Answer By law4u team
The Insolvency and Bankruptcy Board of India (IBBI) plays a pivotal role in regulating insolvency professionals (IPs) under the Insolvency and Bankruptcy Code (IBC). Insolvency professionals are the individuals or entities responsible for carrying out the insolvency resolution process (CIRP), ensuring compliance with legal procedures, and protecting the interests of all stakeholders. IBBI’s powers in regulating these professionals are crucial for maintaining the quality and integrity of the insolvency process.
Powers of the IBBI in Regulating Insolvency Professionals:
Licensing of Insolvency Professionals:
The IBBI is empowered to grant licenses to individuals or entities who wish to operate as insolvency professionals in India.
To obtain this license, the IBBI sets certain eligibility criteria, which include the applicant’s educational qualifications, experience in the field, and the completion of a recognized course in insolvency and bankruptcy.
Once licensed, insolvency professionals are required to maintain continuous compliance with the standards set by the IBBI and renew their licenses periodically.
Regulation of Professional Conduct:
The IBBI is responsible for setting out the code of conduct and professional standards for insolvency professionals, which must be adhered to during the insolvency resolution process.
The code of conduct includes principles related to impartiality, independence, and transparency, ensuring that insolvency professionals carry out their duties without conflict of interest and with due diligence.
The IBBI regularly updates these codes and standards to ensure they align with international best practices and evolving regulatory needs.
Monitoring and Oversight:
The IBBI has the authority to monitor and oversee the activities of insolvency professionals throughout the insolvency resolution process to ensure compliance with the IBC and related regulations.
It tracks the performance of insolvency professionals by collecting reports from them and assessing whether they are fulfilling their roles in a timely, effective, and lawful manner.
The IBBI can also request audits of insolvency professional activities, ensuring that there is no violation of legal and professional standards.
Disciplinary Powers:
The IBBI has strong disciplinary powers to take corrective actions if an insolvency professional violates the rules and regulations set under the IBC.
It can issue warnings, impose fines, suspend, or revoke the license of an insolvency professional if they are found guilty of misconduct, non-compliance, or breach of ethical standards.
The IBBI follows a structured process to investigate complaints against insolvency professionals, including holding inquiries and providing opportunities for the professionals to defend themselves.
Training and Development:
The IBBI is responsible for promoting training and professional development for insolvency professionals. It recognizes various organizations that offer training programs in insolvency and bankruptcy, which insolvency professionals must attend to ensure they are updated on the latest regulations and practices.
The IBBI also encourages the development of specialized skills, including technical knowledge in financial analysis, legal aspects, and crisis management, to improve the quality of the professionals involved in insolvency processes.
Regulation of Insolvency Professional Agencies (IPAs):
The IBBI regulates and oversees Insolvency Professional Agencies (IPAs), which are bodies authorized to register insolvency professionals and ensure their proper functioning.
The IBBI sets the requirements for IPAs, ensuring they maintain high standards for the recruitment, training, and conduct of insolvency professionals.
Ensuring Independence and Impartiality:
The IBBI ensures that insolvency professionals act independently and impartially while performing their duties. This includes preventing conflicts of interest, such as insolvency professionals being involved in the resolution process of a company they have previously worked with or have financial interests in.
To promote transparency, the IBBI requires insolvency professionals to disclose any potential conflicts of interest before taking on assignments.
Appeals and Grievance Redressal:
The IBBI provides mechanisms for grievance redressal for stakeholders who feel that an insolvency professional has acted improperly or failed to comply with the IBC.
Parties can appeal decisions made by the IBBI related to disciplinary actions through the National Company Law Appellate Tribunal (NCLAT), which serves as the appellate body for matters related to insolvency and bankruptcy.
Example:
Consider an insolvency professional who has been handling the insolvency resolution process (CIRP) for a distressed company. If a creditor raises concerns that the insolvency professional has been biased or has failed to comply with the IBC provisions, the IBBI may investigate the matter.
The IBBI would first review whether the insolvency professional followed the code of conduct and legal requirements during the process.
If any violations are found, such as lack of impartiality or failure to maintain transparency, the IBBI can issue a show cause notice to the professional.
Depending on the findings, the IBBI could impose disciplinary action, including suspension of the professional’s license or even a ban on further practice.
Conclusion:
The Insolvency and Bankruptcy Board of India (IBBI) plays a critical role in regulating insolvency professionals to ensure that the insolvency and bankruptcy process is carried out effectively, efficiently, and in compliance with the Insolvency and Bankruptcy Code (IBC). IBBI’s powers include licensing, setting professional standards, disciplinary actions, monitoring, and ensuring the independence and impartiality of insolvency professionals. This helps maintain the integrity and professionalism of the insolvency resolution process in India.
