Interview Regarding Insolvency and Bankruptcy
with Rocky Ravinder Gupta
This interview was first published in the March 2022 issue of "Resolve" an ICSI IIP Insolvency and Bankruptcy Journal in India. ICSIIIP is one of the IPA's in India for regulating and monitoring Insolvency Practitioners.
1. I would like to start with, asking you about your views on Insolvency and Bankruptcy Code, 2016, since its inception?
Prior to the enactment of Insolvency and Bankruptcy Code (IBC), there were multiple overlapping laws dealing with financial failure, insolvencies and bankruptcies of companies and individuals in India. Legal and institutional framework, prior to IBC did not aid creditors, by way of effective and timely recovery or restructuring of defaulted assets and businesses. The previous legislation put undue hardships and strain on the Indian credit system. IBC has brought a paradigm shift in the conduct of businesses in India. It has not only given an exit option to the Entrepreneurs, but it has also changed the way of doing business in India. There has been a huge shift in the mindset of the Entrepreneurs/promoters to pay back their debt in time, to ringfence themselves from probable loss of their businesses through the initiation of insolvency proceedings for non-payment of debts. The Code offers a uniform, comprehensive insolvency legislation for all companies, partnerships, and individuals (other than financial firms).
2. We would like to know what made you take up this budding profession of an Insolvency Professional.
There is a saying in the insolvency profession globally, that an insolvency professional does not choose the insolvency profession, rather it is the other way round, the Insolvency profession chooses the Insolvency Professional. This has been true in my career as well. As a corporate Lawyer practicing in 2012, I got a chance to represent a client, he was declared NPA, and I was given the task of devising a strategy to restructure the business and that was the start of my initiation into the insolvency and restructuring profession. After IBC was enacted, I was inducted as an Insolvency Professional in 2018 and in 2021, I was designated as INSOL Fellow by INSOL International. It is my pleasure to inform you that I am the first IP to be designated as an INSOL Fellow in India. An INSOL Fellow’s credibility as an expert in matters of international insolvency is recognised.
I would also like to share that, when the first lockdown was announced in 2020, we were all at home and I was attending a webinar at the behest of one of my friends Dr Jan Adriansse. The webinar was conducted by Early Warning Europe (EWE). EWE is an EU funded program, in over 12 EU countries and the objective of the EWE is to help MSME’s tide over their insolvency crisis by trained Mentors and volunteers. Early Warning Europe is a network of organizations that have successfully implemented early warning system in project backed by Government of various European Union States like Denmark, Holland, Poland, Spain, Italy, Greece, Croatia, Finland Hungary, Lithuania, Luxemburg, and Slovenia.
Early Warning India was launched in association with EWE and with the support of other like-minded Professionals. In view of the current pandemic, this was the need of the hour where many businesses were facing Stress in India, especially the MSME’s. In line with Early Warning Systems Global Practices, Early Warning India’s objective is to provide free, impartial, and confidential counselling to companies, businesses, and individuals in distress for turning them around from their current distressed state.
3. You have an experience of over twenty-seven years as Corporate & Commercial Lawyer and Business Strategist, how has this been helpful in working on your assignments as an Insolvency Professional?
An Insolvency Professional (IP) is expected to wear many hats. IP is supposed to be a Lawyer, Accountant, Financial expert, Company Secretary, an expert in operations management all rolled into one. In my initial years of legal practice, I engaged in accounting and financial transaction laws, matters relating to Civil laws like family laws, contract laws, employment laws, company law etc. I used to appear before various District Courts and the High Courts and various Tribunals and authorities. This gave me an overview of the functioning of the legal system and helped me in my role as a business and legal strategist. Knowledge of various substantive and procedural law has its own advantage, from an IP’s perspective. As a Lawyer for Corporate Debtors and representing the creditors in various matters before the courts helped me in my role as an IP.
As an IP, it was not so difficult to manage the various stakeholders and their lawyers. I used to argue my own cases before Adjudicating Authority as a Lawyer, representing myself, as an RP, and was constantly assisted by a competent team of professionals (CA’s CS, Management Consultants etc.).
