Role, Duties and Rights of a Resolution Professional in Insolvency Proceedings
Role, Duties, and Rights of a Resolution Professional in Insolvency Proceedings
Introduction
The Resolution Professional (RP) plays a critical role in the Insolvency and Bankruptcy Code, 2016 (IBC) framework in India. Once a corporate insolvency resolution process (CIRP) is initiated, the RP is appointed to manage the affairs of the corporate debtor, protect assets, and steer the resolution process toward successful completion.
Role of Resolution Professional
Interim Management
After appointment, the RP takes over the management of the corporate debtor from the Board of Directors and acts as its interim manager until the resolution process concludes.
Facilitator of Resolution Process
The RP facilitates the submission of claims, preparation of resolution plans, and convening meetings of the Committee of Creditors (CoC).
Reporting and Compliance
The RP ensures compliance with the Code and regulations, submits periodic progress reports to the Adjudicating Authority (National Company Law Tribunal - NCLT), and maintains transparency in the process.
Custodian of Assets
The RP safeguards the assets of the corporate debtor to prevent misuse or loss during the insolvency process.
Duties of Resolution Professional
The duties of the RP are codified mainly in Section 20 and Section 25 of the IBC and the Insolvency and Bankruptcy Board of India (IBBI) Regulations:
1. Management and Control (Section 17 & 20 IBC)
Take control and custody of the assets.
Manage operations of the corporate debtor.
Protect and preserve the value of the assets.
2. Conducting CIRP (Section 25 IBC)
Collect all relevant information about the debtor.
Verify claims submitted by creditors.
Invite resolution plans and examine their feasibility.
Convene and preside over meetings of the CoC.
Prepare and submit reports on CIRP progress to NCLT.
3. Maintaining Impartiality
Act as a fiduciary for all stakeholders.
Ensure a fair, transparent process without favoritism.
4. Prevent Mismanagement and Fraud
Monitor transactions and prevent related-party transactions that may harm creditors' interests.
Initiate investigation if fraud or wrongdoing is suspected.
5. Compliance with Law
Adhere strictly to the provisions of IBC and relevant regulations.
Maintain proper records and accounts during CIRP.
Rights of Resolution Professional
1. Right to Manage
Full authority to manage and operate the business of the corporate debtor during CIRP.
Power to access company records, accounts, and assets.
2. Right to Seek Information
Access information from any person or entity connected with the corporate debtor.
Obtain assistance from professionals or experts if necessary.
3. Right to Initiate Legal Action
File applications or suits on behalf of the corporate debtor.
Challenge antecedent transactions (fraudulent or preferential) to protect creditors’ interests.
4. Right to Remuneration
Receive fees and expenses as approved by the Committee of Creditors and sanctioned by the NCLT.
Important Case Laws on Role, Duties, and Rights of RP
1. Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors., (2019) 4 SCC 17
The Supreme Court recognized the RP’s crucial role in protecting the interests of all stakeholders.
Emphasized that the RP is a fiduciary and must ensure transparency, fairness, and impartiality.
RP acts in the best interest of creditors and the corporate debtor.
2. Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors., (2019) 8 SCC 531
Affirmed the power of the RP to manage the corporate debtor and make decisions independently, subject to CoC’s approval.
Highlighted RP’s responsibility to verify claims and ensure fair resolution.
3. Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353
Established that the RP must act fairly and should not abuse his powers.
The RP’s decisions can be challenged if they are arbitrary or mala fide.
4. Anuj Jain v. Axis Bank Ltd., (2019) 1 SCC 99
Reiterated that the RP has the duty to protect and preserve the corporate debtor’s assets.
RP must avoid conflict of interest and maintain neutrality.
5. K. Sashidhar v. Indian Overseas Bank, (2019) 9 SCC 618
Affirmed RP’s power to take over the management immediately upon appointment.
Highlighted that the RP has the responsibility to identify and challenge preferential and fraudulent transactions.
Summary Table of Role, Duties, and Rights
| Aspect | Details |
|---|---|
| Role | Interim manager, facilitator of CIRP, custodian of assets, compliance overseer |
| Duties | Manage assets, verify claims, invite & evaluate resolution plans, convene CoC meetings, submit reports, prevent fraud |
| Rights | Manage debtor’s affairs, access information, initiate legal actions, receive remuneration |
Conclusion
The Resolution Professional acts as the linchpin in the insolvency resolution process, balancing the interests of creditors and the debtor, ensuring fair play, preserving assets, and facilitating a viable resolution or liquidation. The statutory framework and judicial pronouncements underline the fiduciary nature of the RP, stressing professionalism, impartiality, and strict compliance with law.
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