Overview of the appointment and tenure of an IRP under IBC

Appointment and Role of the Interim Resolution Professional under the IBC Code, 2016

Introduction

The world of business can be unpredictable. Sometimes, companies face financial troubles that make it hard for them to pay their debts. In India, the Insolvency and Bankruptcy Code, 2016 (IBC) was introduced to address such challenges in a fair, transparent, and time-bound manner. The law aims to resolve insolvency quickly, maximize the value of assets, and promote entrepreneurship. Under this blog analysis emphasizes the structured procedural safeguards built into the IBC for the timely, impartial, and effective conduct of insolvency proceedings.

What is the Insolvency and Bankruptcy Code, 2016?

Enacted in 2016, the IBC is India’s comprehensive legislation for handling insolvency and bankruptcy cases involving companies, partnerships, and individuals.

• Insolvency refers to the inability of a person or company to pay debts on time.
• Bankruptcy is the legal process that follows insolvency, involving asset distribution among creditors.
• The IBC replaced multiple fragmented laws with a unified system and established key institutions:
• National Company Law Tribunal: Adjudicating authority for corporate cases.
• Insolvency and Bankruptcy Board of India: Regulator for insolvency professionals and processes.
• Insolvency Professionals: Licensed individuals who manage insolvency proceedings.

Objective and Legislative Intent

The IBC aims to introduce discipline and accountability in the corporate debt structure by imposing strict measures against defaulting debtors who attempt to delay or evade repayment. Through the appointment of IRPs, the Code ensures that management responsibilities are taken over by independent professionals who act in the best interest of the company and its creditors.

The process provides a revival opportunity for distressed corporate entities by replacing the existing management, restoring confidence among creditors, and enabling the possibility of financial recovery and restructuring.

Who is an Interim Resolution Professional (IRP)?

An IRP is an insolvency professional appointed temporarily to manage the initial phase of the CIRP. Acting as a neutral officer of the court, the IRP ensures fairness between the debtor, creditors, and other stakeholders.

Eligibility and Qualification of Interim Resolution Professional

To become an IRP, an individual must:

• Be at least 18 years old, of sound mind, and a resident of India.
• Not be insolvent or convicted of an offence punishable by imprisonment of over six months within the last three years.
• Hold professional experience of:
  • 10 years as a Chartered Accountant, Company Secretary, Cost Accountant, or Advocate; or
  • 15 years in managerial or entrepreneurial roles.
• Pass the Limited Insolvency Examination and complete requisite training (e.g., National or Graduate Insolvency Programme).

CIRP Application is filed before the National Company Law Tribunal & CIRP Effect of admission &  date of admission marks the commencement of CIRP.  IPR appointment Approval condition is that IRP can be appointed only if no disciplinary proceedings are pending against them (Section 16(3)(a) of IBC). & employees of a financial creditor cannot be appointed as IRP (SBI v. Metenere Ltd., 2020 NCLAT).

The IBBI grants a certificate of registration and regulates conduct through a strict Code of Ethics, mandating independence, transparency, and avoidance of conflicts of interest.

Interim Resolution Professional (IRP) a licensed insolvency expert who steps in as a temporary manager to stabilize operations and safeguard stakeholder interests until a long-term resolution is charted.

Initiation of Corporate Insolvency Resolution Process (CIRP)

Appointment of Interim Resolution Professional (IRP) : under section 16 of the IBC, the appointment of an IRP is one of the first steps after CIRP initiation. The NCLT must appoint an IRP within 14 days of admitting an insolvency application. IP Eligibility must be a registered Insolvency Professional (IP) under the IBBI. & Empanelment: IBBI maintains a panel of IPs shared with NCLTs for quick appointment. The appointment process differs based on who files the case:

• Who can initiate the CIRP:

