Duties of Resolution Professional under Section 25 of IBC

The Insolvency and Bankruptcy Code, 2016 (IBC) lays down a clear legal framework for resolving insolvency of corporate entities in a time-bound and effective manner. Once a company, called the corporate debtor, enters into the Corporate Insolvency Resolution Process (CIRP), the management of its affairs is taken over by a professional called the Resolution Professional (RP).

The RP plays a crucial role in protecting the assets of the debtor, ensuring fair treatment of creditors, and facilitating the preparation and approval of a viable resolution plan. Section 25 of the IBC specifically outlines the duties and responsibilities of the RP during this process.

Purpose of Section 25 of IBC

Section 25 imposes a statutory duty on the Resolution Professional to preserve and protect the assets of the corporate debtor and to ensure that the business continues as a going concern. This ensures that the value of the company does not deteriorate during insolvency proceedings and that stakeholders get the maximum possible recovery.

To achieve this, the law gives the RP both administrative and managerial powers along with a set of defined duties listed under Section 25(2).

Taking Custody and Control of Assets

Clause (a) of Section 25(2) requires the RP to take immediate custody and control of all assets of the corporate debtor, including its business records and property.

This step is vital because it prevents misuse, transfer, or concealment of assets by promoters or management once insolvency proceedings begin. The RP must identify and secure all tangible and intangible assets, such as land, machinery, inventory, bank accounts, patents, trademarks, and receivables.

In practice, the RP issues notices to banks, statutory authorities, and counterparties informing them of the commencement of CIRP and takes control of the company’s physical and digital assets.

Acting on Behalf of the Corporate Debtor

Under clause (b), the RP must represent and act on behalf of the corporate debtor in all dealings with third parties. This includes legal proceedings before judicial, quasi-judicial, or arbitration forums.

The RP becomes the face of the company during the CIRP period and can file or defend cases, respond to notices, and exercise contractual rights. This ensures that the debtor’s interests are protected during ongoing litigations or commercial dealings.

Raising Interim Finance

According to clause (c), the RP can raise interim finance to keep the business running, but only with the approval of the Committee of Creditors (CoC) under Section 28.

Interim finance refers to short-term borrowing raised during CIRP to meet essential operational expenses such as salaries, raw materials, electricity, or statutory dues. The IBC recognises such finance as part of the insolvency resolution process cost, meaning it will be repaid with priority.

This provision ensures that business continuity is not hampered due to lack of liquidity.

Appointment of Professionals

Clause (d) empowers the RP to appoint accountants, legal experts, valuers, or other professionals as required for the resolution process.

This is necessary because insolvency resolution often involves technical evaluation, financial due diligence, and legal compliance. The assistance of professionals helps the RP in preparing accurate information, valuations, and reports for submission to the CoC and the Adjudicating Authority (NCLT).

Maintaining an Updated List of Claims

Under clause (e), the RP must maintain an updated list of claims received from creditors.

This involves verifying each claim, determining its validity, and classifying creditors as financial or operational. The list must be continuously updated as new claims are filed or existing ones are modified.

This process is crucial for ensuring transparency and for calculating voting shares within the CoC.

Convening and Attending Meetings of the CoC

As per clause (f), the RP must convene and attend all meetings of the Committee of Creditors.

The CoC is the main decision-making body in the CIRP, consisting of financial creditors. The RP acts as a coordinator, prepares the agenda, circulates meeting notices, and records the minutes. The RP also implements the decisions taken by the CoC.

This role requires neutrality and professionalism since the RP does not have voting rights but must ensure smooth functioning of the process.

Preparing the Information Memorandum

Under clause (g), the RP has to prepare an Information Memorandum (IM) in accordance with Section 29 of the Code.

The IM is a comprehensive document containing details about the corporate debtor’s financial position, assets, liabilities, business operations, and litigation. It helps prospective resolution applicants assess the viability of submitting a resolution plan.

Accuracy and completeness of this document are critical, as they directly affect investor confidence and the success of the resolution process.

Inviting Prospective Resolution Applicants

Clause (h) mandates the RP to invite prospective resolution applicants who meet eligibility criteria approved by the CoC.

