The role of insolvency resolution professionals (IRPs) and their ability to handle day-to day affairs of bankrupt companies has come under the spotlight with the NCLT questioning their decisions in a few recent high-profile insolvency cases.
At last count, there were over 1,800 registered IRPs wading through a pile of over 9,000 cases. Stakeholders are demanding that the law should allow appointment of insolvency resolution entities rather than IRPs.
“How well qualified is a chartered accountant or a company secretary to oversee the functioning of a steel or a power firm is the main concern. We see a bulk of the responsibilities given to either smaller companies or associates of IRP,” noted an expert.
The next round of amendments to the Insolvency and Bankruptcy Code is likely to address this lacuna, the expert added.
In a recent interview to BusinessLine, Uday Bhansali, President (Financial Advisory), Deloitte India, said banks appoint a registered IRP knowing that he will get support from the firm he represents.
“The promoter of a company has an army of people to run the show. When the company is admitted under the IBC it is an institutional problem and it needs an institutional approach to find a solution,” he said.
In the case of Bhushan Steel (one of the largest innsolvency case resolved by Deloitte), he said it hired an outside agency First Advantage, floated by CS Verma, former Chairman of SAIL, and a set of public sector steel executives to manage the steel plant.
Many such companies are being set up by knowledgeable people in the power, steel, cement and across the manufacturing sectors, he said.
“The role of the IRP is critical for the IBC to succeed and they should have some experience in restructuring. Otherwise, they are also learning on the job,” noted Tarun Bhatia, Managing Director, Kroll.
Pavan Kumar Vijay, Founder, Corporate Professionals, who pointed out that often IRPs take on more cases than what they can handle.
“Most of them are CAs or Company Secretaries and do not have the experience of managing operations of a company. They should also be imparted required skills, multidisciplinary insolvency professional entities should be encouraged and the law should allow the appointment of insolvency professional entities to take assignments in place of individual IRPs only,” he said.
Under current guidelines, an IRP can be a chartered accountant, company secretary, cost accountant and advocate with 10 years of experience or a graduate with 15 years of experience in management.
Additionally, they should have completed the National Insolvency Programme or the Graduate Insolvency Programme and passed the Limited Insolvency Examination within 12 months before the date of his application for enrolment with the insolvency professional agency.
Typically, the stakeholders in a particular case propose the name of the resolution professional, but the final decision is with the National Company Law Tribunal. The IBBI has also time and again said that it keep a vigilant eye on the functioning of resolution professionals.
The next round of amendments to the Insolvency and Bankruptcy Code is likely to address the lacunae