Section 17 IBC: Management of Corporate Debtor by Interim Resolution Professional
Section 17 of the Insolvency and Bankruptcy Code, 2016 (IBC) transfers management of a corporate debtor to the interim resolution professional (IRP) from the date of the IRP's appointment. It suspends the powers of the board of directors or partners and enables the IRP to obtain records, direct bank accounts and fulfil applicable legal obligations.
Section 17: Statutory provisions
The following presents the operative clauses of Section 17, including clause (2)(e) introduced in 2018, which was missing from the earlier page.
17. Management of affairs of corporate debtor by interim resolution professional.
(1) From the date of appointment of the interim resolution professional, -
(a) the management of the affairs of the corporate debtor shall vest in the interim resolution professional;
(b) the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional;
(c) the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the interim resolution professional;
(d) the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional.
(2) The interim resolution professional vested with the management of the corporate debtor shall -
(a) act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other documents, if any;
(b) take such actions, in the manner and subject to such restrictions, as may be specified by the Board;
(c) have the authority to access the electronic records of corporate debtor from information utility having financial information of the corporate debtor;
(d) have the authority to access the books of account, records and other relevant documents of corporate debtor available with government authorities, statutory auditors, accountants and such other persons as may be specified; and
(e) be responsible for complying with the requirements under any law for the time being in force on behalf of the corporate debtor.
Meaning and practical effect of Section 17
Management vests in the IRP - Section 17(1)(a)
The IRP assumes responsibility for managing the corporate debtor's affairs upon appointment. The provision supports continuity of operations during the corporate insolvency resolution process (CIRP), subject to the Code and relevant regulations.
Board or partner powers are suspended - Section 17(1)(b)
Existing directors or partners cannot continue exercising the management powers that Section 17 places with the IRP. Their duty to cooperate remains relevant under Section 19 of the IBC.
Officers and managers must provide records - Section 17(1)(c)
Officers and managers must report to the IRP and provide access to necessary corporate documents, accounting information and other records.
Financial institutions must follow lawful instructions - Section 17(1)(d)
Banks and other financial institutions maintaining the corporate debtor's accounts must act on the IRP's instructions concerning those accounts and supply information available to them about the debtor.
Authority and responsibilities under Section 17(2)
- Execution of documents: The IRP may execute deeds, receipts and other documents on behalf of the corporate debtor.
- Regulatory conditions: The IRP must observe the manner and restrictions specified by the Insolvency and Bankruptcy Board of India (IBBI).
- Information utilities: The IRP can access electronic financial records held by an information utility.
- Other records: The IRP can obtain relevant books and documents held by government authorities, auditors, accountants and other specified persons.
- Legal compliance: Section 17(2)(e) makes the IRP responsible for compliance with applicable laws on behalf of the corporate debtor, within the statutory framework.
Related provisions of the IBC
Section 5: Defines important terms used in Part II, including the corporate insolvency resolution process and resolution professional. Section 16: Governs appointment and tenure of the IRP. Section 18: Specifies duties such as collecting information, receiving claims and taking control and custody of assets within the statutory limits. Section 19: Requires cooperation by personnel, promoters and persons associated with management. Section 20: Requires the IRP to preserve the value of the debtor's property and manage operations as a going concern. Section 22: Deals with appointment of the resolution professional. Section 28: Requires committee of creditors' prior approval for specified actions by the resolution professional.
These provisions must be read together; Section 17 is not an unrestricted authorization to dispose of assets or disregard other legal duties.
Frequently asked questions
When does the IRP take over management?
From the date of the IRP's appointment under Section 16, as expressly stated in Section 17(1).
Can directors operate the company's bank accounts after appointment?
Management powers stand suspended and the financial institutions maintaining the debtor's accounts must act on the IRP's instructions under Section 17(1)(d).
Does the IRP have to comply with other laws?
Yes. Section 17(2)(e) expressly assigns responsibility for compliance with requirements under applicable laws on behalf of the corporate debtor.
Official legislation and references
IBBI - The Insolvency and Bankruptcy Code, 2016 (consolidated text)
Ministry of Corporate Affairs - Insolvency and Bankruptcy Code
For the complete statute and other chapters, see The Insolvency and Bankruptcy Code, 2016.