Chapter 5: Regulation of Insolvency Professionals,

Agencies, and Information Utilities

1. Insolvency and Bankruptcy Board of India (IBBI)

 Establishment (Section 188):
o IBBI was set up on October 1, 2016, as a body corporate with perpetual succession, a
common seal, and powers to hold property, enter contracts, and sue/be sued.
o Head office: New Delhi; can establish other offices in India.
 Constitution (Section 189):
o Members appointed by the Central Government include one each from the Ministries of
Finance, Corporate Affairs, and Law (Joint Secretary or above), plus other members.
o Chairperson and members must have expertise in law, finance, economics, accountancy, or
administration.
o Appointments (except ex-officio members) are made on the recommendation of a selection
committee.
o Term: 5 years or until age 65, whichever is earlier; eligible for re-appointment.
o Salaries and conditions are prescribed.
 Removal of Members (Section 190):
o Central Government can remove a member if they:
 Are an undischarged bankrupt.
 Are physically/mentally incapable.
 Are convicted of an offence involving moral turpitude.
 Abuse their position, harming public interest (after a hearing).
 Powers of Chairperson (Section 191):
o General superintendence and direction of IBBI affairs; can exercise delegated powers.
 Meetings (Section 192):
o Held as per regulations, with the Chairperson presiding (or another member if absent).
o Decisions by majority vote; Chairperson has a casting vote in case of a tie.
 Conflict of Interest (Section 193):
o Members with pecuniary interest in a matter must disclose it, and such disclosure is recorded.
o They cannot participate in discussions or decisions on that matter.
 Vacancies and Officers (Section 194):
o Board proceedings are valid despite vacancies, defects in constitution, or procedural
irregularities.
o IBBI can appoint officers/employees with prescribed salaries and conditions.
 Financial Sector Regulator (Section 195):
o Until IBBI was established, the Central Government could designate a financial sector
regulator to perform its functions.
 Powers and Functions (Section 196):
o Register, renew, suspend, or cancel registrations of IPAs, IPs, and IUs.
o Set eligibility criteria, standards, and fees for IPAs, IPs, and IUs.
o Specify curriculum for IP exams and regulate their functioning.
o Conduct inspections, investigations, and monitor performance of IPAs, IPs, and IUs.
o Issue guidelines, maintain records, publish data, and ensure transparency.
o Make model bye-laws for IPAs, covering professional standards, ethics, membership, and
grievance redressal.
o Has civil court powers (e.g., summoning, inspecting documents).
o Form committees, including advisory/executive committees (Section 197).
o Supreme Court (K. Sashidhar case, 2019): IBBI cannot regulate financial creditors’
commercial decisions.
 Condonation of Delay (Section 198):
 o Adjudicating Authority can condone delays in IBBI actions if reasons are recorded.

2. Insolvency Professional Agencies (IPAs)

 Registration Requirement (Section 199):
o No person can act as an IPA without a certificate of registration from IBBI.
o Current IPAs: Indian Institute of Insolvency Professionals of ICAI, ICSI Institute of
Insolvency Professionals, and Insolvency Professional Agency of Institute of Cost
Accountants of India.
 Registration Principles (Section 200):
o Promote professional development, ethical conduct, and competent IP services.
o Protect debtors, creditors, and others; support effective insolvency resolution.
 Registration Process (Section 201):
o Application to IBBI with specified details and fees (per IBBI Regulations, 2016).
o IBBI acknowledges receipt within 7 days.
o IBBI grants or rejects the certificate after review; rejection requires a hearing and
communication within 15 days.
o Certificates are issued with terms/conditions and can be renewed.
o Suspension/cancellation grounds:
 False statements or misrepresentation.
 Non-compliance with regulations/bye-laws.
 Violation of IBC provisions.
 Other specified grounds.
o Only whole-time IBBI members can pass suspension/cancellation orders after a hearing.
 Appeal (Section 202):
o Aggrieved IPAs can appeal to the National Company Law Appellate Tribunal (NCLAT) as
per regulations.
 Governing Board (Section 203):
o IBBI specifies the setup, minimum independent members, and IP representation on the IPA
governing board.
 Functions (Section 204):
o Grant membership to eligible IPs on fee payment.
o Set professional conduct standards.
o Monitor and suspend/cancel IP memberships.
o Protect IP rights and redress consumer grievances.
o Publish information about functions, members, and performance.
 Bye-Laws (Section 205):
o IPAs make bye-laws (approved by IBBI) consistent with IBBI’s model bye-laws, covering
membership, conduct, and governance.

