Real Estate Pune
Insolvency Professional Entities: Eligible for Resolution Professional Appointment?
By GeoSquare News Desk · Published 2024-07-24
The Mumbai bench of the National Company Law Tribunal (NCLT), comprising Shri Sanjiv Dutt (Technical Member) and Shri K.R. Saji Kumar (Judicial Member), has held that Insolvency Professional Entities (IPEs) are eligible to be appointed as Resolution Professionals (RPs) under the Insolvency and Bankruptcy Code, 2016. This landmark ruling clarifies the role of IPEs in the corporate insolvency resolution process.
The NCLT's decision was made in the case of Piramal Capital and Housing Finance Limited vs Notion Real Estate Pvt. Ltd., where Piramal Capital & Housing Finance Limited (Piramal/Financial Creditor) filed an application before the NCLT, praying for the replacement of the Interim Resolution Professional (IRP) with a new Resolution Professional (RP). The RP suggested by Piramal was an Insolvency Professional Entity (IPE) under Section 22(3)(b) of the IBC.
The Committee of Creditors (CoC) submitted that the appointment of the proposed IPE to replace the IRP had been passed by 100% voting of the CoC and was in accordance with the IBBI (Insolvency Professionals) Regulations, 2016. The NCLT sought clarification on whether the appointment of IPEs as RPs was in consonance with the scheme of IBC.
The CoC clarified that although the IBC prima facie recognises only three entities — Information Utility, Insolvency Professional, and Insolvency Professional Agency — as professional service providers, IPEs are also recognised and regulated under Regulation 12 of the IBBI (Insolvency Professionals) Regulations, 2016. These regulations grant certificates of registration to IPEs.
The NCLT observed that Chapter III of Part IV of the IBC recognizes Insolvency Professional Agencies, Insolvency Professionals, and Information Utilities but not IPEs. However, the IBBI is empowered under Section 240(2)(zzi) of the IBC to make regulations regarding the categories of professionals or persons, their qualifications, and experience. Hence, it was held that the IBBI is justified in making regulations to govern IPEs even though there is no express provision in the IBC for the same.
The NCLT further noted the CoC's submissions that an IPE can be appointed as an Insolvency Professional to carry out the duties and functions under IBC and IP Regulations. The IBBI has registered IPEs as IPs and issued them valid authorizations for assignments. The IBBI has also issued Circulars and Clarifications regarding their eligibility to be engaged as RPs.
As a result, the NCLT appointed M/s Incorp Restructuring Services LLP as the new Resolution Professional in place of the IRP.
Information
The Insolvency and Bankruptcy Board of India (IBBI) is a regulator established by the Government of India to oversee the insolvency and bankruptcy process in India. The IBBI is responsible for regulating Insolvency Professionals, Insolvency Professional Agencies, and Information Utilities.
Piramal Capital & Housing Finance Limited is a non-banking financial company (NBFC) that provides financing solutions to real estate developers and corporates. Notion Real Estate Pvt. Ltd. is a real estate company that has been admitted to the Corporate Insolvency Resolution Process (CIRP) by the NCLT.