  • Financial Creditor under Section 7: Financial Creditor or Corporate Debtor: They propose an IRP’s name in their application. NCLT appoints the proposed person if no disciplinary proceedings are pending. Financial Creditor or Corporate Debtor must propose an IRP in the application.
  • Operational Creditor under Section 9 : Operational Creditor: May or may not propose an IRP. If no name is suggested, NCLT seeks a recommendation from the IBBI, which must respond within 10 days. Operational Creditor may propose one optionally; if not, NCLT appoints from panel.
  • Corporate Debtor itself – under Section 10 :
    • Corporate Debtor itself (via its Board of Directors or partners, as applicable). When the Corporate Debtor has defaulted in repayment of its debt amounting to at least the minimum threshold limit (currently INR 1 crore). Application can be file Before the Adjudicating Authority (NCLT) having jurisdiction over the registered office of the Corporate Debtor.
    • The application must be filed in Form 6 (as per Rule 7 of the IBBI (Application to Adjudicating Authority) Rules, 2016) along with Details of the debt and default, Proposed name of the Interim Resolution Professional (IRP), Books of accounts and financial statements, and Special resolution or consent of partners (as applicable). Once admitted, the NCLT declares a moratorium, appoints an IRP, and initiates the CIRP under Chapter II of the IBC.

  • CIRP Timeline:

    • The IBC Code enforces a strict resolution timeline : CIRP to be completed within 180 days from admission. & May be extended by up to 90 days (maximum total of 270 days). So timeline of CIRP is 180 days, extendable up to 330 days. During the CIRP ensuring that financial distress does not drag on, eroding value and employment. When a company defaults on a debt of ₹1 crore or more, the Corporate Insolvency Resolution Process (CIRP) is triggered. The focus is on revival first, liquidation later : and this is where the IRP plays a pivotal role.
    • Once appointed, the IRP makes a public announcement (Form A) within three days to invite claims from creditors. This announcement : published in newspapers and online : ensures full transparency.
    • The IRP’s tenure typically lasts 30 days or until the Resolution Professional (RP) is appointed by the Committee of Creditors (CoC), whichever is earlier.
    • From the insolvency commencement date, a moratorium automatically applies : pausing lawsuits, enforcement actions, and asset transfers : to give the company breathing room for resolution.
• What is Tenure of IRP ?

Earlier rule: Fixed 14-day tenure from CIRP commencement. Which is now Amended w.e.f. 28.12.2019 and new rules are IRP continues until the appointment of a Resolution Professional U/s  22. The Adjudicating Authority may replace an IRP for inefficiency, misconduct, or contravention of IBC provisions or IBBI regulations. Following few Key Judicial References are mention here under :

• • Innoventive Industries Ltd. v. ICICI Bank & Anr. (2017) 9 TMI 58 (SC) : Once IRP is appointed, former directors cannot represent the company.
  • Innovsource Pvt. Ltd. v. Getit Grocery Pvt. Ltd. (2018) (NCLT Delhi) : Panel system ensures timely appointment.
  • SBI v. Metenere Ltd. (2020) (NCLAT Delhi) – Employee of financial creditor ineligible.
  • ARC (India) Pvt. Ltd. v. Shivam Water Treaters Pvt. Ltd. (2019) (NCLT Mumbai) : IRP functions as a court officer.
  • IDBI Bank Ltd. v. Lanco Infratech Ltd. (2017) (NCLT Hyderabad) : Restriction on excessive assignments.

Primary Duties of an IRP (as per Section 18 of the IBC)

The IRP’s responsibilities are extensive and critical to ensuring stability and integrity during the CIRP:

1. Public Announcement
   • Make a public announcement immediately upon appointment regarding the initiation of the CIRP.
   • Invite submission of claims from creditors in the prescribed format and within the specified period.
2. Collection of Information

• • Collect Information: Obtain financial and operational details of the corporate debtor to assess its financial position. Gather all information relating to the assets, liabilities, and operations of the corporate debtor to assess its financial position. This includes:

a) Details of business operations for the preceding two financial years.
b) Records of financial and operational payments for the same period.
c) A list of assets and liabilities as on the insolvency commencement date.
d) Any other relevant information as may be specified by the Insolvency and Bankruptcy Board of India (IBBI).