It is expected of a Lawyer to solve problems and the CIRP process has many stakeholders with various issues that need to be sorted out. Most of the issues are position based and after effective and clear communications, most of the issues are sorted by engaging in discussions, the issues that are left unresolved go to the Adjudicating Authority for resolution. Challenges are always there, it is important not to get bogged by the issues and challenges, the state of mind should always be in the solution and resolution mode.
4. In reference to the assignments handled by you what practical challenges you faced as an Insolvency Professional so far?
I would answer this question in two parts, Practical challenges as a lawyer for the corporate debtor and as an IP. As a Lawyer I have had first-hand experience dealing with the Financial Institutions at pre insolvency stage. The issue starts with the non-cooperation of the Banks at time of request for restructuring by the corporate debtor to try and take care of his cash flows. In number of cases, the Banks take many months to pass an order on restructuring, and in the meantime the corporate debtor has further slipped into red as his outflow is more than his inflow. The inefficiency of the banking sector has never been brought into the limelight and the burden of this inefficiency has to be borne by the corporate debtor in the pre-insolvency scenario. The case is similar for one time settlement schemes. The debtor is thereafter declared NPA and consequently must face all the consequences thereafter and is ultimately dragged into insolvency by the lenders. I am not talking about debtors who have laundered money, but of genuine debtors, who could have survived if the cash flows could have been rectified at the proper time.
As an IP there are more challenges to be faced by the IP from various stakeholders:
Corporate Debtor:
The challenges faced starts from taking over the company, at times false addresses are given, there are empty offices even with no furniture, no books of accounts and no information, whatsoever. There may be non-cooperation from the promoters or the Directors of the corporate debtors, and the delay in taking over the company adds to discomfort of the IP. It raises his stress level and of his team. You also must keep in mind that across the world, the office of IP is perceived in a negative way with extremely high stress levels.
Creditors:
First is the fee aspect. Then the remarkably high expectation of the CoC from the RP. Then there is the issue of AR’s of CoC members attending CoC meetings, who do not have the authority to take decisions, which delays the timelines. The voting also takes time as the AR’s do not get their mandate in time which further delays the voting timelines.
Adjudicating Authorities:
The time is of essence in any insolvency matter. From filing of the insolvency petition to its admission, should have been a 14-day affair, however higher courts orders and their interpretations have made insolvency admissions a three month to one year process. This helps the corporate debtor to take out the value from the business in the intervening period. This also holds good for various applications filed by different stakeholders at various stages of the CIRP process. The passing of orders takes so much time that the basic idea of preserving the value in a business is demolished. The final order for approval of the resolution plan, in many cases have taken over a year to be passed and the brunt of decreasing value has been borne by the resolution applicant. In contrast a US court passed an order on a prepack within 19 hours of filing of the prepack petition. That is the speed we should be aiming at in our insolvency judicial system. Our Insolvency courts will evolve with the passage of time, and I have full confidence that with the upcoming legislative amendments in the IBC will be able to address these issues.
5. You are also an active member of INSOL; would you like to throw some light on this journey of yours? After becoming an IP, I was wondering about my next step. I had already given my consent to function as an IRP, and I was really excited to step into the shoes of IRP. I joined INSOL International and was informed on the GIPC program of INSOL International. I became interested and signed for the program in 2019. In October 2019, the program was initiated. It was a very intensive program, with case studies and authoring papers, with constant interaction with the faculty of INSOL International and understanding the different insolvency regimes in various jurisdictions and the interplay between, the model law on cross-border insolvency, EU regulations on insolvency and various other international insolvency laws in different jurisdictions, along with the various case laws on cross border insolvencies.
In November 2019, the first module was held in London, and it was great to be in company of participants of GIPC from 16 Jurisdictions worldwide. It was a wonderful experience to be in company of mostly lawyers and a few accountants in GIPC. We developed a bond which till today is still extraordinarily strong and last week I was approached for some cross border work in insolvency by one of them.
The next stop was in March 2020 at Cape town, South Africa, for INSOL International Conference and the second round of studies and test at Cape Town, followed by 15 days of intensive court appearances in New York and London in June 2020. Then the Lockdown happened. Cape Town conference and court hearings were cancelled. In June 2021, the Faculty and the Management of INSOL International decided to move the course online as there were extensive travel restrictions. So, after intensive rounds followed by 24 X 7 court appearances in five jurisdictions, Day in and Day out, due to time zone differences, I was appearing and filing in the court rooms in various jurisdictions, sometimes at 2am in the morning. Ultimately finished the program and was designated INSOL Fellow in the first week of November 2021.
