ReIterating that regulations under the Insolvency and Bankruptcy Code (IBC) do not envisage any discontinuity or break in an ongoing insolvency resolution process for a bankrupt company, the Insolvency and Bankruptcy Board of India (IBBI) has proposed to allow an insolvency professional (IP) to seek discharge from the process only on two grounds – if he suffers health problems or becomes ineligible under the law.
The IBBI has sought public comments after coming out with an discussion paper, ‘Discharge from Responsibility as Interim Resolution Professional, Resolution Professional or Liquidator of the corporate processes under the Code’, on Thursday.
“The code of conduct requires that an IP must adhere to the time limits prescribed in the code and the rules, regulations and guidelines thereunder for insolvency resolution, liquidation or bankruptcy process, as the case may be, and must carefully plan his actions, and promptly communicate with all stakeholders involved for the timely discharge of his duties,” the board said in the discussion paper.
“The law does not envisage any discontinuity or break in a process. It does not envisage any break for an IP in a process; nor does it provide time for switchover from one IP to another. When the life of a person undergoing resolution is at stake, the process cannot have a break by resignation or otherwise,” it stated.
“Keeping in view the time bound nature of the processes and the role of the IP in these processes, it is proposed to allow an IP to seek discharge from a process only on one ground, that is, he is incapacitated to continue as IRP, RP or liquidator. He can be incapacitated only in two ways: (a) physically: he suffers from health problems rendering him unable run the process to the satisfaction of the adjudicating authority, and (b) legally: he becomes ineligible under the law,” the paper said.
“In either case, the approval of the adjudicating authority may be necessary. If an IP seeks discharge from the process on any other ground, he may be debarred from taking any fresh assignment for a period of five years,” it said.
There have been a few instances where the National Company Law Tribunal (NCLT) has expressed concerns over resignation or unwillingness of IPs to continue as RP or act as liquidator. Notably, in the matter of Arun Kumar Jain versus Maa Tara Industrial Complex and Arun Kumar Jain versus Upadan Commodities, the NCLT, Kolkata, observed: “Let show cause notice be issued against the IRP as to why after accepting the work of resolution professional, he is resigning, without prior permission of the adjudicating authority.”
The Insolvency and Bankruptcy Code permits 180 days for completion of the corporate insolvency resolution process. It permits one-time extension of up to 90 days by the NCLT in deserving cases.
