The Insolvency and Bankruptcy Board of India’s (IBBI) proposed Code of Conduct for the creditors’ committee is fine, and in sync with global practice. The creditors’ committee is in the driver’s seat while steering the insolvency resolution process and the code of conduct will provide clarity on the scope of their responsibilities. The rules include disclosing any conflicts of interest, not acquiring (directly or indirectly) any of the corporate debtor's assets, and adhering to the bankruptcy code's timetables. In any event, the RBI regulates the creditors, i.e. the banks. The Prevention of Corruption Act also applies to bankers in the public sector. However, the oversight provided to resolution professionals (RP) tasked with resolving the defective asset is limited. The IBBI must establish a system for auditing RPs' work and enforcing the RPs' Code of Conduct.
The 2016 IBBI Regulations include a comprehensive Code of Conduct for RPs. These include safeguarding the confidentiality of insolvency-related information and making necessary disclosures. A Code of Conduct for any profession, however, is useless unless it is enforced. RPs is regulated by the IBBI and insolvency professional agencies that enrol them. According to the bankruptcy code, RPs must preserve and protect the corporate debtor's assets, operate the business as a going concern, appoint valuers, and welcome potential resolution applicants. Nonetheless, the adjudicating authority has frowned upon the RPs in numerous cases due to non-compliance with the bankruptcy code. IBBI has also taken disciplinary action against errant RPs (based on inspections).
RPs, on the other hand, is not answerable to shareholders, unlike managers. It is necessary to hold them accountable for any unethical behaviour. RPs' behaviour has been the subject of numerous complaints. It is possible to perform a concurrent audit of the conduct of RPs. IBBI should undertake a consultation on this, as well as the other issues it is already dealing with. IBC as a whole should not be tarnished by a few bad RPs.
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