, Rules and Regulations, Circulars, Guidelines, Orders, Directions, etc.) during such process.

It is further clarified that if a corporate person during any of the aforesaid processes under the Code suffers any loss, including penalty, if any, on account of non-compliance of any provision of the applicable laws, such loss shall not form part of insolvency resolution process cost or liquidation process cost under the Code. The insolvency professional will be responsible for the non-compliance of the provisions of the applicable laws if it is on account of his conduct.

IBBI also directed that an insolvency professional shall exercise reasonable care and diligence and take all necessary steps to ensure that the corporate person undergoing any process under the Code complies with the applicable laws.

After such amendment the resolution professional(‘RP’), it is now clarified that the onus and responsibility for all legal compliances lies on him during the period.

This amendment was deliberated in Insolvency Law Committee which was setup 16thNovember 2017. The need for clarifying the position of statutory compliance during Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”)was required as the intention of IBC was to run the Corporate Debtor as going concern. The ambiguity with regards to filing of Financial statement maintaining board report appointment of auditor etc. is clarified by Insolvency Law Committee Report. Since there were different practices being followed and, in some cases, view taken by suspended management was that during moratorium there is no requirement to compliance as the power of the board of the director stands suspended in terms of section 17 of IBC.

The ministry of corporate affair / ROC does not allow any person other than authorised signatory to file any documents hence there was dilemma with respect to filing of such statutory documents/Compliance.

Even today in some cases, the directors are not traceable and since the MCA portal does not permit filing. This issue remains unresolved.

Quarterly Financial Results

In case of listed companies, as per clause 41 of Listing Agreement, companies require to file Quarterly financial results which has to be signed by authorised signatory. Now the question comes whether the IP requires to prepare and sign the Quarterly financial results.

The question was answered by Hon’ble NCLT, Kolkata in matter of Nicco Corporation Limited. Interestingly in the case of JP Infratech limited which is limited company and under CIRP, there was a difference of the opinion between the management and Resolution Professional which was mentioned in the notes of accounts of Quarterly financial Statement. This instance shows that even if management and Resolution Professional disagree both will have to sign the Financial results irrespective of the disagreement.

Undervalued and Fraudulent Transaction

During CIRP,RP is required to make an assessment of Undervalued and Fraudulent Transaction under section 43, 45, 49, 50 and 66 of IBC, which may result in reverting back the siphoned/diverted fund to the company by the suspended board or related parties. Violation under these sections may require RP to take steps under other laws as well. NCLT Mumbai have ordered reversal of funds to the tune of Rs.3 crores in the matter of Sanaa Syntex Private Limited v/s SBI Global Factors Ltd. (MA 436/2018 in CP No. 172/IBC/NCLT/MB/MAH/2017)

Annual General Meeting Compliances

It is required under section 96 of the Companies Act, 2013 that every company shall hold a general meeting as its Annual general meeting. Under provisions of the Companies Act, 2013, Directors and Auditor are duty bound to attend Annual General Meeting.

It is observed that in case of Videocon Limited neither the suspended board nor the RP attended AGM. It was attended by the representative of RP only. This raises an important question whether the suspended board can wash away their duties during IBC process, it is yet to be tested in the court of law.

GST Compliance

As per GST law company must make payments of GST for taking credits and further the next returns can only be filed when the earlier tax has been paid.

Now, it is the duty of RP to file returns and pay tax during the CIRP but the PRE-CIRP tax need not be paid as the same shall be under Section 53 of the IBC – Waterfall mechanism. Now, such utility is not available under the GST portal, this again poses challenge to the RP. Practically in cases handled by us, we have taken route of filing physical returns and paying taxes to save from any prosecution.


This article brings out few challenges which RP faces with respect to other laws and therefore the tight rope of 180/270 days becomes thinner due to compliance of various laws. Even their have been cases wherein non-appearance of RP before Court have attracted issuance of warrant and hence in the opinion of authors, RP should be well prepared to comply with laws and litigations and therefore should ask for list of laws to be complied and pending litigations so that he doesn’t face the unpleasant situations. A cue can be drawn after discussing the same with Statutory auditors, compliance officer and the suspended board. Even the companies under Standard on Auditing (SA) 250requires that Register of applicable laws and regulations is maintained by the company to be reviewed by the auditors can be resorted to.

CA (Adv.) Nipun P. Singhvi and CS Kumar Pal MehtaAuthors

Adv.(CA.) Nipun Singhvi is practicing advocate at various Tribunals, High Courts and Supreme Court. CS Kumar Pal Mehta is practicing company secretary. Both have been involved in landmark Mergers and Acquisitions and Insolvency cases.

They can be reached at and

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November 2020