INSOLVENCY AND BANKRUPTCY BOARD OF INDIA: A REGULATOR LIKE NO OTHER

The traditional statecraft has certain limitations in governing markets. To effectively address the issues that arise in dynamic market economy, Government across jurisdictions have been setting up regulators and equipping them with the necessary powers, expertise, and resources commensurate with their tasks. Governance through regulators probably constitutes the most significant governance reforms in the recent decades.

Regulators are generally a class of body corporates, mostly a product of statutes. Like Government, they work in public interest and provide public goods. They have responsibilities – consumer protection, development, and regulation – akin to those of Government. They exercise quasilegislative, executive, and quasi-judicial powers as Government does. Yet they are not the ‘Government’. They are, in a sense, Governments within a Government, imperium in imperio, carrying out governance on behalf of Government in a defined framework.

India has a track record of establishing credible regulators¹and delivering effective governance through them. It has created² a good and comprehensive regulatory system, tailored to her own market and societal needs. Regulators are broadly present in three spaces, namely, regulation of professions like the Bar Council of India, the Institute of Company Secretaries of India (ICSI) and the National Medical Commission; regulation of markets like the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India, and the Competition Commission of India; and regulation of utilities like the Central Electricity Regulatory Commission, the Telecom Regulatory Authority of India, and the Petroleum and Natural Gas Regulatory Board (PNGRB). Further, there are regulators both at Central and State level created under central legislations such as the Water (Prevention and Control of Pollution) Act, 1974, the Electricity Act, 2003, and the Real Estate (Regulation and Development) Act, 2016. The Insolvency and Bankruptcy Board of India (IBBI), established under the Insolvency and Bankruptcy Code, 2016 (Code / IBC), is a recent addition to the regulatory landscape.

The IBBI is a novel experiment, having no parallel either in the Indian regulatory milieu or in the insolvency space elsewhere. In this article, I dwell upon a few facets of IBBI’s role and its functioning which make it a regulator like no other. In doing so, I draw comparison mostly with SEBI, which is considered as one of the most evolved regulators in India. I illustrate the peculiar challenges IBBI encountered in its infancy, many of which have largely subsided, with the growing maturity of the ecosystem. Mine is an insider’s perspective, having been with the organisation since its inception. A disclaimer, therefore, is in order.

IDIOSYNCRATICITY OF IBBI

The IBBI has regulatory oversight over professionals and related institutions – Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs), Insolvency Professional Entities (IPEs) and Information Utilities (IUs) – in the insolvency space. It has the responsibility to make regulations and guidelines on matters relating to insolvency processes – corporate insolvency resolution process (CIRP), pre-packaged insolvency resolution process (PPIRP), corporate liquidation process, voluntary liquidation process, fresh start process (FSP), individual insolvency resolution process and individual bankruptcy process – under the Code. For the time being, it also acts as the authority for valuation profession.

Three-in-one regulator

A regulator of a profession (example, the ICSI) develops and regulates the profession. It does not develop or regulate markets where these professionals serve. Nor does it specify the rules to be followed by them in the market / for transactions, which are specified under the relevant legislations (example, the Companies Act, 2013) and rules made thereunder. A regulator of markets (example, the SEBI), assisted at times by a set of front-line regulators, promotes the development of, and regulates, markets. It does not develop and regulate the professionals, who render services in these markets. A regulator of a utility (example, the PNGRB) regulates productions, distribution, and sale of products/services to protect the interests of consumers and foster fair trade and competition amongst the entities. It lays down technical standards, including safety standards. 

The IBBI is different from other regulators as not only does it develop and regulate the insolvency profession, it also specifies the regulations to be followed by IPs in the market / for transactions and regulates the markets where the IPs serve. In regulation of professions, it is assisted by a set of front-line regulators, namely, IPAs and Registered Valuers Organisations (RVOs). It sets standards to ensure quality of services and endeavours to provide a competitive environment. Differently put, the IBBI blends the duties of a regulator of professions, a regulator of markets, and a regulator of utilities, though its role is vastly different from that of any of them.

Ambit of authority

The Securities and Exchange Board of India Act, 1992 establishes SEBI. The entire Act is devoted to SEBI and the securities markets. The SEBI has statutory objectives to protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market. It has mandate to undertake any measure in furtherance of its objectives. It has authority to make regulations to carry out the purposes of the Act. Its jurisdiction extends over all intermediaries and participants in securities markets, including issuers of securities in relation to issue and trading of their securities.

The Code provides for insolvency resolution processes of corporate persons and individuals. It provides for an ecosystem, comprising the Adjudicating Authority (AA), IPs, IPAs, IUs and IBBI for implementation of the Code. One of the objectives of the Code is the establishment of IBBI. A few sections of the Code are devoted to the IBBI and the insolvency profession. The IBBI does not have explicit statutory objectives, as SEBI has. It has specific statutory functions in the insolvency and bankruptcy space, subject to general direction of the Government. It has authority to make regulations to carry out the provisions of the Code. Its jurisdiction extends over service providers (IPs, IPAs, and IUs) only.

The SEBI Act, 1992 earmarks matters relating to establishment of the regulator and the Securities Appellate Tribunal to be prescribed by Rules and the matters relating to markets/ transactions to be specified by Regulations. The IBC lists 46 matters to be prescribed by Rules – five of these relate to establishment of the IBBI and the rest 41 relate to markets/ transactions. Thus, the ambit of authority of IBBI seems narrow as compared to that of a market regulator.

Regulator vis-à-vis Tribunal

A regulator makes subordinate legislation and enforces them in respect of relevant market participants. For example, the SEBI enforces the SEBI (Prohibition of Insider Trading) Regulations, 2015 on the company, promoters, board of directors, shareholders, investors, merchant bankers, auditors, IPs, and any other insider. It applies and interprets the regulations it has made, through its enforcement and adjudicatory actions. A person aggrieved by such actions and interpretations may prefer an appeal before a tribunal. A decision of the tribunal is binding on the regulator until it is reversed. A tribunal is typically the appellate authority for the quasi-judicial functions of a regulator. However, it has no role as regards quasi-legislative and executive functions of the regulator. 

