Enforced with the objective of time-bound insolvency resolution and maximization of assets, the Insolvency Bankruptcy Code, 2016 (hereinafter referred to as “IBC”), in order to facilitate the process of insolvency resolution, has provision for appointment of an insolvency resolution professional (hereinafter referred to as “IRP”).
According to the provisions of the IBC, the erstwhile management of the debtor is divested of its powers and the same is then vested in an IRP. The IRP then continues the business of the corporate body as a going concern until a resolution plan is drawn up, which enables the corporate body to pay back its debts. The IRP is duty-bound to monitor the assets of the debtor and claims made against it and constitute a committee of creditors. The control and custody of the assets of the debtor may be taken over by the IRP.
The amendments to the IBC have made an attempt to ensure that only viable resolution plans from credible sources are accepted. The IRP appointed under the provisions of the IBC shall submit to the Committee of Creditors all resolution plans which comply with the requirements of the IBC.
The IRP shall render services for a fee which is a reasonable reflection of his work, raise bills / invoices in his name towards such fees, and such fees shall be paid to his bank account. There have been reported cases where the losses of the debtor companies have been reduced by the appointment of IRP. For instance, the Assam Company India Ltd., reported a loss of INR 213,800,000 against INR 224,700,000 a year earlier for the June quarter of 2017. Likewise, the losses for Bhushan Steel reduced from INR 14,860,000,000 to INR 4,670,000,000 for September quater. Losses for Monnet Ispat reduced from INR 4,000,000,000 to INR 3,530,000,0002.
The IBC ensures implication of strict measures against unscrupulous debtors escaping and delaying the repayment of debts incurred by using the legislative framework and thus prevents the scope of one taking advantage of their own wrong. The IRPs take up the management of the debtor with themselves separating the management who were taking care of the affairs of the Company earlier. The IBC is aimed with the objective to accord another opportunity to the dying debtor entity by taking over its responsibility of management and thereby helping it to get back on its feet.