RELEVANT PROVISIONS OF LAW
SECTION 95. APPLICATION BY CREDITOR TO INITIATE INSOLVENCY RESOLUTION PROCESS
(1) A creditor may apply either by himself, or jointly with other creditors, or through a resolution professional to the Adjudicating Authority for initiating an insolvency resolution process under this section by submitting an application.
SECTION 97. APPOINTMENT OF RESOLUTION PROFESSIONAL
(1) If the application under section 94 or 95 is filed through a resolution professional, the Adjudicating Authority shall direct the Board within seven days of the date of the application to confirm that there are no disciplinary proceedings pending against resolution professional.
(2) The Board shall within seven days of receipt of directions under sub-section (1) communicate to the Adjudicating Authority in writing either –
(a) confirming the appointment of the resolution professional; OR
(b) rejecting the appointment of the resolution professional and nominating another resolution professional for the insolvency resolution process.
(3) Where an application under section 94 or 95 is filed by the debtor or the creditor himself, as the case may be, and not through the resolution professional, the Adjudicating Authority shall direct the Board, within seven days of the filing of such application, to nominate a resolution professional for the insolvency resolution process.
(4) The Board shall nominate a resolution professional within ten days of receiving the direction issued by the Adjudicating Authority under sub-section (3).
(5) The Adjudicating Authority shall by order appoint the resolution professional recommended under sub-section (2) OR as nominated by the Board under sub-section (4).
(6) A resolution professional appointed by the Adjudicating Authority under sub-section (5) shall be provided a copy of the application for insolvency resolution process.
SECTION 98. REPLACEMENT OF RESOLUTION PROFESSIONAL
(1) Where the debtor or the creditor is of the opinion that the resolution professional appointed under section 97 is required to be replaced, he may apply to the Adjudicating Authority for the replacement of the such resolution professional.
(2) The Adjudicating Authority shall, within seven days of the receipt of the application under sub-section (1) make a reference to the Board for replacement of the resolution professional.
(3) The Board shall, within ten days of the receipt of a reference from the Adjudicating Authority under sub-section (2), recommend the name of the resolution professional to the Adjudicating Authority against whom no disciplinary proceedings are pending.
(4) Without prejudice to the provisions contained in sub-section (1), the creditors may apply to the Adjudicating Authority for replacement of the resolution professional where it has been decided in the meeting of the creditors, to replace the resolution professional with a new resolution professional for implementation of the repayment plan.
(5) Where the Adjudicating Authority admits an application made under sub-section (1) or sub-section (4), it shall direct the Board to confirm that there are no disciplinary proceedings pending against the proposed resolution professional.
Relevant provisions of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019:
RULE 7 APPLICATION BY CREDITOR
(1) A demand notice under clause (b) of sub-section (4) of section 95 shall be served on the guarantor demanding payment of the amount of default, in Form B.
(2) The application under sub-section (1) of section 95 shall be submitted in Form C, along with a fee of two thousand rupees.
(3) The creditor shall serve forthwith a copy of the application referred to in sub-rule (2) to the guarantor and the corporate debtor for whom the guarantor is a personal guarantor.
(4) In case of a joint application, the creditors may nominate one amongst themselves to act on behalf of all the creditors.
RULE 8 CONFIRMATION OR NOMINATION OF INSOLVENCY PROFESSIONAL
1) For the purposes of sub-section (2) of section 97 and sub-section (5) of section 98, the Board may share the database of the insolvency professionals, including information about disciplinary proceedings against them, with the Adjudicating Authority from time to time.
(2) For the purposes of sub-section (4) of section 97 and sub-section (3) of section 98, the Board may share a panel of insolvency professionals, who may be appointed as resolution professionals, with the Adjudicating Authority.
Relevant provisions of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019:
REGULATION 4. ELIGIBILITY OF RESOLUTION PROFESSIONAL
(1) An insolvency professional shall be eligible to be appointed as a resolution professional for a resolution process, if-
(a) he, the insolvency professional entity of which he is a partner or a director, and all the partners and directors of the said insolvency professional entity are independent of the guarantor;
(b) he is not subject to any ongoing disciplinary proceeding or a restraint order of the Board or of the insolvency professional agency of which he is a professional member; and
(c) the insolvency professional entity of which he is a partner or a director, or any other partner or director of such insolvency professional entity does not represent any party in the resolution process.
Explanation.- For the purposes of this sub-regulation, –
(i) a person shall be considered independent of the guarantor, if he-
(a) is not an associate of the guarantor;
(b) is not a related party of the corporate debtor; and
(c) has not acted or is not acting as interim resolution professional, resolution professional or liquidator in respect of the corporate debtor;
(ii) the expression “related party” shall have the meaning assigned to it in sub-section (24) of section 5.
(2) An insolvency professional, other than who has filed an application under section 94 or 95 on behalf of a guarantor or a creditor, as the case may be, shall provide a written consent in Form A to the Adjudicating Authority before his appointment as resolution professional in a resolution process.
ANALYSIS
In view of the conjoint reading of the above provisions of law, below can be culminated:
1. Application for initiating an insolvency resolution process against a Personal Guarantor can be filed by Creditor either by himself or through a Resolution Professional
[Section 95(1)]
#If the Application is filed through a Resolution Professional-
2. Part IV of *Format of Application requires particulars & declaration from the Resolution Professional which substantially covers all the points as given in the #Consent Form.
*(i.e. Form C of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019)
#(i.e. Form A of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019)
3. The Adjudicating Authority shall direct the IBBI to confirm that there are no disciplinary proceedings pending against Resolution Professional.
[Section 97(1)]
4. The IBBI shall either confirm the appointment of Resolution Professional or reject it and nominate another Resolution Professional.
[Section 97(2)]
5. The Adjudicating Authority shall by Order appoint the Resolution Professional confirmed/nominated by the IBBI.
[Section 97(5)]
#If the Application is filed by the Creditor himself
1. The Adjudicating Authority shall direct the IBBI to nominate a Resolution Professional.
[Section 97(3)]
2. The IBBI shall nominate a Resolution Professional.
[Section 97(3)]
3. The Adjudicating Authority shall by Order appoint the Resolution Professional nominated by the IBBI.
[Section 97(5)]
4. The Adjudicating Authority shall by Order appoint the Resolution Professional nominated by the IBBI.
[Section 97(5)]
CONCLUSION
In view of the above provisions of law, it can be said that when the Creditor himself is filing an Application for initiating an insolvency resolution process against a Personal Guarantor, the facility of proposing the name of a Resolution Professional is not given.
However, if the Creditor is willing to propose a Resolution Professional in an Application for initiating an insolvency resolution process against a Personal Guarantor, it is advisable that such Creditor should file the Application through the Resolution Professional as mentioned in Section 95(1). In such Application, the Appointment of Resolution Professional shall be subject to the provisions of Section 97(1) & 97(2).
Documents attached:
For your easy reference, I have attached the following documents (relevant provisions are highlighted)
Date: May 28, 2021
About the Author: The author (CS Lovkesh Batra) is Company Secretary by profession and works in the area of Insolvency & Bankruptcy Law.
Disclaimer: The entire contents of this document have been prepared on the basis of the information existing at the time of the preparation. The author and IBC Law Reporter do not take responsibility for the same and this document cannot used to be quoted before any authority under any law.
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