The IBBI is not required to apply and interpret the regulations it has made, except in relation to service providers. The AA applies and interprets the law, including regulations, at the first instance, through its decisions, which are appealable before the National Company Law Appellate Tribunal (NCLAT). The Code lays down the roles of the AA and IBBI. The IBBI makes IPs available, and the AA appoints them to conduct various processes. It makes regulations relating to processes. The stakeholders and IPs conduct processes in accordance with regulations. Many of these are submitted to the AA for approval. Since no ecosystem, either in India or elsewhere, has two parallel institutions like IBBI and AA, it required significant efforts to develop mutual appreciation of each other’s role in the initial years³.3

Statutory features

Some examples of statutory features that make the IBBI distinct from other regulators are: (a) Most legislations do not mandate any mechanism for making regulations, though many regulators have evolved standard operating procedures for making regulations, including public consultation. The Code, however, requires the IBBI to specify a mechanism for issuing regulations, including the conduct of public consultation process.

(b) Most statutes do not have specific provision for advisory committees, though many regulators, as a matter of practice, constitute advisory committees to serve as sounding boards for emerging ideas and to lend professional wisdom and market knowledge to the decision-making process. The Code, however, provides that the IBBI may constitute advisory committees in accordance with regulations.

(c) Many regulators have laid down the process to collect and disseminate information and data and conduct research and bring out publications, though respective statutes do not have detailed provisions in this regard. The Code has several provisions, such as, requiring the IBBI to publish information, data, research studies and other information; maintain websites and such other universally accessible repositories of electronic information; collect and maintain records relating to insolvency and bankruptcy cases and disseminate information relating to such cases; etc. (d) In case of most other regulators, respective legislations provide for an appellate authority for appeals against their orders and credit of penalties to Consolidated Fund of India (CFI). The Code does not provide for either of these. The IBBI has sought an amendment to the Code to provide for these, while it credits penalties to CFI as a matter of good governance.

(e) In the interest of autonomy, respective legislations provide for sustenance of the regulator. A regulator typically funds itself from the fees collected from its regulated entities and/or markets or transactions. The Code initially provided for levy of fee or other charges for registration of IPs, IPAs, and IUs. To partially address inadequacy of resources, an Amendment Act in 2018 allowed the IBBI to levy fee or other charges for carrying out the purposes of the Code. Notwithstanding this, the IBBI depends primarily on grants from Government for its sustenance, unlike most other regulators. 

Of its own kind

Most insolvency jurisdictions have two layers in the hierarchy of regulation, namely, the government department dealing with insolvency, and membership organisations regulating insolvency practitioners. Wherever there is another agency in between, such agency is not dedicated to insolvency. For example, the responsibilities of the Australian Securities Investment Commission or the Australian Financial Security Authority include regulation of some aspects of insolvency. In contrast, the Indian jurisdiction has three layers in the hierarchy wherein the IBBI is interspersed between the Government and the IPAs. The IBBI is entrusted with tasks, some of which are either in the realm of Government or professional bodies in other jurisdictions. With no comparable regulator to learn from, either in India or elsewhere, IBBI is an evolving experiment in terms of its role.

The insolvency regime in the UK is probably the closest to that in India. The Insolvency Service, an executive agency of the Department for Business, Energy and Industrial Strategy, authorises and regulates the insolvency profession.⁴ The insolvency practitioners are required to be members of one of the five recognised professional bodies and the Insolvency Service exercises the general oversight over these bodies on behalf of the Secretary of State. It advises its parent department on policy matters related to insolvency and disseminates information to stakeholders on insolvency and investigation matters. The Insolvency Service employs Official Receivers who act as Trustee or Liquidator in cases where no private IP is appointed. It provides estate accounting and investment services for bankruptcy and liquidation estate funds. It conducts investigations into companies in public interest and deals with the disqualification of directors in corporate failures. It administers and investigates the affairs of bankrupts, individuals subject to debt relief orders, companies, and partnerships wound up by the court, and establish why they became insolvent. Unlike IBBI, it performs a range of functions and delivers many services under multiple legislations, namely, the Insolvency Acts 1986 and 2000, the Company Directors Disqualifications Act, 1986, the Employment Rights Act, 1996 and the Companies Acts 1985 and 2006.

FUNCTIONS OF IBBI: AN EXPOSITION OF EVOLUTION

Like every other regulator, the IBBI is a mini-State, having a mix of quasi-legislative, executive, and quasi-judicial functions. Since it is a new kid on the block, as also other elements of the insolvency ecosystem, full clarity of its role vis-à-vis the AA is yet to emerge as regards the statutory provisions.

Quasi-legislative functions

Section 11 of the SEBI Act, 1992 empowers SEBI to take any measure to achieve its objectives. Section 30(1) empowers it to make regulations to carry out the purposes of the Act. Without prejudice to this general power, section 30(2) lists out eight matters on which regulations may be made. The provisions of section 30 of the SEBI Act, 1992 read with SEBI’s functions under section 11 make the scope of regulations very wide and flexible. This probably explains why regulations made by SEBI are rarely challenged on the ground of its authority to make regulations on any matter. On the other hand, section 240(1) of the Code empowers the IBBI to make regulations to carry out provisions of the Code. Without prejudice to this general power, section 240(2) lists out 111 matters on which regulations may be made, creating an impression that the list is exhaustive. Regulations made by IBBI face challenge on the ground of its competence, in addition to its vires or constitutional validity.

It is settled that the legality and propriety of any regulation cannot be considered by tribunals, in this case, the AA or NCLAT.⁵ In some cases, the AA, however, has expressed a view that tribunals are competent to test the vires of subordinate legislation.⁶

It is of the view that the IBBI may make regulations to carry out the ‘provisions of the Code’, and not the ‘purpose of the Code’. Some regulations were struck down in collateral proceedings, without notice to IBBI, adding ambiguity and uncertainty to the regulations. A few examples are:

(a) While considering an application for extension of time in a CIRP, the AA struck down⁷ regulation 36A of the CIRP Regulations, which provides for issue of invitation of express of interest (EoI), being ultra vires of section 240(1) of the Code. The IBBI has contested this in a writ petition.

(b) While considering an application for closure of liquidation process, the AA found⁸ regulation 45(3)(a) of the Liquidation Process Regulations, which provides for sale of the corporate debtor (CD) as a going concern, beyond the competence of IBBI under section 240(2)(y). On appeal, however, the said finding was set aside.⁹ In the meantime, the Supreme Court reiterated¹⁰ that the Code envisages three modes of revival, one of which is sale of the CD as a going concern.

