New Delhi, May 16, 2018
As banks and financial institutions try to resolve the bad loan cases there is huge demand for insolvency resolution professionals.
So far, chartered accountants, company secretaries and lawyers have walked away with the mandate to provide resolution professional services. Non-professionals, including graduates from non-commerce backgrounds and having management experience of 15 years, and who have qualified themselves as RPs, are looking to break a sort of ‘glass ceiling’ to get the mandate.
The reason is not far to see. Under the insolvency framework, it is the Committee of Creditors (CoC) that decides on the appointment of RP. The CoC wields significant influence and in many occasions it even replaces the interim resolution professional appointed by NCLT with its own choice of RP.
It prefers professionals given the quantum and nature of work involved in resolution which is done in a time- bound manner.
So are non-professionals being deprived of mandates as RP? There could be multiple reasons for such perceptions. One main problem is that fewer cases are admitted by the NCLT under the Insolvency and Bankruptcy Code than the number that comes knocking on the tribunal’s doors. There is sort of excess supply of RPs vis-à-vis the number of cases that require such professionals, say experts.
By one estimate, less than 25 per cent of the cases that come to the NCLT are taken up. So this problem of all RPs not getting work will be there till the concept of ‘individual insolvency’ becomes a reality. “Once individual insolvency regime comes into effect and takes wings, there will be lot of work for all RPs whether professionals or non-professionals,” said an IBC observer.
As on date, to become a RP, one has to enrol with an insolvency professional agency (IPA) and register with insolvency regulator IBBI. There are three registered IPAs in the country — one each floated by the CA Institute, CS Institute and Cost Accountants Institute.
Pankaj Mahajan, Head-Restructuring and Insolvency, Mazars Advisory LLP, said non-professionals do have an equal opportunity to demonstrate their capabilities and acquire mandates, as the law has not differentiated between them and professionals while granting them the registration certificates as insolvency professionals.
“Everyone, be it a professional or a non-professional, has a level playing field. If you talk about survival, I am of the firm view that survival in any profession depends on the level of competence and quality of delivery and the same shall hold true in this case too. Incompetent players will be weeded out, be it professionals or non-professionals,” Mahajan told BusinessLine. At the same time, Mahajan also highlighted that IBC intends to resolve a corporate default within a limited time frame, with the duty of running the business of such corporate on “going concern basis” being cast on the resolution professional.
Given the huge quantum of work and the deadlines involved, CAs/CS/CWAs or an advocate are better equipped to do the work given their extensive experience in these areas and their thorough understanding of the nuances of businesses across domains, he said.
Saurav Kumar, Partner, IndusLaw, a law firm, said time has come to review the appointment of resolution professionals.
The regulations, inter-alia, does allow individuals with 15 years of experience in management to become a resolution professional.
“We are typically seeing professionals such as chartered accounts and company secretaries being appointed as resolution professionals. In a complex scenario, they may not have the appropriate management skills to run the process efficiently and at the same time manage the affairs of the company,” he said.
The IBBI should consider imparting training to such professionals, Kumar said. “It would also be exciting to see more individuals with management backgrounds participate as resolution professionals,” he said.
Recently the role of the RP has come under a lot of criticism. They are being condemned by both the stakeholders and the NCLT for not following the process mandated under the Code, he said. Some Benches of NCLT had given adverse directions in relation to the bidding process of Essar Steel, Bhushan Power and Binani Cement. The Kolkata Bench of NCLT has recently accepted that the independence, transparency and competency of a resolution professional may have been misplaced and have asked the IBBI to review of the code and regulation around this aspect.
Till date, the Indian Institute of Insolvency Professionals of ICAI has registered 1,064 insolvency professionals. Of this, as many as 952 are chartered accountants; 33 advocates; one company secretary; two cost and management accountants and 76 graduates.
In the case of ICSI Institute of Insolvency Professionals, as many as 556 insolvency professionals have been enrolled. Of this, as many as 356 are company secretaries; 27 are chartered accountants; 90 advocates; 73 management experts and 10 cost accountants.
[The Hindu Business Line]