IBBI ideals are to be implemented with the help of service providers and they are one of the key pillars to achieve the desired results. Service Providers typically include Insolvency Professionals, Insolvency Professional Agencies and Information Utility etc.
IBC 2016 is now around 3 years old and it was high time, IBBI introspected the working of IBBI based on the experience gained so far. IBBI has thought it fit to reconstitute its Advisory Committee on service providers.
Please go through the related news item that appeared in Economic Times
I feel the following areas need urgent attention in respect of Insolvency Professionals.
- There have been cases where the Adjudicating Authorities [ National Company Law Tribunal / National Company Appellate Tribunal ] have had reasons to be unhappy with the Insolvency Professionals. The instances where the Adjudicating Authorities have had reasons to be unhappy have not be few and far between. Insolvency Professionals are not solely responsible for this–it is their lack of knowledge and experience that is creating this hurdle. The Code is evolving one and it is taking time for all those involved to really understand the basic purpose of the Code. As a first step, we need to educate the Insolvency Professional on an extensive scale and unless and until they are well versed with various nuances of the Code, they should not be given cases.
- Secondly, at the time of registration of Insolvency Professionals, we need to first ensure that we give them sufficient inputs to learn and may even think of giving them dummy cases which they will try to handle and then IBBI or IPA–which enrols them– can evaluate such potential Insolvency Professional. So far we could not adopt this approach because we did not have time and we were in–sort of hurry—to enact and implement the Code. But now that we have sufficient number of Insolvency Professionals, we can afford to go slow on enrolling and registering new Insolvency Professionals–rather we can afford to register them only after we give them sufficient inputs and test them in an exhaustive manner.
- We have adopted the UK law which many in the World consider to be the best law as compared to USA law. The UK model envisages that Insolvency Professionals give some sort of guarantee to the Regulator to ensure Insolvency Professionals have stake in the whole exercise. I know it is difficult to implement this in Indian context. But then what is the alternative? If because of the lax / inefficient handling of cases by Insolvency Professionals. a business —-instead of getting resolution—goes the liquidation route, everybody suffers except the Insolvency Professional. It is true that there are penal provisions / penalties that can be slapped on the Insolvency Professionals for acts of commissions and omissions. But is it an effective deterrent ? And by the way I am sure — —-such cases take their own time to reach logical end. And even if such cases do reach logical end, does it compensate all those who suffered–particularly the business concerned, employees, financing agencies etc.
- I further feel that the examination that enables the Regulator to register the Insolvency Professionals should undergo some changes. The present structure of the examination be continued as an initial bar but there should be one more paper which will lay stress on handling of practical cases. The candidates should be expected to answer in their own words. When they do this, they will have to be naturally thorough in many aspects of the IBC 2016 —and other aspects of insolvency resolution –and this will give an opportunity to the Regulator / Insolvency Professional Agency—to judge a prospective insolvency professional in the vital area of communication.
- Lastly, I strongly feel we need to provide incentives to Insolvency Professionals for having successfully resolved the issues that a business may have been facing at the time the cases was referred to. I know, Insolvency Professional is not a decision maker in any manner / in any aspect of the case, but then he is a facilitator and can play a meaningful role by persuading the stake holders to adopt a particular route which will be beneficial to stakeholders in the long run. Saving the economic assets is far more important.