(c) Regulation 30A specifically provides¹¹ the procedure to affect a withdrawal before the constitution of CoC. The AA, however, exercised its inherent jurisdiction under rule 11 of the NCLT Rules under the Companies Act, 2013 to allow a withdrawal before the constitution of CoC, as such withdrawal is not covered under any provision of the Code.¹²It held that regulation 30A of the CIRP Regulations, being inconsistent with the provisions of section 12A, cannot be used in this case

(d) While considering payment to dissenting financial creditors (FCs) under a resolution plan, the NCLAT held¹³that regulation 38(1)(c) of the CIRP Regulations is inconsistent with section 240(1) of the Code. In deference to this, the IBBI deleted the said regulation. However, this provision subsequently found place in the Code.

On the other hand, as difficulties arise, the AA or the NCLAT calls upon the IBBI to make regulations / guidelines to address the gaps noticed by them. The IBBI makes best effort to address them, expeditiously. For example, while considering an application for approval of a resolution plan, the AA advised ¹⁴ the IBBI to incorporate a specific regulation and specify a standard format for certificate to be provided by resolution professional (RP) certifying that all provisions of the Code, and Rules and Regulations made thereunder have been complied with and there has not been any contravention of the law. It considered that such a certificate is a vital necessity for expeditious disposal. The IBBI noted that the AA is not considering a lis involving adversarial litigation and there may not be any party in some cases to bring up deficiency in the process. The approval of resolution plans would be expeditious, if such a certificate is available, as the AA need not go through the bulky documents to verify compliance with every provision of law. The IBBI amended the CIRP Regulations to provide for a comprehensive compliance certificate and devised Form H for this purpose.

Recently, in a CIRP, the AA noticed that 20+ people accompanied the RP to the meetings of the committee of creditors (CoC), indicating either the RP is not fully prepared or giving fees (monetary benefit) to them. It requested ¹⁵ the IBBI to examine this issue and issue appropriate guidelines. In a liquidation process, the AA advised ¹⁶ the IBBI, to notify guidelines regarding criteria and process of nominating representatives of stakeholders to the stakeholders’ consultation committee under the Liquidation Process Regulations. Similarly, the NCLAT, in a CIRP, noticed that in a contract of guarantee, the creditors, who receive some amount in a CIRP (borrower / guarantor), need to adjust their claims in another CIRP. It advised ¹⁷ the IBBI to lay down regulations to guide interim resolution professional (IRPs) / RPs in this regard.

The regulations have been challenged also before Courts. A few examples are:

(a)  The IP Regulations require an IP to pay fee calculated at the rate of 0.25% of the turnover from the services rendered by him under the Code. On challenge on the ground of competence, the High Court noted that section 240 is the general regulation making power of IBBI and it does not impose any restraint on its powers, except that the regulations should be consistent with the Code and the rules thereunder and should be for the purposes of carrying out the provisions of the Code. It held¹⁸that there can be no question whatsoever about the powers of IBBI to frame regulations regarding the fee payable by IPs and IPAs.

(b) The Liquidation Process Regulations stipulate that a person, who is not eligible under the Code to submit a resolution plan in a CIRP of a CD, shall not be a party in any manner to a compromise or arrangement of the CD. This was challenged before the Apex Court on the ground that the said regulation transgressed the authority of IBBI. The Apex Court observed that the power to frame regulations under section 240(1) is conditioned by two requirements: first, the regulations must be consistent with the provisions of the Code and the rules made thereunder; and second, the regulations must be to carry out the provisions of the Code. It found ¹⁹ that impugned regulation meets both the requirements. 

With the rulings of the Supreme Court, High Court and NCLAT regards the scope of regulations under section 240 read with scope of functions under section 196(1)(t) of the Code, greater clarity will continue to emerge on the powers of IBBI to make regulations.

Executive functions

Most of the processes under the Code are like an orchestra where many constituents have specific roles. For example, a CIRP requires cooperation of the CD and its erstwhile management, creditors and the CoC, resolution applicants, and the IP and professionals appointed by him to assist him. If any of them does not co-operate or resorts to active non-cooperation or malafide actions, the process may not either conclude in time or yield the optimum outcome. A CIRP may be completely frustrated if, for example, the successful resolution applicant (SRA) does not implement the resolution plan, after its approval by the AA.

Actions in respect of market participants

Several CIRPs have witnessed a variety of contraventions of provisions of law by market participants. Since the participants are not within its regulatory domain, the IBBI has tried three options to deal with such contraventions, with varying degrees of success. The options are: (a) Directions to IPs, (b) Filing of complaints, and (c) Filing of appeals.

Directions to IPs: The CoC acts through its meetings chaired by the IP. It can influence the IP to act in the manner which may not be permissible. While the IBBI does not have mandate to discipline the CoC or its members directly, the IBBI typically issues directions to the IP in case of contraventions by the CoC. This has limitations as an IP can be replaced by the CoC without assigning any reason. A few examples of IBBI’s response are:

(a) The AA expressed a concern ²⁰ that the FCs do not send representatives to meetings of the CoC, who are competent to take decisions. This causes delay in process and contributes to depletion of value of the CD. The IBBI directed ²¹ that the RP shall, in every notice of meeting of the CoC and any other communication addressed to FCs, require that they must be represented in the CoC or in any meeting of the CoC by such persons who are competent and are authorised to take decisions on the spot, without deferring decisions for want of any internal approval from the FCs.

(b) The law provides that the insolvency resolution process cost (IRPC) shall not include any expense incurred by a creditor. However, in a CIRP, the CoC insisted on inclusion of expenses incurred on fee payable to lenders’ legal counsel for services rendered during CIRP and even before it commenced. It decided to include it in IRPC, after minuting that if IBBI objects to such inclusion, the amount would be reimbursed to the CD by FCs in proportion to their voting shares. The IBBI happened to notice it and initiated a disciplinary proceeding. The Disciplinary Committee (DC) directed² the RP to make good the loss by securing reimbursement from FCs, as it could not direct the CoC to reimburse the amount.

(c) It is the duty of the IRP / RP to decide as to who is an FC. His decision may be contested before Several CIRPs have witnessed a variety of contraventions of provisions of law by market participants. Since the participants are not within its regulatory domain, the IBBI has tried three options to deal with such contraventions, with varying degrees of success. The options are: (a) Directions to IPs, (b) Filing of complaints, and (c) Filing of appeals.

