An expert committee with the Insolvency and Bankruptcy Board of India (IBBI) has proposed a new set of rules to avoid duplication of action against the erring insolvency professionals (IPs). In a report, the committee noted that parallel disciplinary actions by both IBBI and insolvency professional agencies (IPAs) for similar contraventions can be avoided, by periodic data sharing and regular review meetings between the two.
Preventing double jeopardy for IPs
“It was observed that in the absence of a structured coordination mechanism, there was a possibility of double jeopardy — the same IP being subject to multiple proceedings for the same issue — which could be contrary to the principles of natural justice and administrative fairness,” the committee report said.
It is expected that new norms will make the disciplinary process more fair, transparent, and could serve as a model for collaborative regulation within the insolvency ecosystem.
Experts said that IBBI has issued show cause notices against scores of IPs over the past five years, with a significant number of them having faced penalties and suspensions.
Disciplinary powers of IBBI and IPAs
In the high stakes corporate insolvency resolution process (CIRP), IPs are required to remain unbiased while maintaining the timelines of the process. However, there have been instances where IPs have failed in their duties by taking control of a corporate debtor’s assets or lack of disclosures.
As per the rules, the IBBI can suspend IPs’ registration under Section 220 of the Insolvency and Bankruptcy Code (IBC). The board can also impose monetary penalties (up to a percentage of the fee charged by the IP), or even order imprisonment in cases of serious contraventions.
Similarly, IPAs can initiate action against IPs if they are found to be involved in irregularities related to CIRP. To be sure, any individual seeking IP registration with IBBI is mandated to enroll as a member of IPA.
The IBBI committee said that regular interactions between IBBI and IPAs would facilitate early identification of overlaps, thereby avoiding redundancy in handling of complaints and grievances. As of March 2025, there were three IPAs registered in accordance with the IBC rules.
In July, the IBBI rolled out new guidelines for the appointment of IPs in bankruptcy cases. These guidelines specifically bar the erring IPs from enrolling for the government-approved panel.