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Insolvency and Bankruptcy Code, 2016 | Part III

Section 120 of the IBC: Standard of Conduct for Resolution Professionals

Section 120 requires a resolution professional to carry out statutory functions and duties in accordance with the professional code of conduct referred to in Section 208 of the Insolvency and Bankruptcy Code, 2016.

Key point: Section 120 establishes the conduct obligation; the detailed professional duties and ethical standards must be read with Section 208 and the applicable Insolvency and Bankruptcy Board of India (IBBI) regulations.

Text of Section 120 - Standard of conduct

120. The resolution professional shall perform his functions and duties in compliance with the code of conduct provided under section 208.

Statutory wording reproduced from the Insolvency and Bankruptcy Code, 2016. See the official India Code text.

Meaning and purpose of Section 120

The provision makes ethical and professional compliance a statutory requirement during the individual insolvency resolution process. A resolution professional must do more than complete procedural steps: the professional must act consistently with the standards imposed by the Code and relevant regulations.

Section 120 appears in Chapter III of Part III, which concerns the insolvency resolution process for individuals and partnership firms. Its practical application depends on the commencement notifications and rules applicable to the relevant class of debtors. The Part III insolvency resolution framework has been brought into force in relation to personal guarantors to corporate debtors; its application should not be assumed to extend identically to every individual or partnership firm.

Section 208: Functions and obligations of insolvency professionals

Section 208(1) addresses functions performed by an insolvency professional, including acting as a resolution professional when appointed. Section 208(2) sets out statutory obligations, including taking reasonable care and diligence, complying with the terms of the professional's authorisation, submitting required records, and performing functions in the manner and subject to conditions specified by regulations.

Read together, Sections 120 and 208 mean that a professional supervising a repayment plan must follow applicable standards of independence, diligence, integrity, transparency and professional competence. The detailed code of conduct is contained in the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016, as amended.

Practical standards of conduct

  • Integrity and objectivity: act honestly, avoid improper influence and maintain professional independence.
  • Due care and diligence: examine information carefully and carry out statutory responsibilities competently and promptly.
  • Confidentiality: protect information received in a professional capacity, subject to lawful disclosure requirements.
  • Disclosure of conflicts: identify and disclose relevant relationships and conflicts as required by applicable regulations.
  • Fair treatment and records: communicate accurately with stakeholders and preserve records and reports required by law.
  • Regulatory compliance: observe applicable IBBI regulations, circulars, directions and professional authorisation conditions.

These are explanatory summaries of professional standards, not a substitute for the full regulatory code of conduct.

Section 97 - Appointment of resolution professional

Provides the mechanism for appointment of a resolution professional in the relevant individual insolvency resolution process.

Section 98 - Replacement of resolution professional

Provides a mechanism for replacing a resolution professional in accordance with the statutory procedure.

Section 105 - Repayment plan

Deals with the debtor's preparation of a repayment plan in consultation with the resolution professional.

Section 114 - Order on repayment plan

Deals with approval or rejection of a repayment plan by the Adjudicating Authority and possible implementation directions.

Section 116 - Implementation and supervision

Requires the appointed resolution professional to supervise implementation of the repayment plan and permits applications for directions when necessary.

Section 208 - Functions and obligations

Provides the broader statutory obligations of insolvency professionals and operates alongside the IBBI's professional conduct regulations.

Compliance and regulatory consequences

A breach of professional standards may lead to regulatory scrutiny or disciplinary action under the IBC and applicable IBBI framework, depending on the nature and findings of the breach. Section 120 itself does not prescribe a separate fixed penalty. Relevant provisions include Sections 217 to 220, dealing with complaints, investigation and disciplinary processes.

Frequently asked questions

Does Section 120 contain a detailed code of conduct?

No. It requires compliance with the code of conduct referred to in Section 208. The detailed professional standards are found in applicable IBBI regulations.

Does Section 120 apply to every insolvency professional in every proceeding?

Section 120 specifically addresses the resolution professional's functions in its statutory context. Section 208 and the IBBI professional regulations impose wider duties on insolvency professionals across applicable assignments.

Can a resolution professional be replaced for misconduct?

Replacement may be sought through the applicable statutory process, including Section 98 where relevant. Misconduct may also be examined under the separate IBBI regulatory and disciplinary framework.

Official legal references

For the complete legislation, see The Insolvency and Bankruptcy Code, 2016.

Legal information only. Check the latest notified amendments, applicable commencement provisions and regulatory updates before relying on the law in a particular matter.