Duties of Interim Resolution Professional under Section 18 IBC

The Insolvency and Bankruptcy Code, 2016 (IBC) is one of the most significant reforms in India’s economic and legal landscape. It aims to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. A key role in this process is played by the Interim Resolution Professional (IRP) — a qualified insolvency professional who takes control of the corporate debtor’s management and assets once the corporate insolvency resolution process (CIRP) is initiated.

Section 18 of the IBC specifically outlines the duties and responsibilities of the IRP. The role of the IRP is to act as a caretaker of the corporate debtor’s assets and operations, ensure that the business continues as a going concern, and set the stage for the smooth conduct of the resolution process.

Understanding the Role of the Interim Resolution Professional

When a corporate debtor defaults on its payments, an application for initiating the CIRP may be filed before the National Company Law Tribunal (NCLT) by a financial creditor, operational creditor, or the corporate debtor itself. Once the NCLT admits the application, it appoints an Interim Resolution Professional.

The IRP functions as an interim authority responsible for managing the affairs of the company until a Resolution Professional (RP) is appointed by the Committee of Creditors (CoC). During this phase, the powers of the board of directors are suspended, and the IRP takes control of the company’s management.

The main objective of this arrangement is to ensure that the assets of the corporate debtor are preserved and its operations continue smoothly until a resolution plan is prepared and approved.

Statutory Provision: Section 18 of the IBC, 2016

Section 18 of the IBC clearly defines the duties of the IRP. It empowers the IRP to take control and custody of the corporate debtor’s assets and manage its operations. It also lays down what assets cannot be taken over by the IRP. The duties mentioned under Section 18 are not exhaustive; the Insolvency and Bankruptcy Board of India (IBBI) may specify additional duties from time to time.

Key Duties of the Interim Resolution Professional

The duties of an IRP under Section 18 can be divided into several heads. Each of these duties ensures transparency, accountability, and continuity during the insolvency resolution process.

Collecting Information about the Corporate Debtor

The IRP must collect all relevant information relating to the assets, finances, and operations of the corporate debtor to determine its financial position. This includes:

• Details of the business operations for the previous two years;
• Financial and operational payments made during the previous two years;
• List of assets and liabilities as on the insolvency commencement date; and
• Any other information that may be required or specified by the Board.

This step helps the IRP to understand the financial health of the company and prepare a realistic picture for the creditors. It also ensures that there is no concealment of assets or misrepresentation of financial data.

Receiving and Collating Claims from Creditors

Once the insolvency process begins, the IRP is required to make a public announcement inviting claims from all creditors — financial, operational, and others. The IRP must receive, verify, and collate all these claims to prepare an accurate list of creditors.

This process ensures that every creditor gets an opportunity to submit their claims and participate in the resolution process. It also helps in determining the voting rights of creditors in the Committee of Creditors.

Constituting the Committee of Creditors (CoC)

After verifying all the claims, the IRP has to constitute the Committee of Creditors (CoC), which mainly includes financial creditors. The CoC plays a central role in the CIRP, as it has the power to approve or reject the resolution plan.

The IRP convenes the first meeting of the CoC, during which the members decide whether to confirm the IRP as the Resolution Professional (RP) or appoint another professional in that capacity.

Taking Control and Custody of Assets

One of the most critical duties of the IRP is to take control and custody of all assets owned by the corporate debtor. This includes both tangible and intangible assets. According to Section 18(f), the IRP must take control of:

• Assets located in India or abroad over which the corporate debtor has ownership rights;
• Assets not in the possession of the debtor but still owned by it;
• Tangible assets, whether movable or immovable;
• Intangible assets such as intellectual property rights;
• Securities, including shares held in subsidiaries, financial instruments, and insurance policies;
• Assets that are subject to ownership disputes before a court or authority.

This control ensures that no asset of the corporate debtor is misused, transferred, or concealed during the resolution process.

Managing the Corporate Debtor as a Going Concern

The IRP is required to manage the operations of the company so that it continues as a going concern. This means that day-to-day business activities should not stop or deteriorate during the insolvency process.

