June 10, 2021
“The Insolvency Professional is the most important pillar in the insolvency framework.”
(Mr. Kaushik is an Insolvency Professional based in Delhi)
Can you tell us a bit about yourself and your academic and professional background?
I was born and brought up in Delhi. I did my graduation in mechanical engineering from University of Roorkee and my PGDM from IIM Lucknow. I have worked for more than twenty years in the corporate sector at various positions such as Regional Manager, Brand Manager, Business Head and CEO in various industries — telecom infrastructure, industrial gases, power distribution and infrastructure, healthcare, automobile, and construction equipment. I have been working as an Insolvency Professional since 2017 and have handled eight CIRP and Liquidation cases as IRP/RP/Liquidator/AR. These have been in varied sectors such as infrastructure, textile, metal components, real estate and healthcare. Additionally, I am also a Registered Valuer with over a hundred valuations under my belt in the plant and machinery class, as well as in the securities and financial assets class. Furthermore, I am also a qualified Independent Director.
How did you decide to become an IP?
After a long stint on the corporate side, I decided to start something on my own. My last corporate assignment ended in March 2017. The IBC came into being in 2016, and being an IP is in effect being the CEO of a company for six months. Since I had successfully run companies as a CEO in various industries, I found this profession to be a way of fulfilling my plans of starting my own business as well as utilising my skills. This motivated me to get myself registered as an IP. I got myself registered in August 2017.
How many assignments (CIRPs and liquidations) have you undertaken so far? If permissible, could you share the names?
How was your experience in the early days as an IP? What were some of the challenges you faced in your initial assignments?
I did not find the assignments very challenging from the operational or the procedural angle. The Code and the Regulations are exhaustive enough to provide the necessary guidance. With a corporate and process-oriented background, I could manage the cases. I also did not face challenges on the AA front. I think an exhaustive application with all the details and necessary planning helps take care of this aspect. Either I draft my own applications, reports, or I actively provide my inputs when someone else drafts these documents. Planning helps link operational, legal and regulatory requirements of various stages in the process. An IP has to be capable of multitasking and has to be a good supervisor for running simultaneous processes.
The objective of the Code is to keep the CD as a going concern. If the appointed IP doesn’t have a good understanding of the business, of handling employee teams, of statutory authorities, of production processes, of marketing etc., then he would find it challenging to get a good outcome. He has to be a very hands-on person.
The COC needs to be very cooperative with the IRP/RP to reach timely decisions and for supporting the relevant decisions of the RP. The CIRP or liquidation stage is not a usual affair of business and a higher level of understanding and support is required from the decision makers.
Which has been the most interesting/challenging/memorable assignment for you so far?
The CIRP/liquidation of Praveer Constructions Pvt Ltd has been the most interesting and challenging case for me. The directors of the suspended board were not co-operating. To start with, no assets were available or handed over to me. During the process, I secured information from various other sources and discovered two land assets in different cities which were in dispute with the local land authorities and the allotment had already been cancelled. I collected information and documents through continuous follow-up and communication. I could effectively revive the possibility of allotment. I tried getting resolution plans as specified and received a few EOIs for it. However, ultimately no resolution plans were received. The AA ordered commencement of the liquidation process as per the recommendations of the COC. During the liquidation, I could generate a refund for one of these land assets and distributed it among the stakeholders as specified. I tried to liquidate the other asset as well. The key here was diligent follow-up and communication.
I started with no handed over assets and turned it around into a situation where the FCs would be receiving about 40% of their principal claim. In my opinion, this is quite a hopeful scenario as a result of the IBC, 2016.
The challenges I faced were numerous – non-cooperation from the directors, no funds to run the CIRP process, no information or documents to start with and absence of an organised FC in the COC.
What have been the unexpected parts of being an IP? How have you dealt with them?
Most CIRP cases involve CDs which are not going concerns and where the management does not co-operate. While the IP is expected to be working as the CEO and maximise the value of the CD, he does not have the required information and documentation about the CD. The funds available are limited. The COC is hesitant in taking decisions. In my cases, I have handled such situations with adequate planning to get the best possible output within the four corners of the IBC provisions. I have been lucky to have discovered assets which I could secure.
In another case, the COC did not ratify appointment of valuers citing their own pre-CIRP valuation exercise, which they claimed to have done at a lower expense. While the law authorises the RP to make necessary appointments, the fees are to be ratified by the COC. I could convince the COC by explaining the scope of work and the quality of work requirement. I think my experience and training in running corporate processes has helped me find solutions to such unexpected situations. The Code and the Regulations accord sufficient authority to the IP within the legal framework. It’s important for the IPs to understand their duties and authority. Exercising his authority with wisdom would help an IP deal with unexpected situations. Ability to communicate suitably with various entities in the process is another important aspect in dealing with unexpected situations.
How do you think the IBC has evolved so far? Where has it faltered, and where do you think it has a scope to do better?
The IBC has seen changes responding to the industry requirements. The legislature has been prompt in deciding on required changes and the IBBI has been very effective in developing required regulations and rules. The Insolvency Professional is the most important pillar in the framework. I am of the view that the IPs are learned persons, and they understand the IBC and the regulations very well. A spirited understanding of the duties and authorities would help them evolve as better professionals and also deliver better results. Another important pillar is the COC which can play a very constructive role. The COC has to shoulder the important responsibility of making timely decisions and support the RP in his endeavours to seek the best for the CD. The AA is another important pillar. It has given some landmark judgements and has helped the stakeholders tremendously. The AA has been instrumental in ensuring the process period is as close to the one prescribed as possible. However, the current AA infrastructure is over-burdened. This requires urgent capacity building. The Information Utility pillar is the least utilised currently. The Hon’ble Supreme Court has made certain observations pertaining to the IUs in the Swiss Ribbons case which require implementation so that the real concept of IU can take shape. The capacity building of the IUs is required to capture and store information for OCs. I think currently, the IPs do not have an understanding how an IU could ease the challenges they face while conducting the processes. This awareness needs to be developed.
What advice do you have for the professionals considering becoming an IP?
I would suggest to them to do their own due diligence on the subject in terms of their aspirations and develop an understanding of the IP’s responsibilities. Currently, we have close to 3500 IPs in the country. However, many IPs are yet to conduct any case even after years of registration. The reason may be that they are not on the empanelled list of financial institutions, who file cases under Section 7. Or they may not be accessible to the Operational Creditors who file cases under Section 9. Perhaps they may not be accessible to Corporate Debtors who file cases under Section 10. Some of them may not be interested in taking cases as IP. In any case, it would be prudent for aspirants to check the facts regarding their plans. It is an excellent profession for those genuinely interested.
The Regulation 24 of the Insolvency Professional Regulations states ‘an Insolvency Professional must not conduct business which in the opinion of the Board is inconsistent with the reputation of the profession’. This is a very profound statement which has wide boundaries. This statement even covers areas which are not specifically mentioned in the Code of Conduct. In my opinion, this statement even affects those activities of an IP which are not directly related to the IBC. The objective of this statement seems to be that an Insolvency Professional should not only ensure adherence to the Code of Conduct, but should also set himself a target which is much broader than the written rules.
(This interview was conducted by Adv. Parth Indalkar and has been edited for clarity.)
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