Directions to IPs: The CoC acts through its meetings chaired by the IP. It can influence the IP to act in the manner which may not be permissible. While the IBBI does not have mandate to discipline the CoC or its members directly, the IBBI typically issues directions to the IP in case of contraventions by the CoC. This has limitations as an IP can be replaced by the CoC without assigning any reason. A few examples of IBBI’s response are:

(a) The AA expressed a concern20 that the FCs do not send representatives to meetings of the CoC, who are competent to take decisions. This causes delay in process and contributes to depletion of value of the CD. The IBBI directed21 that the RP shall, in every notice of meeting of the CoC and any other communication addressed to FCs, require that they must be represented in the CoC or in any meeting of the CoC by such persons who are competent and are authorised to take decisions on the spot, without deferring decisions for want of any internal approval from the FCs.

(b) The law provides that the insolvency resolution process cost (IRPC) shall not include any expense incurred by a creditor. However, in a CIRP, the CoC insisted on inclusion of expenses incurred on fee payable to lenders’ legal counsel for services rendered during CIRP and even before it commenced. It decided to include it in IRPC, after minuting that if IBBI objects to such inclusion, the amount would be reimbursed to the CD by FCs in proportion to their voting shares. The IBBI happened to notice it and initiated a disciplinary proceeding. The Disciplinary Committee (DC) directed22 the RP to make good the loss by securing reimbursement from FCs, as it could not direct the CoC to reimburse the amount.

(c) It is the duty of the IRP / RP to decide as to who is an FC. His decision may be contested before the AA. In a CIRP, the AA passed an order declaring a creditor as an FC. However, the CoC sat in appeal ²³ over the order of the AA and passed resolutions to the contrary. It recorded: ‘despite the Order passed by Hon’ble NCLT Allahabad the CoC is of the view that they no longer wish to continue M/s BVN Traders in the category of the “Financial Creditor” in the CoC….’. Since the RP had a hand in facilitating the CoC to take such decisions, the IBBI, through a disciplinary proceeding, suspended ²⁴ the registration of the IP for one year.

Filing of complaints: There are contraventions by promoters and resolution applicants as well. In such situations, the IBBI files a complaint, suo moto or on a reference from the AA, before the special court against the recalcitrant market participant. The complaint may not always succeed for want of adequate evidence (beyond all reasonable doubts) which the IBBI may not be able to gather for want of jurisdiction. Even if it succeeds, it may not serve the cause of the CIRP. A few examples of references from AA are: 

(a) The AA inter alia referred²⁵ the matter to IBBI for initiating prosecution against the promoter and director of the CD, who had contravened the provisions of the Code and its directions. In another matter, it directed²⁶ the IBBI to proceed against the directors of the CD under section 70 of the Code for non-co-operation.

(b) The AA granted²⁷ liberty to the petitioner to file a complaint with IBBI claiming that the SRA intentionally and willfully contravened the terms of resolution plan. In another matter, the AA held ²⁸ that the SRA breached the terms of approved resolution plan in contravention of section 74(3) of the Code.

Filing of appeals: Another option for the IBBI is to file an appeal with the NCLAT in case of noncompliance with law. In a CIRP, the IBBI noticed that an ineligible resolution applicant, the sole FC and the IP colluded to ensure ²⁹ that the people responsible for insolvency of the CD paid a fraction (33%) of the claim amount to the FC and wrested the control and management of the CD. They misused the CIRP to pass on a one-time settlement as resolution plan and to wipe off claims of creditors, which was not possible otherwise. They did this against the explicit mandate of the statute and judicial pronouncements and in contravention of the Code and regulations relating to CIRP. The IBBI, following due procedure, cancelled the registration of the IP. Further, since the resolution plan was in contravention of the law, the IBBI appealed against the order of the AA approving the resolution plan. The NCLAT lamented that it is very unfortunate that IBBI has preferred an appeal, though it cannot be held to be an aggrieved person. It observed³⁰ that the IBBI having no locus standi cannot challenge the finding of the AA. However, at the direction of the IBBI, the IP filed an appeal against the order of the AA approving resolution plan and the NCLAT set aside³¹ the impugned order.

Successful implementation of the Code requires all the constituents to play by the rule book and they are subject to regulatory discipline, with quick consequences for contraventions. A parallel may elucidate the point. In its early days, the SEBI was not being perceived as very effective in protecting the interest of investors, essentially because it did not have jurisdiction over the issuers of securities. This infirmity was addressed by the Securities Laws (Amendment) Act, 1995, which incorporated section 11A (which has been further strengthened in 2002) in the SEBI Act, 1992 to expand SEBI’s regulatory jurisdiction over corporates in the issuance of capital, transfer of securities and other related matters.

 Actions in respect of IPs

The IBBI enforces regulations that cast obligations on IPs, IPAs, and IUs. However, it often faces pushback, as the insolvency processes are conducted under the oversight of the AA. If IBBI finds something irregular in an ongoing process, it may advise or direct the IP to take certain actions. On noticing certain deficiencies in the invitation of EoI in a CIRP, the IBBI directed the RP concerned to issue a fresh advertisement that addresses the deficiencies, and the cost of such advertisement shall not be part of the IRPC. The RP filed a petition contesting the direction of IBBI before the AA, which directed³² the RP to continue to function in normal course and to provide a copy of the petition to the IBBI, with an advice that if IBBI’s actions are sustained, remedial measures can be taken at a later stage. In due course, the AA disposed of the petition³³ with certain direction and observations. Thus, the IBBI needs to defend its administrative actions. If it is not sustained, the market may not get clear signals. Even if it is sustained, the disposal by AA may take some time, impacting the timelines of CIRP.

To avoid such situations, the IBBI now-a-days files an application with the AA seeking replacement of the RP in cases where integrity of the process is threatened. It came across a few instances where the IP has prevented his replacement either by not constituting CoC or not allowing agenda for his replacement to be considered by CoC. This deprived the CoC of its legitimate right to have an IP of its choice. When IBBI filed an application for replacement of the RP, the maintainability of such application was intensely contested. Noting that an IBC proceeding is in rem, the AA held³⁴ the application to be maintainable. After considering the application on merits, it replaced the IP. It even issued a show cause notice (SCN) to the IP as to why contempt proceedings shall not be initiated against him. The IBBI now seeks replacement of the IP, and the AA allows ³⁵ such replacement in deserving cases. In other cases, it initiates disciplinary proceedings to penalise the IP.

The IBBI has a policy in place for conducting trigger based and routine inspections to ensure that the IPs comply with the law. Since inspection entails infringement on the freedom of service providers besides imposing a cost on them and the outcome of such inspection could be an enforcement action, there should be clear governance principles to minimise the pains of inspection on the concerned stakeholders and to avoid unwarranted enforcement actions. Accordingly, IBBI’s Inspection Regulations govern initiation, conduct and closure of inspections and investigations. There are also regulations to deal with grievances and complaints.

