The Insolvency Professionals Guidelines, 2022
The Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees (Recommendation) Guidelines, 2022
Corporate Insolvency
The Insolvency and Bankruptcy Board of India (Board) is required under the Insolvency and Bankruptcy Code, 2016 (Code) to recommend name of an Insolvency Professional (IP) for appointment as Interim Resolution Professional (IRP) or Liquidator as under:
(a) Section 16(3)(a) of the Code requires the Adjudicating Authority (AA) to make a reference to the Board for recommendation of an IP, who may act as an IRP where an operational creditor has made an application for corporate insolvency resolution process (CIRP) and has not proposed an IRP. The Board is required under section 16(4) of the Code to recommend the name of an IP against whom no disciplinary proceedings are pending, within ten days of the receipt of the reference from the AA.
(b) Section 34(4) of the Code requires the AA to replace the resolution professional, if (a) the resolution plan submitted by the resolution professional under section 30 was rejected for failure to meet the requirements mentioned in section 30(2); or (b) the Board recommends the replacement of a resolution professional to the AA for reasons to be recorded in writing; or
(c) the resolution professional fails to submit written consent under section 34(1). For the purposes of clause (a) and clause (c) of section 34(4), the AA may direct the Board under section 34(5) of the Code to propose the name of another IP to be appointed as a liquidator. The Board is required under section 34(6) to propose the name of another IP along with written consent from him, within ten days of the direction issued by the AA under section 34(5).
- The Board has been making available Panels of IPs to the AA for appointment as IRP or Liquidator, as the case may be. Such Panels in advance by the Board has been found useful as indicated below:
(a) The AA, in its order dated January 8, 2018 in Innovsource Private Limited Vs. Getit Grocery Private Ltd., observed: “The Insolvency and Bankruptcy Board of India vide its letter dated 01.01.2018 has recommended a Panel of Insolvency Professionals for appointment of Insolvency Resolution Professional in compliance with Section 16 (3) (a) of the Code in order to cut delay.
The list of recommended Insolvency Professionals provides instant solution to the Adjudicating Authority to pick up the name and make appointment. It helps in meeting the time line given in the Code and the unnecessary time wasted firstly in asking the Insolvency and Bankruptcy Board of India to recommend the name and then to appoint such Interim Resolution Professional by the Adjudicating Authority”.
(b) The NCLAT, in its order dated February 28, 2019 in Sandeep Kumar Gupta, Resolution Professional Vs. Stewarts & Lloyds of India Ltd. & Anr., Observed: “ .. Further, the list of ‘Resolution Professionals’ being made available by the ‘Board’ to the Adjudicating Authorities, any person is appointed out of the said list submitted by the ‘Board’, it should be treated to be an appointment of ‘Resolution Professional’/‘Liquidator’ on the recommendation of the ‘Board’.”
Individual Insolvency - The Board is also required under the Code to recommend the name of an IP for appointment as resolution professional (RP) or bankruptcy trustee (BT) as under:
(a) Section 97(3) of the Code requires the AA to direct the Board to nominate a resolution professional (RP) for an insolvency resolution process, where an application under section 94 or 95 is filed by the debtor or the creditor, as the case may be, and not through a RP. The Board is required under section 97(4) to nominate a RP within ten days of the receiving the direction from the AA under Section 97(3).
(b) Section 98(2) of the Code requires the AA to make a reference to the Board for replacement of a RP in an insolvency resolution process, where in pursuance of Section 98(1), the debtor or the creditor is of the opinion that the RP appointed under section 97 is required to be replaced.
The Board is required under section 98(3) to recommend the name of an RP, against whom no disciplinary proceedings are pending, within ten days of the receipt of the reference from the AA under Section 98(2).
(c) Section 125(3) of the Code requires the AA to direct the Board to nominate a bankruptcy trustee (BT) for the bankruptcy process, where a BT is not proposed by the debtor or creditor under section 122 or 123. The Board is required under section 125(4) to nominate a BT, within ten days of receiving the direction of the AA under Section 125(3).
