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Insolvency regulator IBBI proposes to bring several changes to its corporate insolvency regulations to make the process of appointment of professionals more robust and transparent.
Towards this end, it has come out with a discussion paper that requires an interim resolution profession or a resolution professional to perform certain actions before making an appointment of a professional under IBC.
The proposed regulation among other things stipulates that the request for appointment of professional must be laid before the Committee of Creditors (CoC) for ratification. Such request for appointment must be accompanied by a statement in writing providing the reason and justification for the appointment by way of cost benefit analysis, the scope of work assigned, the absence of such service in the corporate debtor, the manner of selection and reasonableness of cost for such service.
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Commenting on the IBBI discussion paper, Ruby Singh Ahuja, Sr. Partner - Karanjawala & Co, said the proposed amendment to Regulation 27 of CIRP Regulations will surely make the process transparent as far as other professionals is concerned, but it once again raises the question as to whether the Code and the Regulations give more powers to the Committee of Creditors to the detriment of other stakeholders. “Maybe the Board needs to re-look into the same,” she added.
Amit Jajoo, Partner, IndusLaw, said the proposed regulation is a useful measure to plug the insolvency resolution process from becoming a money minting machinery. “However, with the increased approvals, COC must act on the clock for effective resolutions and more importantly to contain the pile up to the unending resolution process of India,” he added.
Pritika Kumar, Founder - Cornellia Chambers, said: “Through this proposed amendment there will be increased transparency and accountability on part of the resolution professional which will make the insolvency process more effective and efficient and it will be in the best interest of all stakeholders.
Such measures will not be burdensome for the resolution professional as these measures should anyways be adopted by prudent professionals while discharging their duties.”
Raj Bhalla, Partner at law firm MV Kini, said “this proposed step of the IBBI is good to crack down on those professionals, who used to make a lot of money from a CIRP by colluding with the IPs. Doing away with appointments of the unnecessary professionals like process advisors, IPEs, accountants etc. which escalate the cost of the CIRPs would result in better prospects for CoC. Although, the IBBI is not denying appointments of any professional if required, it is only suggesting full control with CoC for such appointments”.
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