Mumbai : September 10. Insolvency & Bankruptcy Code, 2016 (IBC) has been one of the top economic legislations of Hon. Mr. Narendra Modi’s government to stop the spreading cancer of non-performance assets (NPA) of Indian banks. IBC is a creditor-in-control regime wherein the promoters loses the control of their business immediately upon the admission order by National Company Law Tribunal (Adjudicating Authority) under the IBC and an insolvency resolution professional (IRP) is appointed to control and manage the affairs of the company.
An IRP is a person licensed by Insolvency & Bankruptcy Board of India (IBBI) which is the regulator of the IBC. To become an IRP there are certain eligibility criteria (advocate, chartered accountant, company secretary, cost & management accountant, etc. with prescribed years of experience) and one has to undergo the training and pass the exam.
Since 2017, IRP has been one of the top professions as NPA cases of lakhs of crores have been sent to the resolution under the IBC. One of the main functions of the IRP is to be find out fraudulent activity by the erstwhile management and to report the same to the Adjudicating Authority. Though the recovery from such activity of the IRP under IBC is still negligible, but there are significant cases where the bankers feel uncomfortable from such examination being done by the by the IRP under the IBC.
It would also be interesting to note that a significant number of ex-bankers have opted for the career as the IRP. ( In Short we can say Bankers Mafia now in NCLT) More importantly, these bankers have been handling the cases of their own earlier employer bank and they are rewarded with heavy fees. A case study will show that such ex-bankers get these cases from ex-employer banks by using their influence and have joined big advisory firms for support services. These big advisory firms also rewards such ex-bankers with a remuneration of minimum 2-3 times of their past remuneration.
One of the legal experts on IBC, who refused to disclose his name, stated that ‘the bankers are more comfortable with an IRP who is ex-banker because they believe such ex-banker understands practical side of banking and do not question too much about as to how the account has been turned NPA. He further said that, so far as avoidance transactions under the IBC are concerned, the banks always want a clean chit from IRP’.
Advocate Ravinder Kumar Rawat, who practices the insolvency laws in Delhi, said that the conflict of interest is a bigger issue and it has to be looked beyond what is written in the IBBI regulations. He said that it is sad that the bankers are engaging ex-bankers as the IRP which is definitely a case of conflict of interest though it does not violate the IBBI regulations. He further stated that recently the Parliament Committee of Finance has also stated that there is a need to make more transparency in the matters relating to the appointment of IRP
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