Know All About Resolution Professional under IBC, 2016

Know all about Resolution Professional under Insolvency and Bankruptcy Code (IBC), 2016

Contents of the Article:

• Resolution Professional (RP);
• Provision for appointment of Resolution Professionals
• Replacement of RP;
• RP Shall carry out CIRP and tenure of RP
• Duties of RP

Resolution Professional (RP)

“Resolution Professional”, means an insolvency professional appointed to conduct the corporate insolvency resolution process and includes an interim-resolution professional;

Provisions Relating to appointment of resolution Professional

The committee of creditors in its first meeting may

(a) appoint the  interim resolution professional as a resolution professional or

(b) replace the interim resolution professional by another resolution professional.

It should be noted that for appointment or replacement, voting is required which shall not be less 6 percent.

(a) Appointment of interim resolution professional as resolution professional [Section-22(3)(a) of ibc]

• COC shall obtain a written consent from the interim resolution professional in Form-AA along with eligibility certificate and IBBI Registration certificate of Resolution Professional.
• COC shall communicate its decision to the interim resolution professional;
• the corporate debtor ; and
• and the Adjudicating Authority;

(b) To replace the interim resolution professional, [Section-22(3)(b) of ibc]

• COC shall file an application before the Adjudicating Authority for the appointment of the proposed resolution professional along with a written consent from the proposed resolution professional in the specified form [i.e Form-AA].
• The Adjudicating Authority shall forward the name of the resolution professional proposed to the Board for its confirmation and shall make such appointment after confirmation by the Board. [Section-22(4) of ibc]
• Where the Board does not confirm the name of the proposed resolution professional within ten days of the receipt of the name of the proposed resolution professional, the Adjudicating Authority shall, by order, direct the interim resolution professional to continue to function as the resolution professional until such time as the Board confirms the appointment of the proposed resolution professional. [Section-22(5) of ibc]

Replacement of resolution professional by committee of creditors. [Section-27 of IBC,2016]

• Where, at any time during the corporate insolvency resolution process, the committee of creditors is of the opinion that a resolution professional appointed under section 22 is required to be replaced, it may replace him with another resolution professional in the manner provided under this section.
• The committee of creditors may, at a meeting, by a vote of sixty-six per cent of voting shares, resolve to replace the resolution professional appointed under section 22 with another resolution professional, subject to a written consent from the proposed resolution professional in the specified form.
• The committee of creditors shall forward the name of the insolvency professional proposed by them to the Adjudicating Authority.
• The Adjudicating Authority shall forward the name of the proposed resolution professional to the Board for its confirmation and a resolution professional shall be appointed in the same manner as laid down in section 16.
• Where any disciplinary proceedings are pending against the proposed resolution professional under sub-section (3), the resolution professional appointed under section 22 shall continue till the appointment of another resolution professional under this section.

Resolution professional to conduct corporate insolvency resolution process. – [Sec-23(1)]

• The resolution professional shall conduct the entire corporate insolvency resolution process and manage the operations of the corporate debtor during the corporate insolvency resolution process period.
• However, the resolution professional shall, if the resolution plan under sub-section (6) of section 30 has been submitted, continue to manage the operations of the corporate debtor after the expiry of the corporate insolvency resolution process period until an order is passed by the Adjudicating Authority under section 31.

Duties of Resolution professionals :- After appointment of Resolution Professional he shall perform bellow mentioned duties for resolution of the corporate debtor.[Secion-25 of IBc, 2016]

(1) Appointment of valuers – The RP shall appoint two valuers within seven days of his appointment to determine the fair value and the liquidation value of the corporate debtor.  After the receipt of resolution plans, the RP shall provide the fair value and the liquidation value to every member of the committee in electronic form, on receiving an undertaking from the member to the effect that such member shall maintain confidentiality of the fair value and the liquidation value and shall not use such values to cause an undue gain or undue loss to itself or any other person.

(2) Preparation of information memorandum – the RP shall submit the information memorandum in electronic form to each member of the committee within two weeks of his appointment, but not later than fifty-fourth day from the insolvency commencement date, whichever is earlier. The RP shall share the information memorandum only after receiving an undertaking from a member of the committee to the effect that such member shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other person.

(3) Invite prospective Resolution Applicants – The RP shall invite the prospective resolution applicants to submit the resolution plan, by publishing brief particulars of the invitation for expression of interest in Form G of the Schedule at the earliest and not later than seventy-fifth day from the insolvency commencement date. Where the RP did not invite prospective applicants for the resolution plan and no reason was given by RP for the same and accordingly, the committee of creditors jumped into liquidation even though one month was left in the completion of initial period of 180 days. The NCLT held that the RP is violating his duties as specified in 25(2)(h) of the Code and declined the liquidation application and directed the RP to invite the expression of interest.⁶

(4) Due Diligence – The RP shall conduct due diligence based on the material on record in order to satisfy that the prospective resolution applicant:

• fulfils such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board;
• complies with the applicable provisions of section 29A; and
• complies with other requirements, as specified in the invitation for expression of interest.

(5) Preparation of Provisional List of Resolution Applicants – The RP shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date for submission of expression of interest to the committee and to all prospective resolution applicants who submitted the expression of interest.

(6) Request for Resolution Plan – The RP shall issue the information memorandum, evaluation matrix and a request for resolution plans, within five days of the date of issue of the provisional list to –

• every prospective resolution applicant in the provisional list; and
• every prospective resolution applicant who has contested the decision of the RP against its non-inclusion in the provisional list.

The request for resolution plans shall allow prospective resolution applicants a minimum of thirty days to submit the resolution plan(s).

(7) Submission to the Committee of creditors – The RP shall submit to the committee all the resolution plans which comply with the requirements of the Code and regulations made thereunder along with the details of:- (a) preferential transactions under section 43; (b) undervalued transactions under section 45; (c) extortionate credit transactions under section 50; and (d) fraudulent transactions under section 66, if any, observed, found or determined by him and the orders, if any, of the adjudicating authority in respect of such transactions.

(8) Submission of approved Resolution Plan – The RP must endeavour to submit the resolution plan approved by the committee to the Adjudicating Authority at least fifteen days before the maximum period for completion of corporate insolvency resolution process under section 12, along with a compliance certificate in Form H of the Schedule. Rejection or approval of a resolution plan is a right of committee of creditors and resolution professional cannot reject any plan without a decision of Committee of Creditors.⁷

(9) File Application for avoidance of transactions – Regulation 35A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution process for Corporate Persons) Regulations, 2016 provides for the timeline within which an application for avoidance of preferential, undervalued and extortionate transactions must be made.

On or before the seventy-fifth day of the insolvency commencement date the RP must form an opinion whether the corporate debtor has been subjected to any of the aforesaid transactions.

Where the RP is of the opinion that corporate debtor has been subjected to any transactions, he must make a determination thereof on or before the one hundred and fifteenth day of the insolvency commencement date and shall intimate to the Board.

Where the RP makes a determination as aforesaid, the RP must apply to the adjudicating authority for appropriate relief on or before the one hundred and thirty fifth day of the insolvency commencement date.