How Is an IRP Appointed?

The appointment of an Insolvency Resolution Professional (IRP) is a critical step in the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016. The IRP is responsible for managing the day-to-day affairs of the corporate debtor, ensuring the proper conduct of the CIRP, and working toward finding a resolution for the debtor's financial distress. The appointment process is closely regulated to ensure that the individual chosen is qualified and capable of handling the complexities of the process.

Process of Appointment of an IRP

Filing of Insolvency Application:

The process begins when an insolvency application is filed by a financial creditor, operational creditor, or the corporate debtor itself, or a resolution applicant with the National Company Law Tribunal (NCLT).

Once the NCLT admits the insolvency application, it will pass an order to initiate the Corporate Insolvency Resolution Process (CIRP) under Section 7, 9, or 10 of the IBC, depending on who files the application.

Appointment of Interim Resolution Professional (IRP):

Upon the NCLT's order to admit the insolvency application, it is required to appoint an Interim Resolution Professional (IRP).

The IRP is usually appointed immediately after the CIRP commences and serves as the temporary administrator of the corporate debtor’s affairs.

The IRP is responsible for:

• Taking over the management of the corporate debtor.
• Initiating the moratorium to prevent any legal actions from creditors.
• Forming the Committee of Creditors (CoC) and initiating the process for a resolution plan.

Selection of IRP:

The IRP is selected from a panel of professionals who are registered with an Insolvency Professional Agency (IPA) recognized by the Insolvency and Bankruptcy Board of India (IBBI).

An IRP must be a qualified insolvency professional with expertise in handling corporate insolvency matters.

Role of Insolvency Professional Agencies (IPA):

The Insolvency Professional Agency (IPA) plays a crucial role in identifying and appointing the IRP. IPAs maintain a list of qualified professionals who are authorized to act as IRPs.

The IRP must be a member of an IPA, and the IPA ensures that the selected professional has the necessary skills, experience, and ethical standing.

Selection Criteria:

• Independence: The IRP must be independent and free of any conflicts of interest with the debtor, creditors, or any other stakeholders.
• Expertise and Qualifications: The IRP must possess the required qualifications and experience to handle the CIRP effectively. This includes knowledge of financial restructuring, legal procedures, and industry-specific challenges.
• Registered with IBBI: The IRP must be registered with the Insolvency and Bankruptcy Board of India (IBBI) as a professional insolvency practitioner.
• Fit and Proper: The IRP should meet the fit and proper criteria defined by the IBBI to ensure that the person can discharge the functions in accordance with the law.
• Availability and Commitment: The IRP must have the resources and capacity to commit to managing the CIRP in an effective and timely manner, ensuring that all legal deadlines are met.

Appointment Process by CoC:

After the IRP has been appointed initially by the NCLT, the Committee of Creditors (CoC) is required to confirm the appointment of the IRP or propose a Resolution Professional (RP) if they wish to appoint a new professional.

The CoC will evaluate the proposed IRP based on their qualifications, experience, and independence.

If the CoC is satisfied with the IRP’s qualifications, the IRP is confirmed as the official Resolution Professional (RP) for the CIRP.

Interim IRP Transition to Resolution Professional:

The IRP may continue as the Resolution Professional (RP) after the CoC approves the appointment. If a new professional is required, the CoC can appoint a different RP from the panel of registered insolvency professionals.

NCLT’s Role in Appointment:

While the CoC has a key role in the final selection and confirmation of the IRP, the NCLT ensures that the appointment complies with all statutory provisions and oversees the entire process of insolvency resolution.

Example of IRP Appointment

ABC Ltd.

Application for CIRP: ABC Ltd. is facing financial distress, and a financial creditor files a petition for insolvency with the NCLT.

NCLT’s Order: The NCLT admits the insolvency application and appoints Mr. X as the Interim Resolution Professional (IRP).

IRP’s Actions:

• Mr. X takes control of ABC Ltd., imposing a moratorium and ensuring no legal actions are taken by creditors.
• He forms the Committee of Creditors (CoC), ensures the protection of assets, and initiates the search for potential resolution plans.

CoC Confirmation: The CoC evaluates Mr. X's credentials and approves him as the Resolution Professional (RP), continuing the process.

Conclusion

The appointment of the Insolvency Resolution Professional (IRP) is an essential part of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016. The IRP is appointed by the NCLT following the initiation of insolvency proceedings, and their role is to oversee the debtor’s affairs, manage the CIRP, and act in the best interest of the creditors. The selection process involves ensuring the IRP's independence, expertise, and qualifications to handle the complexities of insolvency resolution efficiently.