1.1 Who is a Resolution Professional?
A Resolution Professional (hereafter, referred to as “RP”) is an insolvency professional who is appointed by the creditors of the company collectively. The RP takes over control of the Corporate Debtor (hereafter, referred to as “CD”) from its management and manages its affairs and takes into custody the assets of the CD. An RP is a professional who has qualified an insolvency course and is registered with the Insolvency and Bankruptcy Board of India ( hereafter, referred to as “IBBI”) and is governed by the IBBI (Insolvency Professional) Regulation, 2016.

1.2 Appointment of RP:
Since an RP is someone who is appointed by a Committee of Creditors (hereafter, referred to as “CoC”) before its constitution an Interim RP is appointed. The interim RP acts in the same way an RP would and manages the affairs of the CD till the appointment of an RP. As per section 22 of the Insolvency and Bankruptcy Code, 2016 (hereafter, referred to as the “Code”) within seven days of the CoC’s formation it must hold its first meeting and decide whether it would like to appoint the Interim RP as the RP or it can select a new RP. The outcome of the same must be communicated to the RP, the CD and the NCLT.

II. Role of an RP:
2.1 Constitution of a (CoC):
As per section 21 of the Code, an interim RP must constitute a CoC after receiving all claims against the CD. The CoC then decides the fate of the CD, should the problem be resolved or should the CD be liquidated. After the CoC appoints an RP as per section 24 of the Code, it becomes the duty of the RP to convene and manage meetings of the CoC in the course of the Corporate Insolvency Resolution Process (hereafter referred to as “CIRP”).

2.2 Taking over and managing the affairs of the CD:
As per section 17 of the Code once CIRP is initiated the Board of Directors (hereafter, referred to as “BOD”) is dissolved and its powers are transferred to the interim RP. The purpose of this transition is to move from creditor in charge to debtor in charge to more efficiently realize the dues. The RP looks after the broad functions of the CD and does not delve into the day to day functioning of it even though sections 18, 20 and 25 make it seem so. The RP has the authority to outsource these functions. The goal is to put a new captain in charge of the ship who can steer it more efficiently in the interest of its creditors. Section 28 acts as a security measure against the RP abusing his powers. Sections 20 and 25 authorize the interim RP and RP to perform actions such as, entering into contracts at the behest of the CoC, to raise short term finances etc. Section 28 enlists specific actions that require prior approval from the CoC such as changes in documents like its AOA, amending its capital structure etc.

Section 23 of the Code requires the RP to conduct the following functions in addition to the duties already mentioned above,

• Making a public announcement about the initiation of CIRP against the CD
• To collect all available information from the CD on matters such as assets, liabilities and business operations.
• Making an information memorandum to assist the CoC in making a resolution plan.

2.3 Operating the CD as a going concern entity:
Even once a resolution plan is approved by the CoC, the CD continues to exist as a going concern. Section 20 of the Code, requires the interim RP or the RP to preserve the assets and manage the operations of the CD. The list of duties mentioned in section 20 of the Code, vest sufficient power with the RP to ensure the CD is managed as a going concern entity. The purpose of this provision is to ensure that the RP maintains the company on as-is basis rather than making structural changes to it.

2.4 Taking control of Assets:
Section 18(f) of the Code require the interim RP to take control of the assets of the CD. The Hon’ble NCLT in the case of Goa Auto Accessories v Suresh Saluja[1] in December 2019 re-iterated that the RP could take possession of any assets of the CD which fall under the subject matter of the litigation. Section 18 is, however, to be read with sections 20 and 25 of the Code which require the RP to preserve these assets. Therefore, under section 18, an RP can only take custody and maintain possession with due care, s/he cannot dispose of these assets and effect a liquidation.

2.5 Preparation of Information Memorandum (IM):
Section 29 of the Code, requires the RP to prepare an Information Memorandum (hereafter, referred to as “IM”) per CIRP Regulation 36(2) which talk about the IM’s content. Section 29 describes an IM as information required by the resolution applicant to create a resolution plan.