The IRP must ensure payment of salaries, continuation of contracts essential for running the business, and maintenance of assets. This is essential because the value of the company can diminish rapidly if operations come to a halt.

Filing Information with the Information Utility

Another important duty is to file collected information with the information utility, if necessary. Information utilities are regulated entities under the IBC that store financial information such as debts, defaults, and security interests. By filing accurate data, the IRP ensures that the insolvency process remains transparent and verifiable.

Monitoring and Reporting

The IRP must continuously monitor the assets and financial position of the corporate debtor during the interim period. He is also responsible for maintaining records and submitting regular reports to the NCLT and IBBI, whenever required. This promotes transparency and accountability in the process.

Performing Other Duties as Specified by the IBBI

Section 18(g) provides that the IRP shall perform such other duties as may be specified by the Board. This gives the Insolvency and Bankruptcy Board of India (IBBI) the flexibility to assign additional responsibilities to the IRP, depending on the circumstances of a particular case or future amendments.

Assets Excluded from IRP’s Custody

The explanation to Section 18 clarifies that the term “assets” does not include certain categories. These are:

1. Assets owned by third parties but in possession of the corporate debtor under contractual arrangements such as bailment or trust.
2. Assets of Indian or foreign subsidiaries of the corporate debtor, since they are separate legal entities.
3. Any other assets that may be notified by the Central Government in consultation with a financial sector regulator.

This ensures that the IRP does not overstep legal boundaries while taking control of assets and that third-party rights are protected.

Case Laws Explaining the Duties of IRP

Judicial pronouncements have played a crucial role in clarifying the scope of the IRP’s powers and responsibilities.

M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018)

In this landmark judgment, the Supreme Court held that once an insolvency professional is appointed to manage the affairs of a company undergoing CIRP, the erstwhile directors lose their authority to act on behalf of the company. Consequently, they cannot file an appeal in the name of the company.

This case established that the IRP takes complete control of the corporate debtor’s management once appointed and that the board of directors stands suspended.

Canara Bank v. Ms. Mamta Binani, RP of Aristo Texcon Pvt. Ltd. (2017)

The National Company Law Appellate Tribunal (NCLAT) in this case held that the Resolution Professional is an officer of the court and must exercise reasonable and responsible care while managing the affairs of the corporate debtor. The ruling clarified that the IRP (and later the RP) must perform duties diligently, fairly, and in the best interest of all stakeholders.

Purpose and Importance of the IRP’s Role

The role of the IRP is temporary yet vital. It ensures that the corporate debtor’s assets are preserved and that the company continues to operate during the initial stages of insolvency.

The primary objectives of the IRP’s appointment are:

• Safeguard the value of assets of the corporate debtor;
• Maintain business continuity during the transition period;
• Establish transparency by collecting verified financial data;
• Facilitate creditor participation through the constitution of the CoC;
• Lay the foundation for resolution, so that a Resolution Professional can prepare and implement a viable plan.

Without the IRP’s intervention, companies in distress might lose value rapidly or face asset diversion, making resolution difficult or impossible.

Duration of the IRP’s Tenure

The IRP is appointed for an initial period of 30 days from the date of appointment. However, the Committee of Creditors may either confirm the IRP as the Resolution Professional or replace him with another insolvency professional in its first meeting.

Until such replacement or confirmation, the IRP continues to discharge his duties and ensure compliance with the provisions of the IBC.

Challenges Faced by Interim Resolution Professionals

In practice, IRPs often face several challenges such as:

• Lack of cooperation from suspended directors or management;
• Incomplete or inaccurate financial records;
• Resistance from creditors during claim verification;
• Legal disputes over ownership of assets;
• Time constraints, since the initial period is limited to 30 days.

Despite these challenges, the IRP’s role remains indispensable for maintaining stability and transparency in the insolvency process.

Conclusion

The Interim Resolution Professional under Section 18 of the Insolvency and Bankruptcy Code, 2016, performs a crucial role in stabilising a company at the very start of the insolvency process. By taking control of assets, collecting financial data, collating claims, and forming the Committee of Creditors, the IRP ensures that the corporate insolvency resolution process begins on a strong and structured foundation.