The Insolvency and Bankruptcy Code, 2016 is premised on a foundational principle—that the Resolution Professional functions as an independent fiduciary entrusted with the conduct of the insolvency process. Under the statutory framework, the Resolution Professional is expected to act independently of all stakeholders, safeguard the integrity of the process, and work towards maximisation of value of the corporate debtor’s assets.
However, practical experience under the IBC has prompted a growing, albeit understated, debate within the insolvency ecosystem. A question increasingly raised in professional discourse is whether the independence of the Resolution Professional, as envisaged in law, is fully realised in practice, or whether such independence remains largely conceptual within the existing structural framework.
1. Independence in Law vs Independence in Practice
Legally, an RP:
- is an officer of the court,
- owes duties to the process, not to the CoC,
- is bound by the Code, Regulations, and judicial precedents.
Practically, however, the RP’s:
- appointment,
- continuation,
- fee approval,
- expense approvals, and
- extensions
are entirely controlled by the CoC.
This creates an inherent tension between formal independence and practical dependence.
2. The Fee & Continuity Dilemma
In most CIRPs:
- RP fees are negotiated repeatedly,
- payments are milestone-based,
- expenses are questioned line-by-line,
- continuity depends on CoC confidence.
This often places RPs in a difficult position:
- assert independence → risk non-renewal or resistance
- align too closely → risk perception of bias
Neither outcome strengthens the process.
3. Commercial Decisions vs Procedural Duties
While commercial decisions lie with the CoC, RPs often face pressure in areas such as:
- valuation interpretation,
- information memorandum disclosures,
- eligibility scrutiny of resolution applicants,
- timing of actions (especially avoidance applications).
Even subtle influence can affect how independently the RP is perceived, even if actions are legally correct.
4. Independence Is Also About Perception
Independence is not just about actual conduct—it’s also about how stakeholders perceive it.
When:
- the RP is replaced mid-process without explanation, or
- fees are cut abruptly, or
- actions are challenged despite compliance,
the message sent is that independence exists only until it becomes inconvenient.
This perception erodes institutional trust.
5. Courts Can Protect Legality, Not Professional Confidence
Judicial forums can:
- protect RPs from arbitrary removal,
- enforce procedural compliance,
- penalise misconduct.
But courts cannot:
- eliminate subtle commercial pressure,
- change incentive structures, or
- restore confidence once neutrality is questioned.
Structural design matters.
6. Why This Issue Needs Honest Discussion
This is not about:
- blaming CoCs, or
- questioning RP integrity.
Most RPs act with professionalism under difficult constraints. Most CoCs act with caution driven by accountability pressures.
The real issue is whether the current framework unintentionally weakens the very independence it seeks to ensure.
7. What Could Strengthen RP Independence
Some ideas worth debating (not prescriptions):
- clearer fee frameworks
- greater predictability in tenure
- stronger institutional backing for procedural decisions
- reduced ad-hoc interference in statutory functions
- clearer separation between commercial advice and compliance roles
Even incremental changes can improve trust.
Conclusion: Independence Must Be Structural, Not Aspirational
The IBC does not fail because RPs lack integrity. It struggles when independence depends on goodwill instead of structure.
If we want RPs to act fearlessly, fairly, and efficiently, the system must support—not subtly constrain—their independence.
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This is not a criticism of individuals. It is a call for a mature, honest conversation about institutional design.
Author Note: The author is an Insolvency Resolution Professional with extensive experience in managing multiple CIRP and liquidation assignments. For queries or professional discussions related to the Insolvency and Bankruptcy Code (IBC), you may reach out to: Krit Narayan Mishra at kritmassociates@gmail.com | +91 99108 59116.
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