6. One of the major challenges faced by IPs in this profession is fees paid to Insolvency Professionals, so what is your take on this challenge?
Fee is a major issue with the IP’s in this profession. Personally, I have never been a part of any panel of a bank or a financial institution. However, it is a known fact that the Financial Institutions or the COC do not seem to recognise the efforts that the IP has to put to keep the business as a going concern. He must manage the business, keep the operations running, look for any cash mismanagement, comply with the IBBI and IPA compliances, look after the interests of various stakeholders, try, and raise interim finance, look for prospective buyers, and do so many things at the same time, for which in a normal company, there might be many employees to execute the similar functions that the IRP/RP has to carry out.
The compensation therefore must be commensurate with the work being done by the IRP/RP. The lenders are looking to decrease their cost in a CIRP process by under cutting the fee paid to the RP and his team. The dichotomy in this whole process is that the lenders, if they had regularly conducted proper due diligence of the Corporate Debtor, they would be in a better position to recover their money, if they had stepped in at a proper time, however in most of the cases the intervention to drag the corporate debtor to insolvency is in the last stage of the business’s life cycle.
Indicatively multiple factors can contribute to determination of the fee of the IP. The various factors like size of the debt, No. of branches of the corporate debtor, No. of creditors (e.g. a housing company may have thousands of home buyers), another indicator of fee could be remuneration, equivalent or more than the salary of the Director in the company, in which the IP has been appointed, Experience of the IP etc. These factors are only indicative and not a rule. IP’s too should keep the profession in high stead and refuse unreasonably low remuneration. The regulators normally say that the market (read creditors) shall determine the remuneration. However, IBBI and the IPA’s should create a reasonable matrix for determination of remuneration of the IP. This will help the IP’s to focus on CIRP management. I have seen IRP/RP getting their first remuneration after two to three months of commencement of CIRP.
7. What are your views on the implementation of legislative framework for cross-border insolvency in India?
In India we are particularly good at drafting laws to meet the requirements of our country. However, when it comes to implementation and execution of the statutes, the authorities adjudicating and other stakeholders, tend to be more bent on the concept of natural justice, the various stakeholders including lawyers and Resolution Professionals have a habit of seeking adjournments, which stretches the timelines and have an effect of neutralising the gains of legislating a statute. It is true that “Justice delayed is Justice denied.” We have seen this effect of stretching the timelines in statutes specially pertaining to arbitration, insolvency etc. and its consequences.
As far as the legislative framework for cross-border insolvency is concerned, the concept of cooperation and coordination under the model law and the proposed Part Z of the IBC, are the catalyst for cross-border insolvency. I hope and pray that the Adjudicating Authorities, lawyers, the resolution professional, and other stakeholders, all take due care in confirming to the timelines to make the cross-border insolvency law a success. It has to be considered that in a cross-border cases, there would be foreign courts involvement as well and there could be situations in which, joint hearing by domestic and foreign courts take place and non-preparedness of any stakeholder shall not only delay the proceedings but may create negative perception for the Indian judicial process.
The Adjudicating officers need to be trained in the process of cross-border laws in various jurisdictions and trained for interaction with highly trained insolvency judges across the globe. The notion of collective proceedings and enhancing the value of the corporate debtors assets should be the principle for interaction between the courts. The protocols entered in between the insolvency practitioners (Resolution Professionals from various jurisdictions) and the protocols entered between the domestic courts and foreign courts establish the quasi-procedural law for that specific case. This also needs to be understood by lawyers and other stakeholders in the cross-border insolvency case.
8. What advice would you like to give to the upcoming Insolvency Professionals who are seeing their career in Insolvency Law?
