The Insolvency and Bankruptcy Board of India (IBBI), tasked with providing the framework for loan-recovery proceedings in the country’s stretched banking system, has highlighted operational loopholes that may prevent resolution professionals from meeting strict deadlines on viable revival plans.
Insolvency professionals (IP), who have the most crucial role in helping recover potentially Rs 10 lakh crore now stuck in bad debt and non-performing assets, will now be barred from outsourcing their responsibilities. They must also be compliant with other related laws, IBBI said late Wednesday.
“It is hereby directed that an insolvency resolution professional shall not outsource any of his duties and responsibilities under the Code,” IBBI said in one of its circulars. “He shall not require any certificate from another person certifying the eligibility of a resolution applicant.”
In the past few weeks, select IPs issued advertisements for Expressions of Interest with a clause that requires a resolution applicant or an interested entity to obtain an official stamp from a chartered accountant, certifying its eligibility.
Some IPs reportedly told prospective resolution applicants to submit a certificate from another person to the effect that they are eligible to be resolution applicants, IBBI said.
It has also asked insolvency professionals to comply with other laws applicable to the entities they administer.
A listed corporate entity undergoing the resolution process must also comply with every provision of the Securities and Exchange Board of India, for instance. “It is also clarified that the insolvency professional will be responsible for the non-compliance of the provisions of the applicable laws if it is on account of his conduct,” IBBI said.