Quasi-judicial functions

The IBBI has certain quasi-judicial responsibilities. It includes disciplining the IPs in case of deviant behaviour. In a CIRP, the AA clarified³⁶ that if there is any complaint against an IP, the IBBI shall have the same investigated. If it finds, after investigation, that a criminal case is made out against the IP, it shall file a complaint in respect of the offences committed by him before the special court. A complaint by any other person with police is not maintainable. There is a bar on trial of offences in the absence of filing of a complaint by the IBBI. In a liquidation process, the AA clarified³⁷ that IBBI is the only authority to look into and enquire into any allegation against the Liquidator. However, interested parties routinely file FIRs against IPs and threaten them with criminal action so that the IP toes their line under duress. The threat of criminal prosecution and police investigation may prevent an IP from conducting CIRP without fear and favour. The AA observed³⁸ that for lawful discharge of duty as IP, accelerating criminal charges, and using police to register a complaint of criminal nature is not appropriate and if there are any irregularities on the part of the IP or his team, the applications could be filed before it or a complaint could be registered with IBBI. In a recent case, the Supreme Court observed that it was appalled³⁹ with the developments leading to arrest of an IP. It observed that the police official dealing with the case was not familiar with the provision of privilege of an IP appointed by the Court in terms of section 233 of the Code. While directing immediate release of the IP, the Supreme Court directed the Investigation Officer not to take any coercive action against him.

The AA has at times taken up the task on themselves to discipline IPs. In one CIRP, it held the IP to be an unfit person for any assignment under the Code and imposed ⁴⁰ a fine of ` 20,000 on him. It directed the IBBI to remove him from the panel. There are instances where the AA directs IBBI to initiate enquiry or drop an enquiry against an IP. Recently, the AA referred ⁴¹ a matter to IBBI to make an enquiry and take appropriate action against an IP. After a few days in the same matter, it directed ⁴² the IBBI not to initiate any enquiry till further orders, and if any enquiry is initiated, the same be halted till its further direction. This may adversely impact the effectiveness of the disciplinary role of IBBI.

In a CIRP, the AA found ⁴³ inexplicable lackadaisical attitude of an IP and felt expedient to bring it to the notice of IBBI for an appropriate action. The IBBI took note of this advice of the AA, undertook due diligence, and issued a SCN to the IP. However, considering an application of the IP, the AA observed⁴⁴ that under such circumstances, the SCN deserves to be recalled. The IBBI filed an application to the AA with a prayer that the SCN be allowed to be disposed of on merits in accordance with the law. After hearing the parties, the AA directed ⁴⁵ that all disciplinary proceedings initiated by the IBBI be quashed. Aggrieved by the order of the AA, the IBBI filed an appeal before the NCLAT, which held ⁴⁶ that once a disciplinary proceeding is initiated by IBBI based on evidence on record, it is for the IBBI to close it or pass appropriate orders in accordance with law. Such power having been vested with IBBI and in absence of any power with the AA, the latter cannot quash the proceeding, even if it was initiated at its instance and recommendation. With the ruling of the Supreme Court and the NCLAT, the clarity is emerging about role of IBBI in relation to deviant conduct of IPs. 

IBBI’S JOURNEY: DIFFERENT FROM OTHERS

While discharging its statutory duties and functions, the IBBI has charted a slightly different path, as compared to most other regulators, albeit within the permissible boundaries of the statute.

Responsiveness

Speed is the essence of the processes under the Code. The IBBI, being a creation of the Code, imbibed speed from day one. It was established on October 1, 2016 and instructed to commence corporate insolvency by December 1, 2016. This required nothing short of a miracle. The immediate tasks included: market volunteering to set up IPAs; individuals with right calibre to enrol with IPAs and seek registration with the IBBI as IPs; regulations relating to IPs, IPAs, CIRP and Liquidation Process to be in place; advocacy to spread the message of the Code and make the stakeholders aware of their role, and the IBBI to have the capacity to work on these. With active support of the Government, the IBBI delivered all these, making roll out of corporate insolvency possible on December 1, 2016. Promptitude has been a part of its work culture since then.

Regulators are created to address the concerns proactively or at least immediately after a concern has surfaced. A few illustrations of such response by IBBI are presented here:

(a) In the CIRP of Jaypee Infratech Limited, public announcement was made on August 10, 2017 seeking claims by August 24, 2017. It was not clear whether an allottee of a real estate project would submit claims as an FC or OC. To ensure that claims are submitted by August 24, 2017, the IBBI amended the CIRP Regulations on August 16, 2017 to enable submission of claims by allottees. In course of time, the Code was amended on June 6, 2018 to explicitly consider such allottees as FCs.

(b) The first resolution plan under the Code was approved on August 2, 2017, whereby the CD got amalgamated with a group company, while the creditors took a haircut of 94%. This appeared like rewarding the promoters, who probably drove the company to the ground, at the expense of the creditors. To maintain integrity of CIRP, the IBBI amended the CIRP Regulations on November 7, 2017 requiring disclosure of the antecedents – convictions, criminal proceedings, wilful defaults, debarments – of the resolution applicant and its connected persons to enable an assessment of the credibility of such applicant. Subsequently, the Code was amended on November 23, 2017, prohibiting persons with such antecedents and the connected persons from submitting resolution plans

(c) It was noticed that some IPs were not paying adequate attention to compliance with provisions of the applicable laws. The IBBI, vide a circular dated January 3, 2018, directed that the IP shall exercise reasonable care and diligence and take all necessary steps to ensure that the CD undergoing any process under the Code complies with the applicable laws. It clarified that if a corporate person suffers any loss, including penalty, if any, on account of non-compliance of any provision of the applicable laws, such loss shall not form part of IRPC or liquidation process cost. Subsequently on June 6, 2018, the Code was amended to the effect that the IP, acting as IRP or RP, shall be responsible for complying with the requirements under any law for the time being in force, on behalf of the CD.

(d) When the stakeholders have proposed an IP, the AA needs to verify his credentials from the IBBI before appointing him for a process. This requires the AA to make a reference to IBBI and the IBBI to respond. To save time, the IBBI makes available the database of all eligible IPs with the AA in advance so that it can appoint the IP instantaneously. Similarly, where the stakeholders have not proposed an IP, the AA needs to make a reference to the IBBI for recommendation of an IP. To expedite the process, the IBBI makes available a Panel of recommended IPs for appointment as IRPs/ RPs/ Liquidators/ Bankruptcy Trustees, with the AA. The Panel provides ⁴⁷ instant solutions to the AA to pick up a name and make the appointment. The NCLAT has held ⁴⁸ that an IP appointed out of the list of IPs should be treated as an appointment on the recommendation of the IBBI. The Code initially envisaged 14 days for appointment of an IRP. This innovative solution, however, made appointments instantaneous. In recognition of this, the Insolvency Law Committee (ILC) recommended ⁴⁹ doing away with 14 days for appointment of an IRP and section 16(1) of the Code was accordingly amended in December 2019.

