Replacing the Resolution Professional under IBC: Cases

The resolution professional runs the process, but he answers to the committee, the NCLT and the IBBI in different ways. Questions ask when and how he can be replaced, whether the committee must give reasons, what a creditor can do about a rejected claim, what rights the suspended directors keep, and when the professional is personally exposed. The four questions below cover each.

1. The Law in Brief

• Section 22. At its first meeting, the committee by 66 per cent either confirms the interim resolution professional as resolution professional or replaces him; a replacement is forwarded by the NCLT to the IBBI for confirmation and then appointed.
• Section 27. The committee may, at any time during the CIRP, replace the resolution professional by 66 per cent, with the written consent of the proposed professional, followed by IBBI confirmation and appointment by the NCLT.
• Role. The professional's powers are administrative; he collates and verifies claims but cannot adjudicate disputes about them (Swiss Ribbons, 2019)
• Accountability. No suit lies against him for acts done in good faith (section 233); misconduct is dealt with by the IBBI, whose disciplinary orders are appealable to the NCLAT.

Figure 1: Replacing the professional

2. Can the CoC Replace the IRP without Reasons?

• Issue. Whether the committee must give reasons to replace the interim resolution professional, and the NCLT's role.
• Law. Section 22(2) allows the committee at its first meeting, by at least 66 per cent, to resolve either to appoint the interim resolution professional as resolution professional or to replace him. The NCLT forwards the name of the proposed professional to the IBBI and appoints him after confirmation (section 22(4)). The Code requires no finding of misconduct; the choice is a commercial decision of the committee.
• Application. The committee voted 72 per cent, above the threshold, and Ms E has consented. Mr B's competence is irrelevant to the committee's right to choose.
• Conclusion. The NCLT should forward Ms E's name to the IBBI and, on confirmation, appoint her. Mr B has no right to be heard on the merits, though he is entitled to his fees and must hand over records.

3. Where Is a Rejected Claim Challenged?

• Issue. Whether the resolution professional can decide a disputed claim finally, and the forum for challenging his decision.
• Law. In Swiss Ribbons (2019), the Supreme Court held that the resolution professional has only administrative powers: he collates and verifies claims, but disputes about them are decided by the NCLT. Section 60(5) gives the NCLT jurisdiction over any claim by or against the corporate debtor and any question of law or fact arising out of or in relation to the CIRP, and section 63 bars civil courts in such matters.
• Application. The professional's classification and quantification are administrative decisions open to challenge. The suit is in a forum without jurisdiction.
• Conclusion. The civil suit is not maintainable. FG Ltd should apply to the NCLT under section 60(5) to challenge the classification and amount. If it succeeds, the committee will be reconstituted with FG Ltd as a member, and decisions taken in its absence may need reconsideration.

Figure 2: Limits and accountability of the professional

4. Are Suspended Directors Entitled to Attend CoC Meetings?

• Issue. Whether suspended directors are entitled to notice of committee meetings and to copies of resolution plans.
• Law. Section 24(3) requires the resolution professional to give notice of committee meetings to members of the suspended board, who may attend without voting. In Vijay Kumar Jain v Standard Chartered Bank (2019), the Supreme Court held that they must also be given copies of resolution plans, subject to undertakings of confidentiality, because they may have useful information and a right to be heard on the plan.
• Application. The directors were denied notice and access. Confidentiality can be protected by undertakings, and their role in the default does not remove their statutory right to attend.
• Conclusion. The NCLT should direct the resolution professional to give the directors notice of meetings and copies of the plans on confidentiality undertakings. They may speak but not vote, and they cannot bid if section 29A bars them.

5. Can a Creditor Sue the Resolution Professional?

• Issue. Whether a creditor may sue the resolution professional for loss, and what other remedies exist.
• Law. Section 233 bars any suit, prosecution or other legal proceeding against an insolvency professional for anything done or intended to be done in good faith under the Code. The protection does not extend to acts in bad faith. The professional must act with integrity and independence under section 208 and the code of conduct, and the IBBI may inspect, investigate and impose penalties through its disciplinary committee. The committee may replace him by 66 per cent under section 27.
• Application. If the sale was a commercial judgment made honestly, section 233 protects him. Appointing a related firm at high fees suggests a conflict of interest and lack of good faith, which section 233 does not cover.
• Conclusion. LM Ltd should complain to the IBBI and may seek directions from the NCLT on the costs. If the committee votes 66 per cent, he can be replaced. A suit for damages may proceed only if bad faith is shown; for honest errors, it is barred.

6. Frequently Asked Questions

Can the NCLT refuse to appoint the committee's choice of resolution professional?

Only on limited grounds, such as the IBBI not confirming the professional or disciplinary proceedings pending against him; it does not review the committee's commercial reasons.

Who fixes the resolution professional's fees?

The committee, subject to the IBBI's regulations; fees form part of the insolvency resolution process costs.

Does the resolution professional need the committee's approval to file avoidance applications?

No. Filing avoidance applications is his own duty under section 25(2)(j); after 2026, creditors may also apply where he fails to report such transactions (section 47).

7. Related Topics

• Topic 24: Interim Resolution Professional. The first thirty days.
• Topic 29: Resolution Professional. Appointment and duties.
• Topic 112: Claims in CIRP. Admission, rejection and late claims.