3. Verification and Collation of Claims

• Receive and Verify Claims: Receive and collate claims submitted by financial creditors, operational creditors, workmen, and employees. Gather, collate, and maintain a verified list of claims from creditors.
  • Verify each claim by examining supporting documents and proofs of debt.
  • Determine the value of each claim and prepare a comprehensive list of creditors.
  • Submit the verified list before the Adjudicating Authority (NCLT) and present it to the Committee of Creditors (CoC).

4. Constitution of the Committee of Creditors (CoC)

Form the Committee of Creditors (CoC):Constitute the CoC (Section 21) : primarily composed of financial creditors : within 30 days. The CoC subsequently exercises powers to confirm or replace the IRP as the Resolution Professional (RP) U/s  22 of the IBC.

5. Other Duties of the IRP U/s 18 of the IBC
   • Take Control of Assets: Secure custody of all tangible and intangible assets to prevent misuse or loss.
   • Manage Operations: Ensure the company continues as a going concern, handling contracts, employees, and suppliers.
   • File Information: Submit verified financial data to registered Information Utilities for recordkeeping and transparency.
   • Comply with Regulations: Fulfil additional duties prescribed by the IBBI, including reporting and disclosure obligations.

Role of the Interim Resolution Professional (IRP)

• Once an application for initiation of the Corporate Insolvency Resolution Process is admitted by the Adjudicating Authority, the erstwhile management of the corporate debtor is divested of its powers, and control is vested in the IRP.
• On appointment, the Board of Directors of the Corporate Debtor is suspended. The IRP takes control of the debtor’s management, operations, and assets.
• IRP assumes charge of the corporate debtor and continues to operate it as a going concern until a Resolution Professional is appointed and a resolution plan is finalized. In this capacity, the IRP acts as a neutral custodian of the company’s assets and operations, ensuring that business continuity is maintained while protecting the interests of all stakeholders.
• The IRP is duty-bound to monitor the corporate debtor’s assets, verify claims of creditors, and constitute the Committee of Creditors (CoC) within the statutory timeframe. The IRP may take custody and control of the assets of the debtor to prevent dissipation or misuse.
• Functions as a court officer : obstruction to the IRP’s functioning can amount to contempt of court
  (ARC (India) Pvt. Ltd. v. Shivam Water Treaters Pvt. Ltd., 2019 NCLT Mumbai).
• Must not take on excessive assignments to ensure due diligence and attention
  (IDBI Bank Ltd. v. Lanco Infratech Ltd., 2017 NCLT Hyderabad)

Powers of the IRP (Sections 17 & 20)

The IRP assumes wide-ranging powers to maintain control and preserve value:

• Exercise all powers of the board of directors.
• Appoint professionals such as lawyers, valuers, and accountants.
• Access information from government bodies and information utilities.
• Approach the NCLT for directions or protection of assets.
• Take any necessary steps to preserve the company’s value as a going concern.

However, the IRP cannot override the CoC’s decisions and must operate within the framework of the IBC and IBBI regulations.

Importance and Challenges for of IRP

• The IRP is the stabilizing force in the early, often chaotic stage of insolvency. By maintaining business continuity, protecting assets, and organizing creditor participation, the IRP lays the foundation for a viable resolution plan.
• Yet, challenges remain : from non-cooperative management and incomplete records to tight timelines and legal pressures. Landmark cases like Essar Steel have highlighted the delicate balance IRPs must strike between independence, diligence, and stakeholder confidence.

Conclusion

• The IRP’s neutrality, independence, and accountability are crucial, ensuring the corporate debtor’s management transition happens swiftly while maintaining judicial oversight through NCLT. The IRP is the cornerstone of the insolvency resolution mechanism under the IBC. By taking over management, securing assets, and facilitating creditor coordination, the IRP ensures that the corporate insolvency resolution process begins with order, transparency, and fairness. Their role is crucial in transforming insolvency from a punitive process into a constructive mechanism for revival, restructuring, and economic stability.
• Interim Resolution Professional plays a crucial role in India’s evolving insolvency ecosystem. Acting as the bridge between crisis and resolution, the IRP ensures fairness, transparency, and order in the insolvency process. As the IBC framework continues to mature, the professionalism and efficiency of IRPs will remain central to India’s efforts to create a robust, investor-friendly business environment where financial distress is managed : not feared.