2.6 Examination of Resolution Plan/s:
After creating an IM, the RP is required under section 30 of the Code read with CIRP Regulation 38, to ensure the resolution plan made conforms to a basic standard. The RP must ensure that the Resolution Plan contains the following:

• A payment plan for CIRP associated costs before paying off other debts and identification of the source of funds for the same.
• Decides Management and control of the CD after the Resolution Plan.
• Make sure the contents of the plan are not in violation of any existing Laws.
• Repayment of Operational Creditors at minimum liquidation value.
• Repayment to dissenting Financial creditors before repayment of Financial Creditors who voted in favour of the Resolution Plan.

If the above conditions are met, then the next step for the RP is to present the Resolution Plan before the CoC. A minimum vote in the proportion of 60% of the Financial Creditors is required in favour of the Resolution plan for it to be passed. Once the Resolution Plan is Passed, it is the duty of the RP to communicate the same to the NCLT.

If the NCLT is content with the Resolution Plan, it can via an order approve it, and it then becomes binding on the CD and all its stakeholders. If the NCLT is not content with the Resolution Plan, it can reject it under Section 31 of the Code.

III. Time Constraints:
3.1 Timeline an RP needs to follow:
As per Section 12 of the Code, the process of appointment of RP, structuring of all possible resolutions, COC agreeing to a proposal and many other such technical issues are to be planned, suggested and acted upon within the said stipulated time of 180 days as per section 12. This can be a daunting task.

That being said, under Section 12 (2) with a 75% of votes from the CoC, a resolution proposal can be passed, appealing to the NCLT for an extension of up to 90 days which can be granted by the Tribunal under Section 12 (3) if it deems it necessary.

The following table depicts the steps required to be taken by an RP over the prescribed course of 180 days.

Potential challenges faced by an RP:
Section 18 of IBC provides duties to guide the initial and interim stage of proceeding where the interim RP takes over, the duties enlisted are elaborate and very rigorous which are required to be finished under a certain amount of time. Some of the tasks include, the initial gathering of information related to the CD, data and other structural plans like the financial position of the debtor in past two years, receive and collate the claims, take control of the administrative working of a project.

The stipulated timeline is in our opinion is challenging, the challenge being that the RP needs to work at a breakneck pace and it does not take into account the possible size of the CD being dealt with. It may also be noted that in the view of this issue, a new proposal has been made to increase the period for the CIRP to 330 days.[2]

Under section 5 (28), voting share of each financial creditor is based on the financial debt owed to the debtor. This poses as a potential challenge to the RP, as whichever resolution he may propose for floor test could be rejected if does not please the majority creditors as the voting rights are isolated. This also puts the minority holders in a disadvantage position because their interest can easily be diluted in the process.

Remedies the CoC can seek against an RP:
The RP is an appointee of the CoC and therefore, for whatever reason if the CoC is unsatisfied with existing RP it may at any time, under Section 27 (2) of the Code, at a meeting with a 75% majority remove the current RP and re-appoint a new RP. The proposed name of the new RP is then given to the NCLT.

Another available remedy to the CoC is to initiate a disciplinary action against the RP filing a complaint with the Insolvency Bankruptcy Board of India (IBBI). The reason for doing the same could be multiple, ranging from issues like not taking action, misuse of power or defaulting with the process as mentioned in the Code. The IBBI acts the adjudicating authority for disciplinary and administrative actions against RP.

Overview:
The RP is at the centre of the process and therefore, becomes a vital person in the whole process. They are required to do a large number of tasks and are, therefore, expected to possess the necessary skills and knowledge for it. RP as a profession only emerged in 2016 after the introduction of the Code and the quality of RP’s in terms of their competence has been steadily rising over the years which is a positive for the industry as a whole.

Bibliography:

1. Goa Auto Accessories v Suresh Saluja, MA No. 130/2019 in CP (IB)-3863/MB/2018.
2. Dutt, I., 2020. IBC Resolutions Exceed New Time Limit Of 330 Days Prescribed By Govt. [online] Business-standard.com. Available at:
   
   1. Goa Auto Accessories v Suresh Saluja, MA No. 130/2019 in C.P. (IB)-3863/MB/2018
   2. Dutt, I., 2020.