(e) Regulation³⁷ of the CIRP Regulations provides that a resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the CD for maximisation of value of its assets. It provides much more flexibility in developing a resolution plan and a list of inclusive measures that a resolution plan may provide for. The Standing Committee of Finance has recently recommended ⁵⁰ that the Code may be amended to clarify that the resolution plan can be achieved through any of the means specified in regulation 37.

 Governance

There have been concerns emanating from integration of powers in a regulator. Highlighting the concern, the Supreme Court observed ⁵¹ that integration of power by vesting legislative, executive, and judicial powers in the same body, in future, may raise several public law concerns as the principle of control of one body over the other was the central theme underlying the doctrine of separation of powers. Recognising the concern, the IBBI structured itself, within 100 days of its existence, into three separate wings, namely, Research and Regulation Wing, Registration and Monitoring Wing, and Administrative Law Wing and each of these wings is headed by a separate Whole-time Member, to minimise intra-institutional and public law concern.

The Code does not distinguish between the IBBI and its Governing Board (GB). It is, however, useful to distinguish between the body of regulator (an office, employees, assets, and other resources) and its head, the GB which provides leadership, determines strategy, ensures risk management, scrutinises performance, and challenges itself for excellence. In its first meeting held on October 7, 2016, the GB identified the businesses which it alone should transact, pending formal regulations. The formal regulations were notified on January 31, 2017, earmarking the businesses to be transacted by the GB. The GB broadly carries out quasi-legislative functions and approves major policy initiatives and standing operating procedures for important executive functions. The regulations provide for a Charter of Conduct for Members of GB to ensure that the GB conducts in a manner that does not compromise its ability to accomplish its mandate or undermine public confidence in the ability of members to discharge their responsibilities.

Conceptually, the GB’s primary responsibility is to act as a hands-on principal to hold the management accountable. To play this role effectively, non-executive members of the GB have been meeting stakeholders and officers of the IBBI periodically. Further, a regulator is created to serve the society and the economy, not just the stakeholders or direct beneficiaries. This requires an external perspective in governance of the regulator.⁵² There is a thinking to commence interaction of the non-executive directors with representatives of the society, other than direct stakeholders. The GB has been conscious of its performance from the very beginning. It has been evaluating itself since 2018-19 to assess if it is meeting the expectations of external scrutiny and improving both organisational and board performance and to identify the strengths, weaknesses, and opportunities to improve its performance. The evaluation covers broadly three dimensions, namely: (a) Board Composition and Quality, which cover aspects such as expertise and experience of Board Members, strategy to achieve laid down objectives, quality of debate and discussion in its meetings and its engagement with stakeholders; (b) Board Meetings and Procedures, which cover aspects such as regularity and frequency of Board meetings, accuracy of minutes, amount of time spent on strategic and important matters and follow-up on actions arising from Board meetings; and (c) Board Functions and Development, which include aspects such as integrity of accounting and financial reporting, promoting transparency and good governance and open channels of communication with the top management. The outcome of evaluation is being reported in the annual report. The IBBI also evaluates its performance independent of evaluation of the GB. Keeping in view the inadequacy of self-evaluation, the GB directed evaluation of the performance of IBBI, as distinct from that of the Code, by an external agency. The National Council of Applied Economic Research (NCAER) has been commissioned recently to undertake an evaluation covering different aspects, including determination of continued regulatory relevance of IBBI and to develop a framework for assessment of IBBI as a regulator going forward.

The GB is now seized with a desire to reimagine IBBI and IBC with changing times and challenges ahead. It is examining afresh the raison d’être of IBBI as to whether its continued existence is warranted in the light of the outcomes of the processes being overseen by IBBI and whether these are eventually leading to enhanced economic performance. In the reimagined IBC, GB is considering administrative processes under IBBI’s supervision, in place of adjudicatory process, in respect of voluntary liquidation and FSP.

There is no standard framework available to track outcomes of insolvency reforms, other than the World Bank Ease of Doing Business indicators. The World Bank indicators, which is designed in the context of ease of doing business in nearly 200 countries, have limitations to track or measure the outcome of an insolvency regime. Hence, it is important to design a framework for assessment of performance of the insolvency regime in the country in terms of its effectiveness, efficiency, and efficacy. Such a framework would inform various stakeholders, in a structured manner, of the outcomes of the new regime, and enable organisation and availability of information required for the framework. Keeping this in view, the IBBI set up a Working Group to develop a framework for tracking outcomes of the Code vis-à-vis its objectives.

In the interest of transparency and accountability, the IBBI has suggested several amendments to provisions relating to its working, powers, and functions. These include a mechanism for appeal against the orders of IBBI, credit of penalties imposed by the IBBI to CFI, streamlining provisions relating to inspection and investigation, etc. The ILC has decided ⁵³ that the suggested amendments would be addressed by the Government in consultation with the IBBI at a later stage. 

Making regulations

Generally, regulations try to resolve ‘polycentric’ problems. Such problems involve many interested parties interacting with one another in a fluid situation. A small trigger in one variable creates tensions all around, with an incalculable series of interdependent changes. It is not possible either to identify the stakeholders likely to be impacted by a change, and factor in the series of interdependent changes, nor to organise them to participate in the decision making. Yet, the regulators must have ‘second sight’ to see the entire play in an evolving environment before any regulatory intervention to ensure that it addresses the identified market failure and does no more. This makes regulation making more of an art: it is difficult to derive regulations from mathematical formulations or rely on a standard ‘one-size-fits-all’ formulation. A responsive regulator designs and modifies regulations, proactively with changing needs of the market.

