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Ethical Dilemmas Facing Resolution Professionals
In the fast-paced world of India's Insolvency and Bankruptcy Code (IBC), Resolution Professionals (RPs) play a pivotal role in steering Corporate Insolvency Resolution Processes (CIRP). They manage operations, preserve assets, and facilitate creditor resolutions. However, this central position often exposes RPs to ethical dilemmas involving resolution professionals, such as conflicts of interest, disclosure obligations, and balancing stakeholder duties. These challenges test their independence and adherence to professional standards.
This post examines key ethical issues drawn from judicial precedents and regulatory frameworks. While providing general insights, note that this is not legal advice—consult qualified professionals for specific situations, as outcomes vary by facts.
Understanding the Role and Ethical Framework of RPs
RPs, governed by the Insolvency and Bankruptcy Board of India (IBBI), must uphold a Code of Conduct under Section 208 of the IBC and IBBI (Insolvency Professionals) Regulations, 2016. Regulation 7(2)(h) mandates avoiding conflicts and maintaining independence. Jubin Kishore Thakkar vs Ashutosh Agarwala - 2025 Supreme(Online)(NCLT) 8077
Key duties include:
- Conducting CIRP transparently.
- Disclosing relationships with the corporate debtor or creditors.
- Ensuring resolution plans comply with IBC requirements under Section 30(2). VIVEK RAHEJA Vs INSOLVENCY AND BANKRUPTCY BOARD OF INDIA - 2026 Supreme(Online)(Del) 19
Ethical lapses can lead to replacement, disciplinary referrals, or appeals, undermining trust in the process.
Common Ethical Dilemmas: Conflicts of Interest
One prevalent issue is dual roles or undisclosed ties. For instance, an RP serving both parent and subsidiary entities raises impartiality concerns.
Dual Appointments and CoC Scrutiny
In a case involving KLT Automotive, the erstwhile promoter challenged the RP's appointment for parent and subsidiary CIRPs, alleging conflict. The tribunal upheld the Committee of Creditors (CoC) decision, noting no substantial evidence of bias. It emphasized that CoC's commercial wisdom prevails absent proven misconduct. Jubin Kishore Thakkar vs Ashutosh Agarwala - 2025 Supreme(Online)(NCLT) 8077
- Key takeaway: Dual roles aren't inherently unethical if disclosed and CoC-approved. Regulation 7(2)(h) requires RP disclosure of engaged professionals' relationships. Jubin Kishore Thakkar vs Ashutosh Agarwala - 2025 Supreme(Online)(NCLT) 8077
Failure to Disclose Ties
RPs must reject appointments if conflicts exist. In one matter, an arbitrator (also an RP-like figure) failed to disclose firm ties to the respondent, breaching ethical conduct. The court invalidated the appointment under Section 12(3)(a) of the Arbitration Act, highlighting duties even if parties are unaware. V. Balakrishnan VS Capital First Limited - 2019 Supreme(Telangana) 188
Courts stress: Duty cast on arbitrator to disclose... he ought to have disclosed conflict of interest. V. Balakrishnan VS Capital First Limited - 2019 Supreme(Telangana) 188
Remuneration and Professional Fees Disputes
Ethical dilemmas extend to fees. RPs and engaged professionals (e.g., valuers, auditors) seek payment as CIRP costs under Section 5(13)(e) and Regulations 33-34.
Ratification by CoC Essential
A transaction auditor's fees were rejected because the CoC didn't ratify them. The tribunal ruled: Professional fees... not payable as they were not ratified by the Committee of Creditors. Rekha Vivek Dhamankar vs Superdrawn Wire Industries Pvt. Ltd. - 2024 Supreme(Online)(NCLT) 270
- Fees for valuers or counsel must be CoC-approved. ANKIT AGARWAL VS CANARA BANK - 2024 Supreme(Online)(NCLT) 5613
- Unpaid professionals risk disputes, but RPs can't unilaterally claim without ratification. Jubin Kishore Thakkar vs Ashutosh Agarwala - 2025 Supreme(Online)(NCLT) 8077
This underscores the ethical need for transparency in cost management to avoid creditor disputes.