Insolvency is one of the most demanding career options for a professional. It is certainly one of the most challenging and rewarding. Insolvency practitioners can find themselves stepping into the shoes of a CEO in terms of running businesses, negotiating deals, investigating and/or advising on the viability of a business and its restructuring. The work of the insolvency practitioner affects the lives of people in the real world, prospects and livelihoods of creditors, debtors, employees etc. are at stake. Insolvency is about managing people and situations at businesses and need innovative solutions. Even in cases, where there is no option for the business to survive, imagination and determination by the RP/IRP is still required to preserve as much of the value in the business as possible, or as a last resort to get the maximum price for its assets. An IP needs to have a positive approach to the rescue of businesses.
I would also like to add that an IP should not only restrict himself to only formal insolvency procedures. In these times, when pandemic has hit the economy extremely hard and many businesses are on the verge of closure, there is an opportunity for transforming yourself as a Turn Around Professional and help the stressed companies in their pre-insolvency stage. You have all the skills and qualification to turn around or rescue a business and bring it back to its normal state.
In case you are starting your insolvency practice or as an IP, make sure that you are up to date with the current financial and corporate laws. You have a positive bent of mind, and you are not afraid of challenges. Create a reliable and dependable team of experts, on whom you will have to rely on for conducting rescue within or outside the scope of IBC. Please remember that lot of lives are at stake, and unless you do your job properly, with responsibility and reasonable care, children and families may be affected.
9. How significantly do you think the regulators i.e., IBBI and IPAs serve the profession of Insolvency Professionals?
Globally Insolvency professionals are highly regulated by regulatory authority or other agencies. India is also following in the same footsteps. This profession needs proper regulation as the insolvency professional, as soon as he is appointed as an IRP/RP, steps into the shoes of a Chief Executive Officer of that company. He has access to all the financial and operational functions of the company. The insolvency professional regulator (IBBI and IPA in the Indian context) serves as a means of checks and balances towards the actions of the RP/IRP as an appointee. The checks and balances by the regulator should be strict to the extent of checking and stopping any sort of illegality or fraud on part of the RP/IRP.
Having said that I would also like to reiterate that IRP/RP has to wear many hats and to keep the business as a going concern. He has to take decisions fast and if those decisions have been taken in good faith and/or for the interest of maximisation of the value of the business, albeit not conforming to some regulations, should be dealt with softly and not burdened with heavy penalties. I would also like to add that all the responsibilities in a CIRP process fall on head of the RP/IRP. It would be better, if some sort of statutory or regulatory provisions on the conduct of various stakeholders are also legislated and the responsibilities assigned, to free the RP/IRP to conduct the CIRP free from stress.
10. Where do you see Insolvency and Bankruptcy Code and yourself as an IP in the upcoming years?
IBC is an incredibly young piece of legislation which has had too many surgeries (amendments) in its short tenure of little over five years. The code is evolving, and along with the code the thought process of the various stakeholders associated with the code, including lawyers, accountants, Adjudicating Authorities, creditors etc. is also evolving. This paradigm shift in the thought process will play a key role in the coming years for the code to be mature enough to stand the test of time.
All said and done, this specific piece of legislation is a welcome step in ease of doing business in India and very importantly this legislation provides an exit option to various stakeholders and to devise their business and legal strategies around IBC.
As far as my vision for the future as an IP, I had stopped taking any further assignments as an RP/IRP since 2020. This was a deliberate decision as my vision is to focus more on the advisory roles. However, I am open to take an appointment as an RP/IRP in cross border insolvency matters as and when I am approached.
Thank You.
Prior to the enactment of Insolvency and Bankruptcy Code (IBC), there were multiple overlapping laws dealing with financial failure, insolvencies and bankruptcies of companies and individuals in India. Legal and institutional framework, prior to IBC did not aid creditors, by way of effective and timely recovery or restructuring of defaulted assets and businesses. The previous legislation put undue hardships and strain on the Indian credit system. IBC has brought a paradigm shift in the conduct of businesses in India. It has not only given an exit option to the Entrepreneurs, but it has also changed the way of doing business in India. There has been a huge shift in the mindset of the Entrepreneurs/promoters to pay back their debt in time, to ringfence themselves from probable loss of their businesses through the initiation of insolvency proceedings for non-payment of debts. The Code offers a uniform, comprehensive insolvency legislation for all companies, partnerships, and individuals (other than financial firms).