3. Insolvency Professionals (IPs)

 Eligibility and Registration (Sections 206–207):
o IPs must enroll with an IPA and register with IBBI (per IBBI Regulations, 2016).
o Ineligible if:
 Minor, non-resident, or lacks qualifications/experience.
 Convicted of an offence with >6 months imprisonment (5 years post-sentence) or ≥7
years (permanent bar).
 Undischarged insolvent, of unsound mind, or not a “fit and proper” person (based on
integrity, reputation, solvency).
o IBBI specifies categories of professionals (e.g., finance, law, insolvency).
  Code of Conduct (First Schedule, IBBI Regulations, 2016):
o Integrity and Objectivity: Be honest, avoid misrepresentation, and act without bias or
conflict (disclose conflicts within 3 days).
o Independence: Maintain independence, avoid acquiring debtor assets, and disclose
relationships with stakeholders.
o Competence: Upgrade skills for professional service.
o Transparency: Correct misapprehensions, avoid misleading statements, and disclose fees
(published by IPA).
o Timeliness: Adhere to timelines, plan actions, and communicate promptly.
o Information Management: Ensure clear communication, maintain records, and avoid private
stakeholder talks.
o Confidentiality: Protect process information unless disclosure is consented or required.
o Restrictions: Limit assignments (max 10, with ≤3 having claims >₹1,000 crore), avoid
employment during assignments, and refrain from hiring relatives.
o Remuneration: Charge transparent, reasonable fees via banking channels; disclose all costs.
o Gifts: Avoid gifts/hospitality affecting independence or to gain undue advantage.
o Compliance: Cooperate with inspections, provide records, and ensure legal compliance.
 Authorisation (Regulation 7A):
o IPs need a valid authorisation for assignments post-December 31, 2019, except for ongoing
assignments.
 Functions (Section 208):
o Manage processes like Fresh Start, individual/corporate insolvency resolution, pre-packaged
insolvency resolution (PPIRP), liquidation, and bankruptcy.
o Take reasonable care, follow IPA bye-laws, allow inspections, submit records to IBBI/IPA,
and comply with specified conditions.

