Skip to main content

Insolvency professionals divided over ban on resolution outsourcing

Insolvency professionals divided over ban on resolution outsourcing
The insolvency regulator’s move to ban outsourcing of resolution work is primarily targeted at insolvency professional entities (IPEs), some experts said. However, others said this step by the Insolvency and Bankruptcy Board of India (IBBI) would affect individual resolution professionals (RPs) as well.
It is aimed at ensuring that only RPs chair the committee of creditors meeting. Otherwise, the worry was that someone from resolution entities and not an RP would conduct these. In its circular, IBBI had said resolution services cannot be outsourced by insolvency professionals. Sources say it had found that heads of IPEs were chairing the committee of creditors meetings. Insolvency professionals who had taken up the project of reviving the company concerned are supposed to do so.
umant Batra, managing partner at Kesar Dass B and Associates, says, “The outsourcing part of the circular might be targeted at those insolvency professional entities who take up projects in the name of one resolution plan but all the functions of the resolution plans are practically performed by another person in the entity."
He thinks the circular will not affect hiring of consultants and legal advisors to assist in insolvency resolution. IBBI’s circular is not likely to affect the big 12 cases referred by banks on Reserve Bank of India order for insolvency, say experts, as IPEs are not involved in those cases
On the negative side, insolvency professionals state this would make it difficult for them to hire auditors. Nilesh Sharma, senior partner with Dhir and Dhir Associates, says this would bring down the number of professionals in big cases where payment to the insolvency professional is huge as there are many people involved, as compared to smaller cases.
An insolvency professional is required to manage the operations of a defaulting corporate as a going concern. He or she is also required to invite resolution plans, examine these and present to the committee of creditors for its approval.
The regulator has also issued orders for insolvency professionals to use only their official address for correspondence. The circular said, “It has been observed that a few insolvency professionals are using different addresses and emails while communicating with the stakeholders, despite repeated advice from IBBI to use the addressees and e-mails registered with the IBBI in all their communications."
This has irked insolvency professionals. They feel the regulator is getting into micro management. One of them told Business Standard, “There could be technical difficulties for an insolvency professional to use a particular e-mail account. Because of this, he might choose to use another account which also ensures privacy."
The Business Standard, New Delhi, 09th January 2018


Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…