Disciplinary Actions and IBBI Referrals
Serious breaches trigger IBBI scrutiny. Section 207 mandates RP registration and ethical compliance.
Referral Not a Final Guilty Verdict
An NCLAT ruling clarified: Referral to IBBI for disciplinary action isn't a conclusive misconduct finding. The referral... does not equate to a conclusive finding of misconduct, rendering the appeal not maintainable. Renuka Devi Rangaswamy, Resolution Professional of Regen Powertech Private Limited (RPPL) vs State Bank of India, Stressed Asset Management Branch (SAMB) - 2024 Supreme(Online)(NCLAT) 1071
- Appeals under Section 61 don't cover mere referrals; they address Part II IBC issues only. Renuka Devi Rangaswamy, Resolution Professional of Regen Powertech Private Limited (RPPL) vs State Bank of India, Stressed Asset Management Branch (SAMB) - 2024 Supreme(Online)(NCLAT) 1071
Investigation Fairness
In irregularities claims against an RP in Sandhya Prakash Ltd., the court refused interference: The Court does not interfere... if the process adopted... is fair, reasonable, and transparent. Abba Consultants Private Limited VS Insolvency And Bankruptcy Board of India - 2023 Supreme(Del) 5660
IBBI's process under Regulation 7 involves complainant and RP inputs, ensuring balance. Abba Consultants Private Limited VS Insolvency And Bankruptcy Board of India - 2023 Supreme(Del) 5660
Broader Professional Ethics Lessons from Legal Precedents
IBC ethics mirror wider legal standards. Advocates and professionals face similar scrutiny:
- Contempt and Misconduct: Courts decry ethical declines, e.g., suborning witnesses or neglecting restraints. R. K. Anand VS Registrar, Delhi High Court - 2009 Supreme(SC) 1329
- Bar Council Duties: High moral standards are preconditions; violations invite discipline. C. Ravichandran Iyer VS Justice A. M. Bhattacharjee - 1995 Supreme(SC) 907
RPs, as insolvency professionals, draw parallels: Independence is paramount, akin to judicial oaths. R. Muthukrishnan VS Registrar General of the High Court of Judicature at Madras - 2019 Supreme(SC) 345
| Ethical Issue | Regulatory Basis | Judicial Insight |
|---------------|------------------|------------------|
| Conflict Disclosure | Reg. 7(2)(h), IBC S.208 | CoC wisdom unless proven bias Jubin Kishore Thakkar vs Ashutosh Agarwala - 2025 Supreme(Online)(NCLT) 8077 |
| Fee Ratification | Reg. 33-34 | Mandatory CoC approval Rekha Vivek Dhamankar vs Superdrawn Wire Industries Pvt. Ltd. - 2024 Supreme(Online)(NCLT) 270 |
| Disciplinary Referral | IBC S.207 | Not appealable guilt finding Renuka Devi Rangaswamy, Resolution Professional of Regen Powertech Private Limited (RPPL) vs State Bank of India, Stressed Asset Management Branch (SAMB) - 2024 Supreme(Online)(NCLAT) 1071 |
Navigating Dilemmas: Best Practices for RPs
To mitigate risks:
1. Proactive Disclosure: Reveal all ties pre-appointment.
2. CoC Engagement: Seek approvals for fees, plans, and professionals.
3. Documentation: Maintain records to defend actions.
4. Independence: Avoid roles compromising neutrality.
Failure invites replacement by CoC or tribunal under Section 60(5). ANKIT AGARWAL VS CANARA BANK - 2024 Supreme(Online)(NCLT) 5613
Conclusion and Key Takeaways
Ethical dilemmas involving resolution professionals demand unwavering integrity amid pressures from creditors, debtors, and timelines. Courts protect CoC autonomy while enforcing disclosures and fairness. RPs must prioritize independence to sustain IBC's efficacy.