4. Information Utilities (IUs)

 Registration Requirement (Section 209):
o No person can act as an IU without IBBI registration.
 Registration Process (Section 210):
o Application to IBBI with specified details and fees; acknowledged within 7 days.
o IBBI grants or rejects the certificate; rejection requires a hearing.
o Certificates are issued with terms/conditions and can be renewed.
o Suspension/cancellation grounds (after a hearing, by whole-time members):
 False statements or misrepresentation.
 Non-compliance with regulations.
 Violation of IBC provisions.
 Other specified grounds.
 Eligibility (Regulation 3, IBBI Regulations, 2017):
o Must be a public company with:
 Sole object of providing core services.
 Compliant shareholding, governance, and bye-laws.
 Minimum net worth of ₹50 crore.
 Fit and proper promoters, directors, and shareholders (>5% stake), based on integrity,
no convictions (≥6 months), and solvency.
o Example: National E-Governance Services Limited (NeSL) is India’s first IU.
 Appeal (Section 211):
o Aggrieved IUs can appeal to NCLAT as per regulations.
 Governing Board (Section 212, Regulation 9):
o Includes managing director, independent directors (>50% Indian residents), and shareholder
directors.
o Independent directors: Experts in finance/law, no pecuniary ties, not shareholders, max 2
terms (3 years each, up to age 75).
 o At least one independent director must attend board meetings; an independent director is the
Chairperson.
o Directors disclose conflicts of interest and abstain from related decisions.
 Core Services (Section 213):
o Provide services like storing, authenticating, and accessing financial information, as specified
by regulations.
 Obligations (Section 214):
o Store financial information in a universal format.
o Accept electronic submissions from obligated persons (Section 215) and others.
o Meet service quality standards, authenticate information, provide access, publish statistics,
and ensure interoperability with other IUs.
 Submission of Information (Section 215):
o Financial/operational creditors submit information in specified forms with fees.
o Others can submit voluntarily in specified formats.
 Rights of Submitters (Section 216):
o Can update, modify, or rectify errors in submitted information via application.
o Cannot share submitted information with others except as specified.
 Illustrations:
o IUs are not obliged to register entities accessing their database (Illustration 1).
o Core services exclude determining defaults (Illustration 2).

5. Inspection and Investigation

 Complaints (Section 217):
o Any person can file a complaint against an IPA, IP, or IU with IBBI in the specified form and
time.
 Investigation (Section 218):
o IBBI can appoint an Investigating Authority if it receives a complaint or suspects a violation
of IBC provisions.
o Investigations follow IBBI (Inspection and Investigation) Regulations, 2017.
o The Authority can demand documents, enter premises, seize records (per Criminal Procedure
Code), and keep them until investigation ends (with identification marks).
o A detailed report is submitted to IBBI.
 Show Cause Notice (Section 219, Regulations 11–12):
o Post-investigation, IBBI issues a show cause notice detailing violations, evidence, proposed
actions, and a 15-day response period.
o Notices are served electronically and by post, with relevant documents attached.
o Non-response leads to disposal based on available records.
 Disciplinary Committee (Section 220, Regulation 13):
o Comprises whole-time IBBI members; reviews investigation reports.
o Actions after a hearing:
 Impose penalties (3x loss caused or unlawful gain, max ₹1 crore if unquantifiable).
 Suspend/cancel registrations of IPAs, IPs, or IUs.
 Order disgorgement of unlawful gains and restitution to affected persons.
o Orders are issued within 30 days (effective after 30 days unless stated otherwise), published
on IBBI’s website, and sent to IPAs (for IPs) and creditors/Adjudicating Authority (if
applicable).
o Service providers must discharge obligations and comply with directions.

6. Finance, Accounts, and Audit

  Grants (Section 221):
o Central Government provides grants to IBBI as appropriated by Parliament.
 Board’s Fund (Section 222):
o Comprises grants, fees, charges, and other sources approved by the Central Government.
o Used for salaries, IBBI functions, and other prescribed purposes.
 Accounts and Audit (Section 223):
o IBBI maintains accounts and prepares annual statements (Forms A, B, C) as prescribed by the
Central Government with the Comptroller and Auditor-General of India (CAG).
o Accounts are audited by CAG; IBBI bears audit costs.
o CAG has rights to demand books, inspect offices, and access records.
o Audited accounts and reports are sent to the Central Government annually for presentation in
Parliament (per IBBI Rules, 2018).

7. Key Regulations
 IBBI (Insolvency Professional Agencies) Regulations, 2016: Govern IPA registration and
operations.
 IBBI (Model Bye-Laws) Regulations, 2016: Provide model bye-laws for IPAs.
 IBBI (Insolvency Professionals) Regulations, 2016: Specify IP eligibility, code of conduct, and
authorisation.
 IBBI (Information Utilities) Regulations, 2017: Detail IU eligibility, governance, and services.
 IBBI (Inspection and Investigation) Regulations, 2017: Outline procedures for inspections,
investigations, and disciplinary actions.