Introduction
Under the Insolvency and Bankruptcy Code, 2016 (IBC), the Corporate Insolvency Resolution Process (CIRP) is a time-bound mechanism managed by two distinct office-holders: the Interim Resolution Professional (IRP) and the Resolution Professional (RP).
The process begins with an IRP, who takes immediate control of the debtor’s assets, stabilizes operations, verifies creditor claims, and forms the Committee of Creditors (CoC). Subsequently, the CoC either confirms the IRP to continue as the RP or appoints a new RP to manage the remainder of the process, primarily focusing on securing and implementing a resolution plan.
While their powers and duties overlap significantly, the IRP and RP are appointed at different stages, have distinct tenures, and serve different core objectives within the CIRP framework.
Appointment and Legal Framework
- IRP Appointment: The Adjudicating Authority (National Company Law Tribunal or NCLT) appoints an IRP on the date of CIRP commencement under Section 16 of the IBC. The process for proposing an IRP depends on whether the CIRP is initiated by a financial creditor, an operational creditor, or the corporate debtor itself. If an operational creditor initiates the process without proposing an IRP, the NCLT will appoint one based on a recommendation from the Insolvency and Bankruptcy Board of India (IBBI).
- RP Appointment: The CoC must convene its first meeting within seven days of its formation. In this meeting, the CoC decides by a 66% majority vote to either confirm the existing IRP as the RP or replace them with a new insolvency professional. The NCLT then formally appoints the chosen RP after receiving confirmation from the IBBI, as mandated by Section 22 of the IBC.
Tenure and Transition
The IRP’s role is inherently temporary, lasting only until the RP is formally appointed. To prevent any administrative vacuum, regulations ensure a seamless transition. If the CoC fails to appoint an RP or the appointment is delayed, the IRP continues to function as the RP, ensuring the CIRP proceeds without interruption.
Core Roles and Responsibilities
The IRP’s primary mandate is to stabilize the corporate debtor and lay the groundwork for the resolution process. The RP builds on this foundation to drive the company toward a viable resolution.
- IRP’s Core Responsibilities:
- Taking immediate control and custody of the corporate debtor’s assets.
- Managing the company’s operations as a going concern.
- Issuing a public announcement of the CIRP to invite claims from creditors.
- Receiving, collating, and verifying all creditor claims.
- Constituting the Committee of Creditors (CoC).
- RP’s Expanded Responsibilities:
- The RP assumes all the duties of the IRP, continuing to manage the company as a going concern.
- Preparing the Information Memorandum, a comprehensive document detailing the corporate debtor’s financial position for prospective resolution applicants.
- Inviting and examining resolution plans to ensure they comply with the mandatory requirements of the IBC.
- Presenting all eligible resolution plans to the CoC for evaluation.
- Submitting the CoC-approved resolution plan to the NCLT for final sanction.
The Decisive Role of the Committee of Creditors (CoC)
The CoC holds the ultimate authority in determining who leads the CIRP. Its commercial wisdom is paramount in both the initial appointment and the potential replacement of the RP.
- Initial Appointment: As noted, the CoC’s first major decision is to confirm or replace the IRP.
- Replacement: Even after appointment, the CoC can decide to replace the RP at any time during the CIRP by a 66% vote if it is dissatisfied with their performance. This power, under Section 27 of the IBC, acts as a crucial safeguard for accountability and ensures the process is led by the most suitable professional to maximize value for all stakeholders.
Practical Implications for Stakeholders
- For Creditors: Early and accurate submission of claims to the IRP is critical. Subsequently, the RP becomes the main point of contact for evaluating and voting on resolution plans.
- For the Corporate Debtor: The management and promoters must provide full cooperation to the IRP to ensure business continuity and accurate data collation. This cooperation must extend to the RP during the resolution plan phase.
- For Resolution Applicants: The RP is the facilitator for resolution applicants, providing access to the Information Memorandum and managing the submission and negotiation process for resolution plans.
Key Differences Summarized
| Feature | Interim Resolution Professional (IRP) | Resolution Professional (RP) |
| Stage in CIRP | Initial phase: stabilization, claim collation, and CoC formation. | Main phase: resolution plan management, negotiation, and approval. |
| Appointing Authority | Appointed by the NCLT upon admission of the CIRP application. | Appointed by the NCLT based on a resolution passed by the CoC. |
| Tenure | Temporary, serving from the insolvency commencement date until the RP is appointed. | Serves for the remainder of the CIRP until a resolution plan is approved. |
| Emphasis of Responsibilities | Focuses on administrative tasks: taking control, verifying claims, and forming the CoC. | Focuses on substantive resolution: preparing the Information Memorandum and managing the plan evaluation process. |
Conclusion
The IBC’s two-tiered structure of an IRP followed by an RP is a deliberate design that balances speed with creditor oversight. The immediate appointment of an IRP ensures that the debtor’s assets are protected and operations are stabilized without delay.
Granting the CoC the power to then confirm or appoint an RP upholds the principle of commercial wisdom, allowing creditors to select a professional they trust to maximize the chances of a successful resolution. This framework ensures continuity, accountability, and flexibility, all of which are essential for navigating the complexities of the CIRP within the Code’s strict timelines.
— Team AMLEGALS
Please reach out to us at rohit.lalwani@amlegals.com in case of any query.