Key Takeaways:
- Conflicts require disclosure; CoC decides viability.
- Fees hinge on ratification—unapproved claims fail.
- IBBI referrals initiate probes, not punish.
- Ethical lapses erode trust, risking removal.
As IBC evolves, RPs should stay updated via IBBI guidelines. This overview highlights trends; individual cases need tailored advice.
Disclaimer: This article offers general information based on precedents. Legal outcomes depend on specifics. Seek professional counsel for your matter.
Search Results for "Ethical Dilemmas Facing Resolution Professionals"
1981 0 Supreme(SC) 511 • India - Supreme Court
A.C.GUPTA, V.D.TULZAPURKAR, S.MURTAZA FAZAL ALI, R.S.PATHAK, P.N.BHAGWATI, D.A.DESAI, E.S.VENKATARAMIAH
And then the balance will not be between 'ethical or social' vadues ofa confidential relationship involving the public interest arid ... The role of the Bar council under the Advocates Act is comparable to the role of a guardian in professional ethics. ... of conflict resolution is informal, rough-and-ready and invites a liberal approach.
1979 0 Supreme(SC) 118 • India - Supreme Court
A.P.SEN, D.A.DESAI, V.R.KRISHNA IYER
extreme brutality and murders involving exceptional depravity. ... The policy of retribution is justified and sustained by an ethical philosophy which regards punishment as an integral and in violative ... A 'professional' murderer must, as a matter of course, be sentenced to death because he is a menace to the society.
2009 0 Supreme(SC) 1329 • India - Supreme Court
B.N.AGARWAL, AFTAB ALAM, G.S.SINGHVI
Para 176) ... (p) Administration of Justice – Concen at decline of ethical ... – Public prosecutor interacting with prosecution witness – Neglecting professional restraint – Freely discussing the case with the ... It, however, left them free to carry on their other professional work, e. g., `consultations, advises, conferences, opinion etc. ... The other important issue thrown up by this case and that causes us both grave concern and dismay is the decline of ethical and professional ... Further, there ....
2015 8 Supreme 65 • India - Supreme Court
JAGDISH SINGH KHEHAR, J.CHELAMESWAR, MADAN B.LOKUR, KURIAN JOSEPH, ADARSH KUMAR GOEL
raised and a Resolution was passed appointing such a committee. ... In cases involving vital constitutional issues this Court must feel to bring its opinions into agreement with experience and with ... A Governor is chosen out of persons having professional excellence and/or personal acclaim.
1995 0 Supreme(SC) 907 • India - Supreme Court
B.L.HANSARIA, K.RAMASWAMY
The high moral, ethical and professional standards among the members of the Bar are preconditions even for high ethical standards ... The Bar Council, therefore, is enjoined by the Advocates Act to maintain high moral, ethical and professional standards which of ... Wilful abuse of judicial office, wilful misconduct in the office, corruption, lack of integrity, or any other offence involving moral
2012 0 Supreme(Kar) 521 • India - Karnataka
AJIT J.GUNJAL
Euthanasia is an extremely controversial subject fraught with complex moral dilemmas and ethical implications. ... In the present set of things, certainly, we are not attempting to understand these moral and ethical implications, which are important ... The tear in the disc ring may result in the release of inflammatory chemical mediators which directly causes severe pain.
2019 0 Supreme(AP) 297 • India - Andhra Pradesh
M.SATYANARAYANA MURTHY
Therefore, the Government being litigant is at least expected to follow the ethical issues and practical considerations while dealing ... resolution where appropriate; (g) Minimizing costs in proceedings; (h) Not taking advantage ... Behind each of the duties an overreaching duty to act honestly, fairly, with complete propriety and in accordance with the highest professional
2009 0 Supreme(All) 1260 • India - Allahabad
V.K.SHUKLA, A.P.SAHI, VIKRAM NATH, S.K.JAIN, JANARDAN SAHAI
litigants and public faith—High Court emphasised that Bench and Bar should come together for preservation of judicial system and ethical ... compromises so as to indicate any diminishing standards of professional ethics. ... This in our opinion was not only against professional ethics but it was also a fanatical stand. ... Sir Tej called another meeting and repeated similar resolution.
