The government has barred resolution professionals (RPs) under the insolvency process from being appointed as liquidator for the same company for which a resolution plan was previously rejected. The Insolvency and Bankruptcy Code (IBC) Amendment Act 2026, passed by Parliament recently, has broadened the disqualification criteria for RPs acting as liquidators.

In the original IBC (Amendment) Bill, the disqualification of an RP was tied to a specific failure under Section 30(2), which requires RPs to examine compliances in a resolution plan before submitting it to the committee of creditors (CoC) for approval. However, according to the final approved law, RPs cannot be appointed or replaced as liquidator of the same entity under any circumstances.

New appointment mechanism

Notwithstanding the Bill’s proposal to allow the CoC to suggest the liquidator, the Act introduced a completely new appointment mechanism wherein the adjudicating authority (AA) will refer the matter to the IBBI, which must propose the name of an insolvency professional within 10 days.

What do experts say?

Experts said the Act bifurcated the roles and responsibilities of an RP and a liquidator to promote transparency. “This step would disincentivise RPs from putting a company into liquidation as they will not have a role to play at the liquidation stage,” said Prateek Kumar, partner at Khaitan & Co.

“The automatic disqualification of an RP from being appointed as liquidator of the same matter eliminates any hint of conflict, thereby guaranteeing neutrality and independence,” said Srinivasa Rao, senior partner (risk advisory) at Nangia Global.

Further, the IBC amendment Act has diluted the penal provisions for RPs found violating certain sections of the IBC. Even though the Bill retained criminal liability (from the parent law) under Sections 74 and 76 of the IBC, the approved Act replaced those criminal liabilities with civil penalties under new sections – 67B and 67C, which is considered a substantive policy shift.

Under Section 67B, the Act covers breaching moratorium terms and violating an approved resolution plan with civil penalties running up to Rs 2 crore. On the other hand, Section 67C targets operational creditors who conceal a pre-existing dispute or debt repayment when filing an application to initiate insolvency proceedings with civil penalties between Rs 1 lakh and Rs 2 crore – to be decided by the AA.

This is a significantly lower form of punishment compared to corresponding sections – Section 74 (contravention of the moratorium or approved resolution plan) and Section 76 (non-disclosure by creditors) – which were part of the pre-amended Code.

Experts said that the transition from criminal charges to civil penalties will minimise the fear-based behaviour without undermining accountability. “The introduction of section 67B and 67C are aimed at decriminalising – removal of imprisonment – the violation of certain provision of IBC for an errant RP while retaining fines. This dilution will give RPs the freedom to function without the threat of harsh consequences,” said Khaitan & Co’s Kumar.

Following the passage of the Bill in Parliament, the Act received the President’s approval last week. The insolvency board has already initiated the process of framing new regulations to align with the significant changes brought about by the new law.