The Insolvency and Bankruptcy Code, 2016 (IBC/Code) introduced a paradigm shift in India's insolvency regime by establishing a structured framework, offering a structured path for resolving distressed assets. Central to this framework is the role of a Resolution Professionals (RP), who acts as a custodian of the corporate debtor's assets and leads the insolvency resolution process.

During the corporate insolvency resolution process (CIRP), RP plays pivotal role, as it/he/she effectively assumes control of the corporate debtor's management and becomes responsible for overseeing all aspects of CIRP. RP's role is not limited to managing corporate debtor's day-to-day operations and coordinating with creditors and stakeholders but also to steer the boat of corporate debtor towards a viable resolution. Its/his/her expertise and impartiality are crucial in ensuring transparency, efficiency, and fairness throughout the insolvency process, which ultimately aims to achieve the best possible outcome for all the stakeholders involved. Therefore, one can rightly say that RP has a defining role in navigating the corporate debtor through the intricacies of CIRP/liquidation as the case may be.

Initially, the role of RP was relatively nascent and clouded with many ambiguities/disputes. The provisions of the Code along with its associated regulations, provided a rudimentary framework for RP and outlined its/his/her duties, powers, and obligations. Section 16, 17, 18, and 20 of the Code read with Regulations 17 to 20 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), lay down a comprehensive roadmap for RP. These provisions detail the scope of RP's responsibilities, reporting obligations, and mechanisms for its/his/her replacement, forming the backbone of their role in the insolvency process. However, in the dynamic realm of Indian insolvency regime, the role of RP has undergone a profound evolution which have been significantly influenced by the judicial decisions that have delineated and refined the role, responsibilities and power of a RP under the Code.

On August 31, 2017, the Hon'ble Supreme Court of India (SC) delivered a groundbreaking verdict in the matter of Innoventive Industries Limited v. ICICI Bank Limited1, whereby the Hon'ble SC shed light on the vital role of RPs in overseeing the corporate debtor's operations throughout the CIRP. The Hon'ble SC also stressed on the RP's primary responsibility to manage the corporate debtor's affairs transparently and efficiently during insolvency resolution.

Thereafter, the Hon'ble SC in Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors.2 upheld the constitutional validity of the provisions of the Code and while analysing certain other key concerns. The Hon'ble SC threw light on the role of RP and held that RP has merely administrative powers as opposed to quasi- judicial powers.

The key judicial rulings, under Innoventive Industries Case and Swiss Ribbons case played a crucial role in delineating the powers and responsibilities of RPs. These decisions highlight the RP's administrative powers and underlined their duty to ensure compliance with legal provisions and facilitate resolution plan approval by the Committee of Creditors (CoC).

Further, in ArcelorMittal India Private Limited v. Satish Kumar Gupta,3 the Hon'ble SC held that the RP's role is to ensure that the resolution plans submitted are complete in all respects as provided under Section 30(2) of the Code before presenting them to the CoC for approval. SC further held that RPs are tasked with confirming that a resolution plan does not contravene any of the provisions of law for the time being in force, including Section 29A of the Code, but only to give a prima facie opinion to the CoC that the resolution plan has or has not contravene the provision of law. Section 30(2)(e) does not empower the RP to "decide" whether the resolution plan does or does not contravene the provisions of law.

In Committee of Creditors of Essar Steel India Limited Through Authorised Signatory v. Satish Kumar Gupta & Ors.4, the Hon'ble SC categorically analysed the role of the RP and held that RP not only manages the corporate debtor's affairs from the commencement of CIRP until the approval of a resolution plan but also plays a crucial role in appointing CoC and convening their meetings so that the CoC may decide on the resolution plans submitted in accordance with the detailed information provided by the RP. Additionally, the RP is also responsible for collecting, collating and finally admitting claims of the creditors, which then be examined for payments (in full or in part or not at all) by the resolution applicant(s) and finally negotiated by resolution applicant(s) with CoC. Thus, the judgment further clarifies that the role of RP is merely administrative and not adjudicatory.

In S. Rajendran, Resolution Professional of PRC International Hotels Private Limited v. Jonathan Mouralidarane,5 National Company Law Appellate Tribunal (NCLAT) clarifies that RP had no jurisdiction to determine the claim as he could only collate the same based on the evidences and records available with the Corporate Debtor or submitted by the Creditor.

In addition to these judicial rulings, recent developments have also emphasized on the importance of RPs in diligently examining creditor claims and ensuring procedural fairness in the insolvency resolution process.

In the case of Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr,6 the Hon'ble SC held that even if a creditor's claim against the corporate debtor is not submitted in the specified format outlined in the CIRP Regulations, it must still be considered by the Interim Resolution Professional (IRP) or RP if it can be verified through evidence provided by the creditor or records maintained by the corporate debtor.

In Mr. Umesh Kumar v. Mr. Narendra Kumar Sharma, IRP of Indirapuram Habitat Centre Pvt. Ltd., 7 NCLAT held that RP must exercise its due diligence in examining creditor claims and cannot simply rubber-stamp claims without verification. NCLAT held that "RP is not expected to rubber stamp the claims filed by the creditors without exercising due diligence while examining the invoices. By merely filing their claims, the creditor cannot rest on its oars and refrain from providing further evidence if it so sought by the RP by taking shelter on the ground that the RP lacks adjudicating powers. If such basic verification is not done, the logical corollary is that the Information Memorandum is likely to be defective and flawed thereby having consequential adverse impact on the CIRP process"

The development of the RP's responsibilities reflects the advancement of India's insolvency framework, marked by a nuanced equilibrium among creditor rights, stakeholder concerns, and procedural equity. One can witness the dynamic evolution in the RP's role, tracing its journey from administrative facilitator to custodian of creditor rights and procedural fairness. Moreover, the clarity provided by judicial decisions and statutory guidance adds the cherry on top, synergistically contouring the RP's mandate and ensuring efficiency, transparency, and accountability within the insolvency resolution process.

As India continues its journey towards a more resilient and adaptive insolvency regime, the role of resolution professionals stands as a beacon of stability and integrity, anchoring the aspirations of a vibrant economy. In the crucible of insolvency, where stakes are high and outcomes transformative, the evolution of the RP's role stands as a testament to the resilience and adaptability of India's legal framework—a framework continually shaped and refined by the steady hand of judicial wisdom.

Footnotes

1. Civil Appeal Nos. 8337-8338 of 2017

2. Writ Petition (Civil) No. 99 of 2018

3. Civil Appeal Nos.9402 – 9405 /2018

4. Civil Appeal Nos.8766 - 8767/2019

5. 2019 SCC OnLine NCLAT 758

6. Civil Appeal Nos.7590 - 7591/2023

7. Company Appeal (AT) (Insolvency) No. 100 of 2024

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.