The Insolvency and Bankruptcy Board of India (IBBI) has proposed to restrict the number of assignments to be handled by an insolvency professional (IP), on grounds that few of them are handling too many assignments under the IBC.
The IBBI has floated a discussion paper seeking comments from the industry on this matter by July 25. It has proposed to issue necessary guidelines to IPs advising them to limit the maximum number of assignments handled by them, “given the expansive and intense responsibilities of an IP in corporate processes”.
“The said restriction on an IP will put a check on undesirable instances of delay and disturbance to the processes led by IPs,” the discussion paper said.
IBBI has devised a matrix to decide the number of assignments an IP can undertake. For instance, an IP cannot take more than one insolvency case where the turnover of corporate debtor is more than Rs 50,000 crore. He can undertake two assignments if they are both with a turnover less than Rs 10,000 crore.
The maximum IBC cases one IP is allowed are five provided the turnover of the corporate debtor in each is less than Rs 1,000 crore.
IBBI is of the view that the move will be conducive for development of the market for professionals as more talent will be drawn towards IP profession.
IBBI has drawn from various orders of the Supreme Court and National Company Law Tribunal to draft its proposal to limit an IP’s work if he is unlikely to be able to devote adequate time to each of his assignments.
For instance, NCLT’s Hyderabad bench in the matter of IDBI Bank versus Lanco Infratech said, “...we agreed with the submissions of the respondents considering his previous three assignments to large companies and the the current corporate debtor itself is a large company and we are of the prima facie view that the proposed IRP would not find sufficient time to act as IRP for the respondent company.”
There are around 3,000 insolvency professionals in the country and around 2,000-3,000 ongoing corporate insolvency resolution processes.