This clause was amended by the Insolvency and Bankruptcy Code (Amendment) Act, 2018 to ensure a more structured and transparent process. The RP must consider factors like the scale and complexity of the debtor’s business before finalising eligibility norms.

The RP issues an invitation for expressions of interest (EoI) and provides qualified applicants with the Information Memorandum and evaluation criteria to submit resolution plans.

Presenting Resolution Plans

According to clause (i), the RP must present all resolution plans received from applicants at CoC meetings.

The RP ensures that each plan complies with Section 30 requirements — including payment to operational creditors, feasibility, and compliance with existing laws. The CoC then evaluates and votes on these plans.

The RP must act fairly, without favouring any applicant, and provide an objective comparison of all proposals.

Filing Applications for Avoidance of Transactions

Clause (j) empowers the RP to file applications for avoidance of transactions under Chapter III of the IBC.

This includes identifying and reporting:

• Preferential transactions under Section 43,
• Undervalued transactions under Section 45,
• Extortionate credit transactions under Section 50, and
• Fraudulent transactions under Section 66.

The purpose is to reverse any transactions made before insolvency that unfairly benefited certain parties or depleted the debtor’s assets.

Performing Other Actions as Specified by the Board

Finally, clause (k) provides a residual power — the RP must carry out any other actions specified by the Insolvency and Bankruptcy Board of India (IBBI).

This allows flexibility for the Board to issue additional directions or prescribe new responsibilities through regulations as needed for effective administration of CIRP.

Preservation and Protection of Assets

Beyond the individual duties listed, the overarching obligation under Section 25(1) is to preserve and protect the assets of the corporate debtor and to maintain it as a going concern.

This means the RP must not only safeguard existing assets but also ensure that the company continues its day-to-day operations, retains employees, maintains supply contracts, and complies with statutory obligations.

Preserving the business as a going concern helps in achieving better valuation and maximises the chances of a successful resolution.

Role of the Committee of Creditors

While the RP manages operations, several of their key actions — such as raising interim finance, creating security interests, or changing capital structure — require approval from the CoC under Section 28.

This shared control ensures accountability and collective decision-making. The RP functions as an executor and facilitator, while the CoC holds the final authority on financial decisions.

Accountability and Professional Conduct

The RP is expected to act with independence, objectivity, and integrity. Misconduct, negligence, or conflict of interest can attract disciplinary proceedings by the IBBI.

The Code emphasises transparency and impartiality. Hence, RPs must avoid any action that favours one creditor or stakeholder over another. They also need to maintain proper records, submit progress reports to the NCLT, and comply with all regulations under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Judicial Interpretation

Indian courts have emphasised the significance of the RP’s role in several cases.

In Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019), the Supreme Court highlighted that the RP acts as a facilitator and not a decision-maker. The Court clarified that the RP’s role is administrative in nature, ensuring compliance with the Code and regulations.

Similarly, in Swiss Ribbons Pvt. Ltd. v. Union of India (2019), the Supreme Court upheld the independence and professional responsibility of the RP in maintaining the integrity of the resolution process.

Difference Between Interim Resolution Professional and Resolution Professional

It is important to note that during the initial stage of CIRP, an Interim Resolution Professional (IRP) is appointed, who later may be confirmed as the Resolution Professional by the CoC.

While both perform similar functions, the IRP primarily takes control and collects information, whereas the RP continues the process, invites resolution plans, and ensures completion of CIRP within the statutory period.

Challenges Faced by Resolution Professionals

The RP’s role is complex and challenging. Some practical difficulties include:

• Resistance from promoters and management.
• Incomplete financial records.
• Legal disputes and overlapping jurisdictions.
• Pressure from multiple creditors.
• Limited time for completing CIRP.

Despite these challenges, Section 25 provides a structured framework that helps the RP navigate the process effectively.

Conclusion

Section 25 of the Insolvency and Bankruptcy Code establishes the backbone of the resolution process by clearly defining the duties of the Resolution Professional. The RP acts as a custodian of the debtor’s assets, a coordinator among creditors, and a facilitator of resolution plans.

By fulfilling these duties with diligence and neutrality, the RP ensures that the insolvency process achieves its ultimate objective — revival of the corporate debtor and maximisation of asset value.