2019 0 Supreme(Telangana) 188 • India - Telangana
M.S.RAMACHANDRA RAO
trust reposed on him by complainant – Clearly prove guilt of Respondent-1 acted in manner unbecoming of lawyer, who was bound by ethical ... complainant – Facts which are analysed clearly prove guilt of Respondent-1 acted in manner unbecoming of lawyer, who was bound by ethical ... had not known about it, such duty is cast on him not only to disclose it but also to refuse to be an arbitrator to adjudicate the dispute ... Resolution in India (ICADR) shall appoint arbitrator. ... This Court also held that when a lawyer is ....
2017 Supreme(Online)(KER) 27266 • India - High Court of Kerala
SUNIL THOMAS, J
IPC Section 304A, 34 - The court scrutinized the role of expert bodies in assessing claims of criminal negligence against medical professionals ... Issues: Whether the conclusions of the State Level Apex Body pertaining to the absence of criminal negligence were justified ... State of Punjab (2005 KHC 1045), after a lengthy discussion of the various medical, legal and ethical issues involved, ... The Court noticed that a case of occupational negligence was different from one of professional negligence.....
2023 0 Supreme(Del) 5660 • India - Delhi
SUBRAMONIUM PRASAD
Professionals. ... He contends that under Regulation 7 of the 2017 Regulations, upon receiving a complaint from any person regarding the nature and manner of performance of a service provider, including a Resolution Professionals, information is sought from both, the complainant and the service provider. ... It is pertinent to mention here that though initially Union of India was arrayed as Respondent No.2 and the Resolution Professional, against whom the present proceedings have been initiated, was arrayed as Respondent....
2024 Supreme(Online)(NCLAT) 1071 • India - National Company Law Appellate Tribunal
Not Mentioned, Not Mentioned
Section 207 of I & B Code, which provides for the registration of the Insolvency Resolution Professional and that of, Section 208 of the I & B Code which provides to the functions and obligations of the insolvency professionals. ... Functions and obligations of insolvency professionals. -(1) Where any insolvency resolution, fresh start, liquidation or bankruptcy process has been initiated, it shall be the function of an insolvency professional to take such actions as may be necessary, in the following matters, namely:
2024 Supreme(Online)(NCLT) 5613 • India - National Company Law Tribunal
Further, Regulation 34 of the IRP Regulations also defines ‘insolvency resolution process cost’ to include the fees of other professionals appointed by the RP. 31. ... Resolution Process (CIRP). ... resolution process costs” under Section 5(13) (e) shall include expenses incurred on or by the Interim Resolution professional to the extent ratified under Regulation 33 & 34. ... Further since the beginning, the financial creditor had rejected both the appointment and remuneration of the legal counsel so wh....
2025 Supreme(Online)(NCLT) 8077 • India - National Company Law Tribunal
Smt. Lakshmi Gurung, Shri Hariharan Neelakanta Iyer, JJ
Replacement of Resolution Professionals by Committee of Creditors. ... Regulation 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 provides that insolvency professionals must adhere to a Code of Conduct specified in the First Schedule to these regulations for avoiding conflicts of interest and maintaining independence. ... An insolvency professional shall ensure disclosure of the relationship, if any, of the other professionals engaged by it with itself, the corporate debtor, the financi....
2024 Supreme(Online)(NCLT) 270 • India - National Company Law Tribunal
Mr. Shammi Khan, J, Mr. Sameer Kakar, T
It is also denied that other professionals (registered valuers etc) engaged by earlier Resolution Professional i) With respect to Paragraph No. 12, it is stated that averments made therein are a matter of record. ... The applicant has learnt that even other professionals (Registered Valuers etc.) engaged by the earlier RP during the Insolvency Resolution Process of Respondent No 1, have not been paid their professional charges by the Respondents. x. ... It is submitted that all the professionals are reg....
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