In what may bring about major reform and efficiency in the insolvency regime in India, the Insolvency and Bankruptcy Board of India (IBBI) has proposed to limit the number of cases an insolvency professional can handle to five as it noted that few insolvency professionals (IP) are handling too many cases
In a recent discussion paper, the board noted the “skewed” work allocation and has come up with a matrix for allocation of cases.
Citing observations by courts and tribunals, the paper said: “Keeping in mind the provisions of the Companies Act, 2013, the skewed work allocation amongst the IPs and the observations of the Supreme Court or Adjudicating Authority, and given the expansive and intense responsibilities of an IP in corporate processes, it is proposed to issue necessary guidelines to IPs advising them to limit the maximum number of assignments handled by them, to five, at a given point of time.”
As per the proposed matrix an insolvency resolution professional (IRP) can handle a total of five cases of resolution or liquidation, including voluntary liquidation, wherein the turnover of the corporate debtors is less than or equal to Rs 1,000 crore. As the matrix progresses, an IRP handling the case of a corporate debtor with the turnover of Rs 50,000 crore would be able handle only that very case, and no more.
“On the basis of information available, it is observed that a few IPs are handling too many assignments under the Code, which is detrimental to the institution of IP in the long run,” it noted.
The IBBI’s discussion paper said that the processes under the Insolvency and Bankruptcy Code (IBC) require a unique combination of skill sets in terms of subject matter knowledge and management skills for an IP and at different stages of transactions, different sets of skills are called for.
A spike in one area of expertise will not be sufficient to create a uniform experience for stakeholders. Further, it cannot be ignored that no two IPs possess identical sets of qualification, experience, skills and expertise, it said.
“Similarly, no two CIRPs are same as it involves diverse businesses, complex corporate structures, varied stakeholders. The said restriction on an IP will put a check on undesirable instances of delay and disturbance to the processes led by IPs while simultaneously handling too many assignments under the Code.”
The Board was of the view that with limits in place, quality of output is expected to improve and it will facilitate the realisation of the objective of value maximisation as enshrined in the Code.
The major inputs for violation will be through complaints and therefore, the cost of surveillance for the Board may not be significant. Further, this will be conducive for development of the market for professionals as more talent will be drawn towards IP profession, it added.
The IBBI has sought public comments on the proposal till July 25, 2020.
Source : Times of India