On what parameters should an insolvency professional be judged? Here are some views

It has been more than four years since the Insolvency and Bankruptcy Code (IBC) came into existence. And during these four years we have seen a new class of professional – insolvency professional – emerging from nowhere and play one of the most critical role in giving a shape, and evolution of the insolvency regime in the country.

With over 4,000 insolvency applications admitted by the National Company Law Tribunal (NCLT), 277 resolutions, over 1,000 liquidations, and defaults cases involving Rs 10 lakh crore having seen closure, it is probably time to ask the question – what makes for a good insolvency professional? What are the boxes that an insolvency professional should check to be counted as a good professional?

There’s no denying the fact that quality matters, but how much weightage quantity should get while judging the performance of insolvency professionals. How do you judge the efficiency or the success of insolvency professionals – by their ability to get a resolution quickly or is it the ability to get the maximum realization of value of assets?

These are still early days, the insolvency regime in the country is evolving, and IPs are playing a key role in giving a shape to the insolvency law in India. So, we asked an array of experts, stakeholders and insolvency professionals themselves – on what parameters one should judge their performance, and here are some of the responses we got:

Dr Neeti Sikha, head, Centre for Insolvency& Bankruptcy, Indian Institute of Corporate Affairs, says success of an insolvency professional can be measured vis-a-vis the success of the resolution process. “In this regard, timely completion of the resolution process becomes a natural measure of success,” she says.

Chirag Gupta, a Supreme Court lawyer, who specializes in commercial litigations and insolvency laws, says that total number of successful resolutions achieved within a reasonable time frame should be a good parameter. “Another significant parameter is that the Insolvency professional should not assume the role of an adjudicator as opposed to the one of an administrator-cum-facilitator. Such conduct of the insolvency professional will result in less litigation, thereby, saving substantial time and resources during the insolvency process,” he says.

Sanjiv Rathi, a registered valuer and a resolution professional, says thatthe primary objective of the Insolvency and Bankruptcy Code (IBC) is maximisation of asset value. Therefore, he says, the primary parameter is successful resolution as opposed to liquidation.

Sanjeev Ahuja, a resolution professional and a mediator, adds a new dimension to the argument. He says the performance is not always about how many and when, but also about how. What he probably is referring to is whether or not the sanctity of the process is maintained by the insolvency professional.

Rahul Gossain, head of marketing communication, Cyril Amarchand Mangaldas, puts it in a different way. Hey says thata successful insolvency professional needs to excel at soft skills of taking people along by effectively and transparently engaging with key stakeholders, including existing employees, to minimise conflicting interests.

Neeti Sikha of Indian Institute of Corporate Affairs also stresses on the integrity of the insolvency professional. “I would say that measure of success should not always be equated to the success of a case. Discharge of duties in an ethical manner, providing quality disclosure during the CIRP as required by the Code, wise use of powers given to them, etc can also be measure of their success,” she says.

But how do you measure integrity? Mamta Binani, an insolvency professional, says most of the IPs have been practicing in their respective areas for 10 years or more, they are associated with some institutions or other, and they do carry some reputation. One can judge their integrity or lack of it from the reputation they carry.

Anuradha Gupta, another registered insolvency professional and valuer, sayson a lighter note, “One criterion could be the number of notices (one receives) from the regulator(s).” While Anuradha’s comments were on a lighter note, it is true that a lot of actions have been taken by the disciplinary committee of the Insolvency and Bankruptcy Board (IBBI) against insolvency professionals for their various breaches of rules and regulations.

While many of those breaches are ‘mistakes’ and not wilful violations of the law, the severity of those breaches and contraventions can certainly give some idea about an IPs integrity and ethical leanings.

There are, however, those who believe given the complexity of the role, it is impossible to devise a barometer for ‘rating’ the IPs.

Anjali Jain, Partner, and Head of Insolvency and Corporate Laws, at law firm Areness, for example,says: “Considering factors as variable as number/type/nature of creditors, assets/liabilities, geographical spread of assets, amounts involved, extent of inventories and books, nature of business, litigations, it is impossible to set up a barometer to gauge efficiencies of IPs. At most what can be ensured is that the IPs are performing with utmost prudence and integrity within the four corners of institutional framework established by the Code and the Board.”