The Supreme Court has observed ⁵⁴ that it would be a healthy functioning of our democracy if all subordinate legislation were to be transparent. It exhorted Parliament to frame a legislation along the lines of the US Administrative Procedure Act, 1946 (with certain well-defined exceptions) by which every subordinate legislation is subject to a transparent process. It requires that due consultations are held with all stakeholders, and the rule or regulation making power is exercised after due consideration of all stakeholders’ submissions, together with an explanatory memorandum which broadly considers what they have said and the reasons for agreeing or disagreeing with them. While it is not possible to have standard regulations to address a market failure, it is possible to standardise process for making regulations to ensure that the regulations are effective as well as responsive, yet not excessive. The IBBI (Mechanism for Issuing Regulations) Regulations, 2018 (Issuing Regulations) provide a standard mechanism and process for making or amending any regulations. Due to ever evolving nature of markets, a subordinate legislation, over time, may become obsolete. The Issuing Regulations require the IBBI to review each regulation every three years unless a review is warranted earlier. The IBBI has been making regulations in accordance with these Regulations, although it falls short to an extent in the quality of economic analysis.

The IBBI has always endeavoured to engage with stakeholders in every possible format in the regulation making process, to ensure acceptable degree of legitimacy. The engagement factors in ground realities, secures ownership of regulations and produces regulations which are robust and precise, relevant to the market needs of the time. The IBBI discusses the draft regulations in several roundtables with the stakeholders to revalidate the understanding of the issues the said regulations seek to address, and the appropriateness of such regulations to address the issues. After considering comments of public on draft regulations and the advice of the relevant Working Group and Advisory Committee, the GB approves regulations. The IBBI also organises roundtables to convey the intent of regulations so made to stakeholders and facilitate implementation of the regulations. The IBBI has a standing arrangement to enable any stakeholder to seek any new regulation or any change in any of the existing regulations, throughout the year. This puts every stakeholder into the shoes of a regulator and crowdsources ideas and perspectives. Consequently, the universe of

ideas available with the regulator is much larger and the possibility of a more conducive regulatory framework much higher. The IBBI invites comments from stakeholders on the existing regulations in April every year. It has been the endeavour to process the comments received till December and following the due process, modify the regulations, to the extent necessary, by March. 

Use of technology

The IBBI has laid emphasis on using information technology (IT) for delivery of its services since its inception. It made a functional website available by middle of November, 2016, and the submission of online applications for registration of IPs commenced by end of November, 2016. An online limited insolvency examination was available by the end of December, 2016. Gradually, the facilities were enhanced, IP registration module was redeveloped to make it fully online, and Content Management System improved the capability of the website, which is now a repository of matters relating to insolvency and bankruptcy in the country. The IBBI conducts four online examinations (Valuation Examinations for three Asset Classes and Insolvency Examination) in four sessions every day from about 100 locations. It has a mechanism for stakeholders to file complaints and grievances online and track their status. It has an electronic platform that enables seeking and processing comments and suggestions on each section / regulation and sub-section / sub-regulation of the proposed legislation/subordinate legislation. This platform has also been used by Government a few times to seek comments on draft legislations.

The IBBI disseminates a variety of information about professionals and processes. IPs, IPAs, Registered Valuers, RVOs, AA and stakeholders submitting complaints have role-based login IDs. IPs have been filing process related Forms online. While work is on to expand coverage, add analytics and make data available in machine readable form, the following data are available on IBBI’s website:

(a) Insolvency Professionals: The available information includes profile of the IP, including professional qualifications, work experience, details of authorisation for assignment (AFA), details of continuous professional education (CPE), Orders of the DC, if any, detail of assignments handled in various capacities (IRP, RP, and Liquidator), etc.

(b) Corporate insolvency resolution process: It disseminates: (i) profile of the CD, public announcement, invitation of EoI, details of claims of creditors, and related orders of AA, in respect of each CIRP, (ii) outcomes in terms of liquidation value, claims, realisations by FCs and OCs, and timelines, in respect of each CIRP ending with resolution plans, and (iii) outcomes in terms of number of resolution plans received, highest value offered through resolution plan, details of claims, and timelines in respect of each CIRP ending with order of liquidation.

(c) Liquidation process: The details available are: (i) profile of the CD, public announcement, details of claims of stakeholders, and related orders of AA, in respect of each liquidation process, and (ii) outcomes in terms of sale proceeds, claims, liquidation value, distribution of sale proceeds among stakeholders, and timelines in respect of each closed liquidation process.

(d) Voluntary liquidation process: The details available are: (i) profile of the CD, public announcement, and related orders of AA, in respect of each voluntary liquidation process, and (ii) outcomes in terms of amount due to creditors, the realisation of assets, distribution of sale proceeds among creditors, liquidation expenses, and timelines in respect of each closed voluntary liquidation process.

The IBBI has a paperless office that ensures transparency and accountability and assures data security and integrity. In times of COVID-19, e-Office and e-Meetings helped the officials to dispose the office work from the safety of their respective homes and the office was fully functional even during the nationwide lockdown or peak of second wave of the pandemic. Going forward, the IBBI is working on a single comprehensive IT system, IBC-21 which will be a ‘one-stop-shop’ for all data pertaining to processes under the Code and service providers registered with the IBBI and for all interactions with stakeholders.

Building profession

The IBBI has been shepherding two emerging professions, namely, insolvency profession and valuation profession. While using the standard toolbox to build professions, it has made some innovations as discussed below.

Graduate Insolvency Programme: The IBBI led an industry initiative to conceptualise Graduate Insolvency Programme (GIP) to take the insolvency profession to the next level. It is a one of its kind programme in the world to produce top-quality IPs who can deliver world-class services. It provides an avenue for young professionals, having talent but lacking experience, to take up the insolvency profession. It is a 24-month programme consisting of an intensive residential classroom component of 12 months and a hands-on internship component at the cutting edge of the practice for 12 months. The Indian Institute of Corporate Affairs commenced GIP in 2019-20. The National Law Institute University, Bhopal is scheduled to commence GIP in 2021-22. A few pass outs of the first batch have recently joined the profession.

Fit and Proper Person: A distinct requirement of the insolvency profession (also valuation profession), as compared to most other professions in the country, is that it lets only those individuals in, who the profession would feel proud of, and prevents entry of those individuals, whose antecedents are doubtful or questionable. The IBBI allows entry of only those individuals who are fit and proper person and requires them to remain ‘fit and proper’ as a condition of continued registration. For determining whether a person is ‘fit and proper’ or not, it considers various aspects, including but not limited to (a) integrity, reputation, and character, (b) absence of convictions and restraint orders, and (c) competence and financial solvency.