2. We would like to know what made you take up this budding profession of an Insolvency Professional.
There is a saying in the insolvency profession globally, that an insolvency professional does not choose the insolvency profession, rather it is the other way round, the Insolvency profession chooses the Insolvency Professional. This has been true in my career as well. As a corporate Lawyer practicing in 2012, I got a chance to represent a client, he was declared NPA, and I was given the task of devising a strategy to restructure the business and that was the start of my initiation into the insolvency and restructuring profession. After IBC was enacted, I was inducted as an Insolvency Professional in 2018 and in 2021, I was designated as INSOL Fellow by INSOL International. It is my pleasure to inform you that I am the first IP to be designated as an INSOL Fellow in India. An INSOL Fellow’s credibility as an expert in matters of international insolvency is recognised.
I would also like to share that, when the first lockdown was announced in 2020, we were all at home and I was attending a webinar at the behest of one of my friends Dr Jan Adriansse. The webinar was conducted by Early Warning Europe (EWE). EWE is an EU funded program, in over 12 EU countries and the objective of the EWE is to help MSME’s tide over their insolvency crisis by trained Mentors and volunteers. Early Warning Europe is a network of organizations that have successfully implemented early warning system in project backed by Government of various European Union States like Denmark, Holland, Poland, Spain, Italy, Greece, Croatia, Finland Hungary, Lithuania, Luxemburg, and Slovenia.
Early Warning India was launched in association with EWE and with the support of other like-minded Professionals. In view of the current pandemic, this was the need of the hour where many businesses were facing Stress in India, especially the MSME’s. In line with Early Warning Systems Global Practices, Early Warning India’s objective is to provide free, impartial, and confidential counselling to companies, businesses, and individuals in distress for turning them around from their current distressed state.
3. You have an experience of over twenty-seven years as Corporate & Commercial Lawyer and Business Strategist, how has this been helpful in working on your assignments as an Insolvency Professional?
An Insolvency Professional (IP) is expected to wear many hats. IP is supposed to be a Lawyer, Accountant, Financial expert, Company Secretary, an expert in operations management all rolled into one. In my initial years of legal practice, I engaged in accounting and financial transaction laws, matters relating to Civil laws like family laws, contract laws, employment laws, company law etc. I used to appear before various District Courts and the High Courts and various Tribunals and authorities. This gave me an overview of the functioning of the legal system and helped me in my role as a business and legal strategist. Knowledge of various substantive and procedural law has its own advantage, from an IP’s perspective. As a Lawyer for Corporate Debtors and representing the creditors in various matters before the courts helped me in my role as an IP.
As an IP, it was not so difficult to manage the various stakeholders and their lawyers. I used to argue my own cases before Adjudicating Authority as a Lawyer, representing myself, as an RP, and was constantly assisted by a competent team of professionals (CA’s CS, Management Consultants etc.).
It is expected of a Lawyer to solve problems and the CIRP process has many stakeholders with various issues that need to be sorted out. Most of the issues are position based and after effective and clear communications, most of the issues are sorted by engaging in discussions, the issues that are left unresolved go to the Adjudicating Authority for resolution. Challenges are always there, it is important not to get bogged by the issues and challenges, the state of mind should always be in the solution and resolution mode.
4. In reference to the assignments handled by you what practical challenges you faced as an Insolvency Professional so far?
I would answer this question in two parts, Practical challenges as a lawyer for the corporate debtor and as an IP. As a Lawyer I have had first-hand experience dealing with the Financial Institutions at pre insolvency stage. The issue starts with the non-cooperation of the Banks at time of request for restructuring by the corporate debtor to try and take care of his cash flows. In number of cases, the Banks take many months to pass an order on restructuring, and in the meantime the corporate debtor has further slipped into red as his outflow is more than his inflow. The inefficiency of the banking sector has never been brought into the limelight and the burden of this inefficiency has to be borne by the corporate debtor in the pre-insolvency scenario. The case is similar for one time settlement schemes. The debtor is thereafter declared NPA and consequently must face all the consequences thereafter and is ultimately dragged into insolvency by the lenders. I am not talking about debtors who have laundered money, but of genuine debtors, who could have survived if the cash flows could have been rectified at the proper time.
