Role of an Interim Resolution Professional and Resolution Professional
“The role of the RP is not adjudicatory but administrative”1
The role of the resolution professional in the revival of the corporate debtor is stated in detail in several Sections of the Code read with the 2016 Regulations, which is listed below:
Appointment: Adjudicating Authority appoints an interim resolution professional in the manner laid down in Section 16. [Section 13(1)(c)]
Public Announcement: The step starts rolling with the Adjudicating Authority, after admitting an application under either Sections 7, 9 or 10, ordering that a public announcement of the initiation of the CIRP together with calling for the submission of claims under Section 15 shall be made. [Section 13(1)(b)]
In the public announcement of the CIRP, under Section 15(1), information as to the last date for submission of claims, as may be specified, is to be given; details of the interim resolution professional, who shall be vested with the management of the corporate debtor and be responsible for receiving claims, shall also be given, and the date on which the CIRP shall close is also to be given. [Section 15(1)(c), (d) and (f)]
Management of the Affairs: Under Section 17 of the Code, the management of the affairs of the corporate debtor shall vest in the interim resolution professional, the Board of Directors of the corporate debtor standing suspended by law.
Receiving and collating of all claims: Among the important duties of the interim resolution professional is the receiving and collating of all claims submitted by creditors and the constitution of a Committee of Creditors. [Section 18(1)(b) and (c)].
Under Chapter IV of the CIRP Regulations, claims by operational creditors, financial creditors, other creditors, workmen and employees are to be submitted to the resolution professional along with proofs thereof. [Regulations 7 to 12].
Thereafter, under Regulation 13, the resolution professional shall verify each claim as on the insolvency commencement date, and thereupon maintain a list of creditors containing the names of creditors along with the amounts claimed by them, the amounts admitted by him, and the security interest, if any, in respect of such claims, and constantly update the aforesaid list.
Manage the operations as a going concern: Under Section 20 of the Code, the interim resolution professional is to make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern.
Appointment RP: At the first meeting of the Committee of Creditors, which shall be held within 7 days of its constitution, the Committee, by majority vote of not less than 66% of the voting share of financial creditors, must immediately resolve to appoint the interim resolution professional as a resolution professional, or to replace the interim resolution professional by another resolution professional. [Section 22(1) and (2)].
Conduct the entire CIRP: Under Section 23(1), the resolution professional shall conduct the entire CIRP and manage the operations of the corporate debtor during the same. Importantly, all meetings of the Committee of Creditors are to be conducted by the resolution professional, who shall give notice of such meetings to the members of the Committee of Creditors, the members of the suspended board of directors, and operational creditors, provided the amount of their aggregate dues is not less than 10% of the entire debt owed.
Like the duties of the interim resolution professional under Section 18 of the Code, it shall be the duty of the resolution professional to preserve and protect assets of the corporate debtor including the continued business operations of the corporate debtor [Section 25(1)]
For this purpose, he is to:
- maintain an updated list of claims;
- convene and attend all meetings of the Committee of Creditors;
- prepare the information memorandum in accordance with Section 29 of the Code;
- invite prospective resolution applicants; and
- present all resolution plans at the meetings of the Committee of Creditors [Section 25(2)(e) to (i)]
Identify preferential transactions under Sec. 43: Click here.
Information Memorandum: Under Section 29(1) of the Code, the resolution professional shall prepare an information memorandum containing all relevant information, as may be specified, so that a resolution plan may then be formulated by a prospective resolution applicant.
Receive Resolution Plan: Under Section 30 of the Code, the resolution applicant must then submit a resolution plan to the resolution professional, prepared on the basis of the information memorandum.
Invitation for Expression Of Interest(EOI): Under Regulation 36A, the resolution professional shall publish brief particulars of the invitation for expression of interest in Form G of the Schedule. This document must also, inter alia, provide for such basic information about the corporate debtor as may be required by a prospective resolution applicant for its expression of interest. [Regulation 36-A (4)(c).]
Determination of Fair Value & Liquidation Value: Chapter X of the Regulations then deals with resolution plans that are submitted. Under Regulation 35, “fair value” as defined by Regulation 2(hb)1 and “liquidation value” as defined by Regulation 2(k)2 shall be determined by two registered valuers appointed under Regulation 27, which shall be handed over the resolution professional.
Provide fair value and liquidation value to CoC: As per Regulation 35(2), after receipt of the resolution plans in accordance with the Code and the Regulations, the resolution professional shall then provide the fair value and liquidation value to every member of the Committee of Creditors. Regulation 36 is important as it forms the basis for the submission of a resolution plan.
Conduct due diligence: The resolution professional, once he receives a proposed resolution plan, must then conduct due diligence based on the material on record, in order that the prospective resolution applicant complies with Section 25(2)(h) of the Code (which, inter alia, requires prospective resolution applicants to fulfil such criteria as may be laid down, having regard to the complexity and scale of operations of the business of the corporate debtor); the provisions of Section 29-A; and other requirements as may be specified in the invitation for expression of interest. [Regulation 36A(8).]
List of prospective resolution applicants: Once the due diligence is done, the resolution professional shall issue a provisional list of eligible prospective resolution applicants to the Committee of Creditors, and after considering any objection to their inclusion or exclusion, shall then issue the final list of prospective resolution applicants to the Committee of Creditors. [Regulation 36-A (10) to (12).]
Present Resolution Plan to the Committee of Creditors: Under Section 30 of the Code, the resolution applicant must then submit a resolution plan to the resolution professional, prepared on the basis of the information memorandum. After this, the resolution professional must present to the Committee of Creditors, for its approval, such resolution plans which conform to the conditions referred to in Section 30(2) of the Code. [Section 30(3)].
Submit the Resolution Plan to the Adjudicating Authority: If the resolution plan is approved by the requisite majority of the Committee of Creditors, it is then the duty of the resolution professional to submit the resolution plan as approved by the Committee of Creditors to the Adjudicating Authority. [Section 30(6)]
Other: Under Regulation 36-B, the resolution professional shall issue the information memorandum, evaluation matrix, as defined by Regulation 2(h)(a)3, and a request for resolution plan within the time stated. Importantly, the resolution professional shall endeavour to submit the resolution plan approved by the Committee of Creditors to the Adjudicating Authority, at least 15 days before the maximum period for completion of CIRP, along with a compliance certificate in Form H of the Schedule.
In K. Sashidhar Vs. Indian Overseas Bank & Ors., the Apex Court held that there is no provision in the Code which empowers the adjudicating authority (NCLT) to oversee the justness of the approach of the dissenting financial creditors in rejecting the proposed resolution plan or to engage in judicial review thereof. Concededly, the inquiry by the resolution professional precedes the consideration of the resolution plan by the CoC. The resolution professional is not required to express his opinion on matters within the domain of the financial creditor(s), to approve or reject the resolution plan, under Section 30(4) of the Code.