RESIGNATION BY INSOLVENCY PROFESSIONAL FROM HIS ASSIGNMENT

[Mr. M. GOVINDARAJAN]

Insolvency professional is one of the service providers of the Insolvency and Bankruptcy Board of India (‘Board’ for short) to implement the provisions of the Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) effectively and to achieve the purpose of the code for the revival of business.

Insolvency Professional is regularized by the Board and monitored by the Insolvency Professional Entities.  The Board framed IBBI (Insolvency Professional) Regulations, 2016.

The said regulations prescribe the qualifications of a person to become an insolvency professional.  Further detailed procedures are prescribed to become an insolvency professional such as passing the examination, enrolling membership in the Insolvency Professional Agencies and with the Board.

The Code provides the various roles to be played by the Insolvency Professional, such as Interim Resolution Professional, Resolution Professional, Liquidator, Administration, Authorized person, Bankruptcy Trustee etc. The Adjudicating Authority appoints an insolvency professional as Interim Resolution Professional on the admission of the application filed by the financial creditor or operational creditor or by the corporate applicant itself.  The Code entrusts with the Interim Resolution Professional of various duties and functions in the corporate insolvency resolution process, constitution of Committee of Creditors, public announcement calling the claims from the creditors of the corporate debtor etc.  The Interim Resolution Professional will hold the post till the Resolution Professional is appointed.  The Interim Resolution Professional himself continue as Resolution Professional or he may be replaced by another insolvency professional by the Adjudicating Authority on the recommendations of the Committee of Creditors.

The Resolution Professional, once appointed, is fully responsible for the conduct of corporate insolvency resolution process within the time prescribed or the process is completed or the corporate debtor is put on liquidation on the order of the Adjudicating Authority. 

Once the company is order for liquidation the insolvency professional who is appointed as liquidator by the Adjudicating Authority will proceed on the liquidation process.  The Resolution professional in the corporate insolvency resolution process may continue as liquidator or another insolvency professional may be appointed as liquidator by the Adjudicating Authority.  During the liquidation proceedings the liquidator may be replaced by another insolvency professional by the Adjudicating Authority.

Thus the insolvency resolution professional may be appointed as Resolution Professional in the insolvency resolution process against the personal guarantor to the Corporate Debtor under Section 94(1) and 95(1) of the Code.  The insolvency may act as a Bankruptcy Trustee in a bankrupt case.

The regulation provides for the surrender of the certificate of registration granted to him by the Board.  The Board is having powers to initiate disciplinary action against a insolvency professional who does not comply with the provisions of the Code and regulations made there under.  In many cases the Board punished the insolvency professionals by suspending the certificate for a particular period or imposing penalties on the insolvency professional or even cancelling the certificate of registration.

In general, in any law there shall be provisions for resignation of the particular officer/professionals.  For example, Companies Act, 2013 has provisions for the resignation of Directors, Auditors etc. 

A resolution process can be withdrawn by the party who filed the application.  But the insolvency professional cannot able to do the same.  If he wants to resign from his assignment, he has to file a separate interim application before the Court and may get the relief by the order of Adjudicating Authority.

The Schedule I to the Regulation provides the Code of Conduct for the insolvency professionals on the following-

• Integrity and objectivity;
• Independence and impartiality;
• Professional competence;
• Representation of correct facts and correcting misapprehensions;
• Timeliness;
• Information management;
• Confidentiality;
• Occupation, employability and restrictions;
• Remuneration and costs;
• Gifts and hospitality.

Resignation

Vide Notification No. IBBI/2023-24/GN/REG110, dated 31.01.2024 the Board brought out an amendment to the Regulations.  The amendment inserted a new para 22A in the Code of Conduct.

The newly inserted para 22A provides that an insolvency professional may resign from the assignment, subject to-

• the recommendation of the committee of creditors in a corporate insolvency resolution process,
• consultation committee in liquidation process,
• the debtor or the creditor in the insolvency resolution process of personal guarantor to the corporate debtor,

and the approval of the Adjudicating Authority.  The insolvency professional shall continue to discharge his duties, functions and responsibilities till the approval of resignation by the Adjudicating Authority.  This new provision will enable the insolvency professional to resign from the assignment in unavoidable circumstances without any pain.