As an IP there are more challenges to be faced by the IP from various stakeholders:
Corporate Debtor:
The challenges faced starts from taking over the company, at times false addresses are given, there are empty offices even with no furniture, no books of accounts and no information, whatsoever. There may be non-cooperation from the promoters or the Directors of the corporate debtors, and the delay in taking over the company adds to discomfort of the IP. It raises his stress level and of his team. You also must keep in mind that across the world, the office of IP is perceived in a negative way with extremely high stress levels.
Creditors:
First is the fee aspect. Then the remarkably high expectation of the CoC from the RP. Then there is the issue of AR’s of CoC members attending CoC meetings, who do not have the authority to take decisions, which delays the timelines. The voting also takes time as the AR’s do not get their mandate in time which further delays the voting timelines.
Adjudicating Authorities:
The time is of essence in any insolvency matter. From filing of the insolvency petition to its admission, should have been a 14-day affair, however higher courts orders and their interpretations have made insolvency admissions a three month to one year process. This helps the corporate debtor to take out the value from the business in the intervening period. This also holds good for various applications filed by different stakeholders at various stages of the CIRP process. The passing of orders takes so much time that the basic idea of preserving the value in a business is demolished. The final order for approval of the resolution plan, in many cases have taken over a year to be passed and the brunt of decreasing value has been borne by the resolution applicant. In contrast a US court passed an order on a prepack within 19 hours of filing of the prepack petition. That is the speed we should be aiming at in our insolvency judicial system. Our Insolvency courts will evolve with the passage of time, and I have full confidence that with the upcoming legislative amendments in the IBC will be able to address these issues.
5. You are also an active member of INSOL; would you like to throw some light on this journey of yours? After becoming an IP, I was wondering about my next step. I had already given my consent to function as an IRP, and I was really excited to step into the shoes of IRP. I joined INSOL International and was informed on the GIPC program of INSOL International. I became interested and signed for the program in 2019. In October 2019, the program was initiated. It was a very intensive program, with case studies and authoring papers, with constant interaction with the faculty of INSOL International and understanding the different insolvency regimes in various jurisdictions and the interplay between, the model law on cross-border insolvency, EU regulations on insolvency and various other international insolvency laws in different jurisdictions, along with the various case laws on cross border insolvencies.
In November 2019, the first module was held in London, and it was great to be in company of participants of GIPC from 16 Jurisdictions worldwide. It was a wonderful experience to be in company of mostly lawyers and a few accountants in GIPC. We developed a bond which till today is still extraordinarily strong and last week I was approached for some cross border work in insolvency by one of them.
The next stop was in March 2020 at Cape town, South Africa, for INSOL International Conference and the second round of studies and test at Cape Town, followed by 15 days of intensive court appearances in New York and London in June 2020. Then the Lockdown happened. Cape Town conference and court hearings were cancelled. In June 2021, the Faculty and the Management of INSOL International decided to move the course online as there were extensive travel restrictions. So, after intensive rounds followed by 24 X 7 court appearances in five jurisdictions, Day in and Day out, due to time zone differences, I was appearing and filing in the court rooms in various jurisdictions, sometimes at 2am in the morning. Ultimately finished the program and was designated INSOL Fellow in the first week of November 2021.
6. One of the major challenges faced by IPs in this profession is fees paid to Insolvency Professionals, so what is your take on this challenge?
Fee is a major issue with the IP’s in this profession. Personally, I have never been a part of any panel of a bank or a financial institution. However, it is a known fact that the Financial Institutions or the COC do not seem to recognise the efforts that the IP has to put to keep the business as a going concern. He must manage the business, keep the operations running, look for any cash mismanagement, comply with the IBBI and IPA compliances, look after the interests of various stakeholders, try, and raise interim finance, look for prospective buyers, and do so many things at the same time, for which in a normal company, there might be many employees to execute the similar functions that the IRP/RP has to carry out.
The compensation therefore must be commensurate with the work being done by the IRP/RP. The lenders are looking to decrease their cost in a CIRP process by under cutting the fee paid to the RP and his team. The dichotomy in this whole process is that the lenders, if they had regularly conducted proper due diligence of the Corporate Debtor, they would be in a better position to recover their money, if they had stepped in at a proper time, however in most of the cases the intervention to drag the corporate debtor to insolvency is in the last stage of the business’s life cycle.
