June 10, 2021
“The process for fixing the remuneration of IPs needs to be more transparent.”
(Mr. Sharma is an Insolvency Professional based in Delhi)
Can you tell us a little about yourself and your academic and professional background?
Advocate and Insolvency Professional, FCS, FCMA. 40 years of diversified job and consulting experience in public, private, cooperative, NGO sectors as well as in the Central, State and local governments. Have been consultant/adviser in several projects funded by the Asian Development Bank (ADB), the World Bank (WB), the European Union (EU) Department for International Development and the Government of the UK (DFID).
How did you decide to become an IP?
Thought this is a new and challenging area of professional practice where I will be in a position to perform better with my vast experience and qualification.
How many assignments (CIRPs and liquidations) have you undertaken so far? If possible, 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?
All were in the learning mode (the Adjudicating Authorities, the Regulator, the governments and the professionals). There were frequent amendments to the Code and Regulations and contradictory orders from the NCLTs and the NCLAT. There were no guidelines available for the IPs. The biggest challenges were taking effective control of the corporate debtor and manging it as a going concern despite the tag of insolvency; striking a balance of powers with the committee of creditors; and ever-increasing compliance burden.
Which has been the most interesting/challenging/memorable assignment for you so far?
Every assignment has its challenges. There is constant learning with every new assignment. No two assignments are similar. An IP has to be creative to find out solutions for the practical issues faced, within the framework of law.
What have been the unexpected parts of being an IP? How have you dealt with them?
Litigation, compliance burden, appointment process and unsustainable fee. As a result, I have changed my focus to consulting and advisory services, stopped applying for empanelment.
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 government and the regulator have been very proactive in amending the law to plug the loopholes and to make it more effective. Be it adding section 29A to keep away defaulters or section 32A to protect the successful resolution applicants. Pre-pack is a welcome step in recognising that one law does not fit all sizes of the business organisations. However, frequent amendments have led to more confusion and uncertainly, particularly relating to the rights of home-buyers and operational creditors. Amendments in the procedures have caused issues in implementation and excessive compliance burden on IPs.
The timeline framework, which is the essence of IBC, has not been achieved. The delays due to excessive/frivolous litigation by vested interests and a lack of required infrastructure at the Adjudicating Authority are major hindrances.
The law was framed to help genuine business failures, but the experience with implementation of the Code reveals that most business failure were due to siphoning of funds, as is evident from the fact that the applications filed by RPs for avoidance of preferential transactions are worth more than Rs. 1.30 lakh crore.
The system for appointment of IPs and fixing their remuneration needs to be more transparent to retain professionals with high standards of honesty and integrity. The conduct of the Committee of Creditors needs to be regulated to ensure that its decisions are transparent and corruption-free, in the larger interest of the economy, and to strengthen the eco-system.
What advice do you have for the professionals considering becoming an IP?
It is a very demanding profession in terms of time and resources due to onerous responsibilities cast on an IP. With active assignments, it may be very difficult to continue practice of other professions like CA, CS, CMA, advocate. The table of fee during liquidation and fee in the biggest cases highlighted in media may look very attractive, but in practice fee levels are competitive to the extent of being unsustainable to maintain the highest level of integrity and honesty. Getting an assignment is a big challenge for an individual IP. Large Insolvency Professional Entities (IPEs), with their dominance in the market, are exploiting individual IPs by taking a major share of their fee and influencing their independence.
One should be well aware of these realities and prepare accordingly. A network of reliable and efficient support professionals, good office support system and fairly deep pockets to sustain ‘no assignment periods’ are some key requirements.
(This interview was conducted by Adv. Parth Indalkar and has been edited for clarity.)
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