(d) Section 146(2) of the Code requires the AA to direct the Board for replacement of the BT on his resignation in a bankruptcy process. The Board is required under section 146(3) to recommend another BT as a replacement, within ten days of the direction of the AA under Section 146(2).
(e) Section 147(2) of the Code requires the AA to direct the Board for replacement of a BT in a bankruptcy process in the event of occurrence of a vacancy in the office of the BT for any reason other than his/her replacement or resignation. The Board is required under section 147(3) to recommend a BT as a replacement, within ten days of the direction of the AA under section 147(2). - The relevant Rules provide as under:
(a) Rule 8 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 enables the Board to share a Panel of IPs, who may be appointed as resolution professionals, with the Adjudicating Authority for the purposes of section 97(4) and section 98(3).
(b) Rule 8 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 enables the Board to share a Panel of IPs, who may be appointed as bankruptcy trustee, with the Adjudicating Authority for the purposes of section 125(4) and section 146(3) and section 147(3) of the Code.
Guidelines - At the time of reference/ directions received from the AA, the Board does not have information about the volume, nature and complexity of an insolvency or bankruptcy process and the resources available at the disposal of an IP. In such a situation, the Board is unlikely to add much value by recommending an IP for the process. Further, it takes some time for a reference or a direction from the AA to reach the Board. The Board may take up to ten days to identify an IP for the purpose. It also takes some time for the recommendation of the Board to reach the AA, after which the AA could appoint the recommended IP. The process of appointment may entail 2-3 weeks, which could be saved if the AA has a ready Panel of IPs recommended by the Board and it can pick up any name from the Panel for appointment while issuing the Order itself.
- Given that every IP is equally qualified to be appointed as the IRP, Liquidator, RP or BT of any corporate or individual insolvency resolution, liquidation or bankruptcy process, as the case may be, if otherwise not disqualified, and in the interest of avoiding administrative delays, the Board considers necessary to have these guidelines to prepare a Panel of IPs for the purpose of section 16(4), 34(6), 97(4), 98(3), 125(4), 146(3) and 147(3).
Panel of IPs - 1 The Board will prepare a common Panel of IPs for appointment as IRP, Liquidator, RP and BT and share the same with the AA (Hon’ble NCLT and Hon’ble DRT) in accordance with these Guidelines.
7.2 The Panel will have Zone wise list of IPs based on the registered office (address as registered with the Board) of the IP.
7.3 The Panel will have validity of six months and a new Panel will replace the earlier Panel every six months. For example, the first Panel under these Guidelines will be valid for appointments during July – December 2022, and the next Panel will be valid for appointments during January – June 2023, and so on.
7.4 The NCLT may pick up any name from the Panel for appointment of IRP, Liquidator, RP or BT, for a CIRP, Liquidation Process, Insolvency Resolution or Bankruptcy Process relating to a corporate debtors and personal guarantors to corporate debtors, as the case may be.
7.5 The DRT may pick up any name from the Panel for appointment as RP or BT, for an Insolvency Resolution or Bankruptcy Process for personal guarantors to corporate debtors, as the case may be.
Inclusion of IPs in the Panel - An IP will be eligible to be in the Panel of IPs, if –
(a) there is no disciplinary proceeding, whether initiated by the Board or the IPA of which he is a member, pending against him;
(b) he has not been convicted at any time in the last three years by a court of competent jurisdiction;
(c) he expresses his interest to be included in the Panel for the relevant period;
(d) he undertakes to discharge the responsibility as IRP, Liquidator, RP or BT, as he may be appointed by the AA;
(e) he holds an Authorisation for Assignment (AFA), which is valid till the validity of Panel. For example, the IP included in the Panel for appointments during July – December 31, 2022 should have AFA valid up to December 31, 2022. - An IP will be included in the Panel against the Zone where his registered office (his address as registered with the Board) is located. For example, an IP located in the city of Surat (Gujarat) will be included in Ahmedabad Zone, which covers the State of Gujarat. He shall be eligible for appointment by any bench of NCLT or DRT located in the State of Gujarat, Union Territory of Dadra and Nagar Haveli, and Union Territory of Daman and Diu. The areas covered in different Zones are as under:
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