Indicatively multiple factors can contribute to determination of the fee of the IP. The various factors like size of the debt, No. of branches of the corporate debtor, No. of creditors (e.g. a housing company may have thousands of home buyers), another indicator of fee could be remuneration, equivalent or more than the salary of the Director in the company, in which the IP has been appointed, Experience of the IP etc. These factors are only indicative and not a rule. IP’s too should keep the profession in high stead and refuse unreasonably low remuneration. The regulators normally say that the market (read creditors) shall determine the remuneration. However, IBBI and the IPA’s should create a reasonable matrix for determination of remuneration of the IP. This will help the IP’s to focus on CIRP management. I have seen IRP/RP getting their first remuneration after two to three months of commencement of CIRP.
7. What are your views on the implementation of legislative framework for cross-border insolvency in India?
In India we are particularly good at drafting laws to meet the requirements of our country. However, when it comes to implementation and execution of the statutes, the authorities adjudicating and other stakeholders, tend to be more bent on the concept of natural justice, the various stakeholders including lawyers and Resolution Professionals have a habit of seeking adjournments, which stretches the timelines and have an effect of neutralising the gains of legislating a statute. It is true that “Justice delayed is Justice denied.” We have seen this effect of stretching the timelines in statutes specially pertaining to arbitration, insolvency etc. and its consequences.
As far as the legislative framework for cross-border insolvency is concerned, the concept of cooperation and coordination under the model law and the proposed Part Z of the IBC, are the catalyst for cross-border insolvency. I hope and pray that the Adjudicating Authorities, lawyers, the resolution professional, and other stakeholders, all take due care in confirming to the timelines to make the cross-border insolvency law a success. It has to be considered that in a cross-border cases, there would be foreign courts involvement as well and there could be situations in which, joint hearing by domestic and foreign courts take place and non-preparedness of any stakeholder shall not only delay the proceedings but may create negative perception for the Indian judicial process.
The Adjudicating officers need to be trained in the process of cross-border laws in various jurisdictions and trained for interaction with highly trained insolvency judges across the globe. The notion of collective proceedings and enhancing the value of the corporate debtors assets should be the principle for interaction between the courts. The protocols entered in between the insolvency practitioners (Resolution Professionals from various jurisdictions) and the protocols entered between the domestic courts and foreign courts establish the quasi-procedural law for that specific case. This also needs to be understood by lawyers and other stakeholders in the cross-border insolvency case.
8. What advice would you like to give to the upcoming Insolvency Professionals who are seeing their career in Insolvency Law?
Insolvency is one of the most demanding career options for a professional. It is certainly one of the most challenging and rewarding. Insolvency practitioners can find themselves stepping into the shoes of a CEO in terms of running businesses, negotiating deals, investigating and/or advising on the viability of a business and its restructuring. The work of the insolvency practitioner affects the lives of people in the real world, prospects and livelihoods of creditors, debtors, employees etc. are at stake. Insolvency is about managing people and situations at businesses and need innovative solutions. Even in cases, where there is no option for the business to survive, imagination and determination by the RP/IRP is still required to preserve as much of the value in the business as possible, or as a last resort to get the maximum price for its assets. An IP needs to have a positive approach to the rescue of businesses.
I would also like to add that an IP should not only restrict himself to only formal insolvency procedures. In these times, when pandemic has hit the economy extremely hard and many businesses are on the verge of closure, there is an opportunity for transforming yourself as a Turn Around Professional and help the stressed companies in their pre-insolvency stage. You have all the skills and qualification to turn around or rescue a business and bring it back to its normal state.
In case you are starting your insolvency practice or as an IP, make sure that you are up to date with the current financial and corporate laws. You have a positive bent of mind, and you are not afraid of challenges. Create a reliable and dependable team of experts, on whom you will have to rely on for conducting rescue within or outside the scope of IBC. Please remember that lot of lives are at stake, and unless you do your job properly, with responsibility and reasonable care, children and families may be affected.
