Sunday, Dec 04, 2022

Interim Resolution Professionals Don't Have Time For Bankrupt Companies They Are Supposed To Help

Interim Resolution Professionals Don't Have Time For Bankrupt Companies They Are Supposed To Help

While strict tribunal judges have become stricter following instances of dereliction of duties by Interim Resolution Professionals, the latter claim they waste productive time awaiting their case hearing

Interim Resolution Professionals (IRPs) are fed up with the regular personal appearances they are required to make cases before the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). Appointed in companies facing bankruptcy proceedings, these individuals claim that these appearances hamper their efforts to revive the firm in a time-bound manner. 

"We must wait for several hours or sometimes the entire day in the Tribunal for our cases to come up for hearing. Often this gets adjourned for the next date. We feel that a lot of productive time is wasted in sitting idle in the court," an IRP from one of the manufacturing companies said, requesting anonymity. 

A Race Against The Clock

Under the Insolvency and Bankruptcy Code 2016, when a company is admitted for the Company Insolvency Resolution Process (CIRP), the tribunals appoint IRPs or RPs to replace the company's directors. 

These professionals make all possible efforts to revive the company in a time-bound manner to maximise the company's value in the interest of all stakeholders. They are also tasked with infusing fresh life into a failed business entity. 

"Of late, dereliction of duties and several cases of irregularities on the part of IRPs have made the tribunal judges very strict and vigilant. In the last five years, I have not seen this much pressure on IRPs for a personal appearance at the Principal Bench of the Tribunals in Delhi as it has been in the past few months," Abhishek Garg, a lawyer managing insolvency matters, said. 

Another lawyer who handles insolvency matters, Venket Rao from Intygrat Law Offices, agreed with Garg. He noted that the trend is more evident in recent times. 

"It is true that there have been disciplinary issues with some professionals. But besides this, often buyers or other stakeholders file multiple intervention applications, at times even frivolous ones, before the Tribunal with one allegation or the other. Tribunals cannot simply ignore these applications," Rao said. He added that this issue is now becoming a growing concern among IRPs. 

Hitting Where It Hurts

Over 4,000 IRPs are registered with the Insolvency and Bankruptcy Board of India (IBBI). Per the law, each IRP can have a maximum of ten companies under them. Ultimately, this means that every IRP manages multiple companies, making their job extremely challenging.

"So, even if the case of one company is listed once a month, five to six appearances are there in a month for any professional," an IRP heading a real estate firm said. 

Speaking on conditions of anonymity, he added, "We have our lawyers who represent us in the Tribunal. If a particular bench feels they need IRPs for personal appearance, it can assign a date with prior intimation. Making them present all the time while the case is going on is not a wise decision."

Some IRPs cite some instances where, despite their lawyers' presence, the Tribunal judges took them to task for not turning up in court during the hearing of their cases.

"At times, IRPs feel terrified. I have earned praise from all quarters for my work. However, during one of the hearings, a tribunal judge told my lawyer to ask me to present in court as there were complaints of irregularities against me. This kind of incident can turn off anyone working honestly," another IRP from the real estate sector complained. 

Many IRPs who spoke to Outlook on the condition of anonymity said that if any professional is absent in the court, judges make sarcastic comments that lower their self-esteem. "One feels insulted as he or she is assigned to work as a head of the company," an IRP said.  

Juggling Too Many Cases

According to IBBI, besides their prime responsibility, "an IRP is entrusted to perform other key activities, including making a public announcement, verification of claims, preparation of information memorandum, raising interim finance, the appointment of valuers, inviting prospective resolution applicants to put forth their resolution plan, etc."

An IRP claimed that besides running a failed company, their job is to maximise its assets and find a suitable bidder to take it over. "In that sense, our job is more difficult than any of the directors of a running company," he said. Tasked to revive the fortune of an MSME organisation, he noted that all benches of NCLT should arrange for the live telecast of proceedings for general awareness.  

Yogendra Aldak, Partner at Lakshmikumaran & Sridharan Attorneys says that Tribunals are empowered to issue directions requiring the personal appearance of IRPs. This is essentially to receive inputs from them as they are the managers of the entire resolution process. The Tribunals can also demand justification for a particular action they undertake during the resolution process. 

"Generally, Tribunals specify the next date of hearing for personal appearance of IRPs, with or without specific reasons. However, due to reasons such as lack of time, etc., the matter may get adjourned. This raises genuine concerns of the resolution professionals as they are required to function under strict timelines," Aldak said.  

He, however, pointed out that it is also important to note that IRPs are also a part of the resolution process. "The directions of Tribunals requiring them to cause personal appearances is to resolve and decide the matters," he added. 

To strike a balance, Aldak suggested that while the practice of directing the personal appearance of resolution professionals is at the discretion of Tribunals, it should be called in rare and extreme circumstances for effective functioning of Tribunals, enabling timely resolution of CIRP.