Valuation Profession: Valuations serve as reference for evaluation of choices, including liquidation, and selection of the choices that decides the fate of the CD and consequently its stakeholders. If valuation is not right, a viable CD could be liquidated and an unviable CD could be rehabilitated, which are disastrous for the economy. The Code read with regulations assign valuation to RVs, which did not exist as such. As an interim arrangement, a framework was created under the Companies Act, 2013 enabling IBBI to groom valuation profession. To take the profession to the next level, a Committee of Experts has recommended establishment of National Institute of Valuers to steer regulation and development of valuation profession.

Knowledge organisation: The IBBI strives to be a knowledge organisation given its role in respect of two new professions. In association with IPAs, it has been engaging with researchers, academia, and practitioners to produce and capture emerging knowledge and build capacity of professionals at the time of entry and on a continuing basis. The IBBI and IPAs bring out several publications, and research studies, and actively encourage and support academia to do so. The IBBI has made available study material, developed by experts, to help the candidates appearing for insolvency and valuation examinations. Of these, the study materials for plant and machinery, and land and building, developed by Centre for Valuation Studies, Research and Training Association, are used by many valuer organisations across the world.

Innovative solutions 

The IBBI has played a pioneering role from conceptualisation to implementation of several innovative products, including insolvency framework for resolution of stress of financial service providers, PPIRP, and institutional framework for valuation profession. It has conceptualised several innovative solutions to improve outcomes of processes and taken up with appropriate authorities. Some of them are as follows.

Insolvency professional entity: An individual IP may not always have adequate resources of his own to handle a large and complicated CIRP. It would help him if he has access to a developed pool of resources which he can draw in case of need. The IP Regulations provide for such a pool in the form of IPE to provide support services. An IP may use the services of a recognised IPE subject to the condition that the entity as well as the IP shall be jointly and severally liable for all acts of omission or commission of its partners or directors as IPs.

Resolvability: The Code has shifted the focus of creditors, in case of default, from the possibility of recovery to the possibility of resolution. The success of resolution process depends on how resolvable the company is. The likelihood is more if the company has value, and such value is free from encumbrances, is visible to a discerning eye, and easily realisable by any resolution applicant. It is less if value resides in informal, off-the record arrangements; personal relationships of promoters; disputed titles, complicated structures, and contingent contracts; or avoidance transactions. To improve the likelihood of resolution, a company should consider having a sort of ‘living will’ that provides a guided path for resolution. The IBBI is advocating companies to always remain resolvable, should the need arise. In the days to come, market would prefer to deal with a company which is resolvable and a resolvable company would obtain a competitive advantage vis- á-vis non-resolvable company.

Automation of contracts: It often takes time and effort for an IU to receive the information from one of the parties to a loan agreement and then seek authentication from the other party before the information is usable. Automation (standardisation, dematerialisation, and electronic execution) of loan agreements will obviate the need for authentication, facilitating seamless insolvency proceedings, while making the process of contracting efficient. An IU or some other repository could facilitate automation of loan contracts and serve as comprehensive utility for all the financial information required for insolvency proceedings. The IBBI has been advocating automation of loan contracts. A beginning has been made whereby the National e-Governance Services Limited (NeSL) facilitates digital execution of loan agreements. The Secondary Loan Market Association, a selfregulatory body, has been set up by banks to specify standard documentation and covenants for loans and ensure standardisation of practices to promote secondary market for corporate loans.

Fresh Start Process: The Code envisages an FSP which allows an indebted individual to restart his life afresh, where the chances of recovery are so low that the cost of resolving the insolvency becomes an additional burden to either the debtor or the creditor or the State. It, however, provides for a court supervised and IP assisted FSP. The IBBI, based on advice of the advisory committee, has suggested a redesign of the process to make it accessible, simpler, quick, and cost effective. It has recommended: (a) Shift from quasi-judicial process to an administrative process, whereby dedicated Debt Relief Officers of IBBI will oversee the FSP and issue debt relief orders; (b) Shift from sophisticated IPs to Insolvency Advisers, who will assist and guide eligible debtors; and (c) Implementation of the entire process on an online platform accessible from anywhere. The ILC⁵⁵ found this feasible and has recommended an amendment to the Code to this effect. 

Platform for distressed assets: India is one of the fastest-growing, trillion-dollar economies. In the face of competition and innovation, it is natural that some firms will have stress. Given the size of the economy and its growth potential, there will be a continuous flow of stressed assets into market. They would need to be resolved, not necessarily through IBC. The resolution would happen even before the assets become stressed. It is necessary to have robust and liquid market for stressed assets that enables realisation of best value by the stakeholders and rescue of viable firms. The IBBI has empanelled two vendors, namely, NeSL and Mjunction, for providing platforms for distressed assets, with four elements: (a) Market for Interim Finance, (b) Virtual Data Room, (c) Invitation and Evaluation of Resolution Plans, and (d) Auctions for Liquidation Assets. As participation increases, the platforms would prove to be a gamechanger, providing cost efficient resolutions.

The IBBI has recommended redesign of several other elements in the Code to make them operational and effective. These relate to avoidance transactions, Insolvency and Bankruptcy Fund, IU, AA, group insolvency, cross border insolvency, corporate liquidation, voluntary liquidation, etc. These are at various stages of consideration.

BUILDING LEGITIMACY

What distinguishes an organisation from an institution is its legitimacy. An organisation needs to be accepted by the stakeholders for what it does and how it does, rather than only for its statutory mandate. What sets apart an institution from others is the perception that its actions are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions. ⁵⁶In a regulatory context, a regulator can be said to be ‘legitimate’ if it is perceived as having a right to govern both by those it seeks to govern and those on behalf of whom it purports to govern.⁵⁷This requires the regulator to build its social capital by consistent conduct and performance over years or even decades. To my understanding, the IBBI began the journey of legitimacy from its very inception.

The kind of pro-active engagement IBBI has with stakeholders, including through hundreds of roundtables every year, has been unprecedented in many ways. The active role stakeholders have played has been commendable, turning out to be the most valuable resource of the IBC ecosystem. Many believe that IBC has been a reform by the stakeholders, for the stakeholders and of the stakeholders. Further, the statutory process of making regulations and an organisational structure that houses the quasi-legislative, executive, and quasi-judicial wings at arm’s length distance, help build credibility of each regulatory action of IBBI.

The IBBI is constantly learning and upgrading the skills of its officers. Every interaction with constituents of the insolvency ecosystem brings new learnings and understanding. The IBBI is also making efforts to encourage research in insolvency to help make better and informed policy decisions going forward. It has recently set up a Research Guidance Group comprising of eminent policy makers, subject experts, and academicians to guide research in this evolving area and promote academic research.