9. How significantly do you think the regulators i.e., IBBI and IPAs serve the profession of Insolvency Professionals?
Globally Insolvency professionals are highly regulated by regulatory authority or other agencies. India is also following in the same footsteps. This profession needs proper regulation as the insolvency professional, as soon as he is appointed as an IRP/RP, steps into the shoes of a Chief Executive Officer of that company. He has access to all the financial and operational functions of the company. The insolvency professional regulator (IBBI and IPA in the Indian context) serves as a means of checks and balances towards the actions of the RP/IRP as an appointee. The checks and balances by the regulator should be strict to the extent of checking and stopping any sort of illegality or fraud on part of the RP/IRP.
Having said that I would also like to reiterate that IRP/RP has to wear many hats and to keep the business as a going concern. He has to take decisions fast and if those decisions have been taken in good faith and/or for the interest of maximisation of the value of the business, albeit not conforming to some regulations, should be dealt with softly and not burdened with heavy penalties. I would also like to add that all the responsibilities in a CIRP process fall on head of the RP/IRP. It would be better, if some sort of statutory or regulatory provisions on the conduct of various stakeholders are also legislated and the responsibilities assigned, to free the RP/IRP to conduct the CIRP free from stress.
10. Where do you see Insolvency and Bankruptcy Code and yourself as an IP in the upcoming years?
IBC is an incredibly young piece of legislation which has had too many surgeries (amendments) in its short tenure of little over five years. The code is evolving, and along with the code the thought process of the various stakeholders associated with the code, including lawyers, accountants, Adjudicating Authorities, creditors etc. is also evolving. This paradigm shift in the thought process will play a key role in the coming years for the code to be mature enough to stand the test of time.
All said and done, this specific piece of legislation is a welcome step in ease of doing business in India and very importantly this legislation provides an exit option to various stakeholders and to devise their business and legal strategies around IBC.
As far as my vision for the future as an IP, I had stopped taking any further assignments as an RP/IRP since 2020. This was a deliberate decision as my vision is to focus more on the advisory roles. However, I am open to take an appointment as an RP/IRP in cross border insolvency matters as and when I am approached.
Thank You.
Brief profile of Rocky Ravinder Gupta
Rocky Ravinder Gupta is a Lawyer, INSOL Fellow, Accredited Mediator, an Insolvency Representative/Professional (India) and the Managing Partner of Law Firm UNITEDJURIS.
He has over Twenty-Seven years of experience as a Corporate & Commercial Lawyer and Business Strategist. His expertise is in M&A, Cross-border Insolvency, Commercial, Transactional and Corporate law.
He has varied experience as a Lawyer and has successfully undertaken assignments involving formulation of Legal and Business strategies. He has led Legal and Commercial due diligence teams to facilitate the decision-making process involving M&A transactions, Stressed asset management, Debt management, and Recoveries. He has advised Companies and Businesses on their financial and operational restructuring and facilitated their successful turnaround.
In these times of Pandemic, where many businesses are facing Stress, especially the MSME's, Rocky with the support of other like-minded Professionals have started an initiative to use their collective knowledge and expertise on Turnaround and Business rescue to provide free, impartial, and confidential advice to stressed businesses through their project EARLY WARNING INDIA in association with Early Warning Europe.
Rocky Ravinder Gupta is a Lawyer, INSOL Fellow, Accredited Mediator, an Insolvency Representative/Professional (India) and the Managing Partner of Law Firm UNITEDJURIS.
He has over Twenty-Seven years of experience as a Corporate & Commercial Lawyer and Business Strategist. His expertise is in M&A, Cross-border Insolvency, Commercial, Transactional and Corporate law.
He has varied experience as a Lawyer and has successfully undertaken assignments involving formulation of Legal and Business strategies. He has led Legal and Commercial due diligence teams to facilitate the decision-making process involving M&A transactions, Stressed asset management, Debt management, and Recoveries. He has advised Companies and Businesses on their financial and operational restructuring and facilitated their successful turnaround.
In these times of Pandemic, where many businesses are facing Stress, especially the MSME's, Rocky with the support of other like-minded Professionals have started an initiative to use their collective knowledge and expertise on Turnaround and Business rescue to provide free, impartial, and confidential advice to stressed businesses through their project EARLY WARNING INDIA in association with Early Warning Europe.