Paper Companies

In India, the term "paper company" or "shell company" is often used to describe entities that exist primarily on paper, with little or no actual business activity. But if we step back, it’s clear that all companies, by their nature, are paper entities—legal constructs rather than physical beings. A company is an artificial entity, created through documentation and compliance procedures, defined by the paperwork that establishes and governs it. It is the legal paper that makes a company a company; they are not people, and they don’t exist outside the constructs of law and compliance.

The distinction, therefore, is not between real companies and paper companies but between those that serve a lawful, intended purpose and those that might be structured to obscure dubious activities. Many paper-based entities operate legitimately, while others may misuse the legal framework.

Legitimate Roles of Low-Activity or Dormant Companies

Several business structures operate with minimal visible activity but serve valid and strategic purposes:

• Holding Companies: Holding companies are legitimate entities set up to manage and control shares in other companies. They typically exist to organize assets, streamline operations, and facilitate business strategy but may not engage in daily business transactions.

• Asset-Specific Companies: Some companies are established specifically to hold a single asset, such as intellectual property or real estate, and have no operational need for employees or frequent transactions.

• Dormant Companies: Businesses may register and maintain companies with future prospects in mind. Dormant companies, or early-stage startups, might be inactive yet compliant, waiting to launch or re-purpose based on business needs.

These companies exist to fulfill legal and strategic purposes, even if their day-to-day activities are minimal or absent. Simply put, they are "paper companies" in the sense that they are entities governed by documentation and legal requirements, but they are not illegitimate.

Regulatory Oversight and the Broad Approach

Despite the inherent legitimacy of paper entities, regulatory bodies like the Ministry of Corporate Affairs (MCA), the Securities and Exchange Board of India (SEBI), and the Income Tax Department have intensified scrutiny on companies with minimal operations, concerned that they may be conduits for tax evasion, money laundering, or other illicit activities. However, their approach often categorizes all inactive or minimally active companies together, leading to a broad sweep that includes legitimate entities within its scope.

When Overreach Affects Compliance

A key example of such overreach was seen in 2017, when the MCA deregistered over 200,000 companies due to inactivity. While the intent was to target suspicious entities, many compliant holding companies, dormant businesses, and investment vehicles were also affected. This broad-brush approach does not account for the varied, legitimate reasons a company might remain inactive or minimal in operations, even while fully compliant with tax filings, MCA requirements, and other obligations.

The Distinction Between Inactive and Illegitimate

In India’s regulatory environment, the lack of a legal definition for "shell company" or "paper company" has led to misinterpretations. Inactive does not mean illegitimate, and minimal operations do not equate to suspicious intent. Key reasons why inactive or paper-based companies are legitimate include:

1. Strategic Legal Structuring: Many entities, such as holding companies or asset-specific entities, play crucial roles in corporate strategy without the need for day-to-day transactions.

2. Compliance-Driven Purpose: Companies that file taxes, submit MCA documentation, and meet regulatory requirements operate within the law, regardless of their operational size.

3. Future-Ready Ventures: Companies may maintain dormant status for future purposes, such as expansions, investments, or future reactivation, without engaging in substantial activities immediately.

The Need for a Targeted Approach

Regulatory efforts would benefit from focusing on specific patterns of non-compliance or suspicious transactions instead of generalizing based on minimal activity. Distinguishing between companies with complex business structures and companies involved in illicit transactions would allow authorities to better target actual misuse.

By refining their approach, regulatory bodies could more effectively identify companies involved in suspicious activities, without unduly penalizing those that serve lawful, strategic purposes. This would protect the interests of law-abiding businesses, support economic strategy, and help prevent the unnecessary burdens that blanket measures create.

Conclusion

In essence, every company is a paper entity—formed and governed by legal documentation. Yet, the function and purpose of these entities vary widely, from active trading companies to passive holding structures. While regulatory oversight is essential to curb misuse, a more discerning, criteria-based approach is needed to differentiate between companies with minimal activity for legitimate reasons and those structured for dubious purposes. This would foster a balanced, fair regulatory environment that supports lawful business operations while focusing resources on genuine cases of misuse.

Summons under PMLA

The Prevention of Money Laundering Act (PMLA) allows statements recorded by investigating officers to be used as evidence in court under Section 50. This provision undermines key constitutional rights and opens the door for abuse, similar to what occurred under TADA and POTA.

1. Violation of Constitutional Rights
Self-Incrimination (Article 20(3)): PMLA violates the right against self-incrimination by making statements recorded by officers admissible, creating pressure for individuals to incriminate themselves. In Nandini Satpathy v. P.L. Dani (1978), the Supreme Court held that indirect coercion to confess violates Article 20(3).
Right to Fair Procedure (Article 21): Maneka Gandhi v. Union of India (1978) established that the procedure must be "fair, just, and reasonable." PMLA's lack of safeguards compromises fair trial rights by allowing statements made without judicial oversight to be used as evidence.

2. Historical Abuse Under TADA and POTA
Similar provisions under TADA and POTA allowed statements made before officers to be admissible, leading to widespread misuse. Kartar Singh v. State of Punjab (1994) recognized the potential for abuse under TADA. Both TADA and POTA were repealed due to their coercive nature and misuse for extracting false confessions.

3. Artificial Distinction Between ED and Police Officers
PMLA's classification of ED officers as "non-police" allows them to record admissible statements. However, this distinction is arbitrary, as ED officers perform police-like functions. In Tofan Singh v. State of Tamil Nadu (2020), the Supreme Court ruled that officers under similar laws (NDPS) should be considered police officers, making confessions inadmissible. The same logic should apply to ED officers under PMLA.

4. Lack of Safeguards and Judicial Oversight
Unlike confessions made before a magistrate, PMLA provides no neutral oversight during questioning. This lack of protection increases the risk of coercion and violates principles outlined in Section 164 of the CrPC, which requires that confessions be made voluntarily before a judicial officer.

5. Global Standards and Potential for Misuse
International law, such as in Miranda v. Arizona (1966) in the U.S., protects individuals from coercive interrogations. PMLA falls short of such standards. Moreover, the act has been used for selective targeting, raising concerns about political misuse, much like the misuse of TADA and POTA.

Conclusion
PMLA’s provisions allowing statements made to investigating officers to be used as evidence violate constitutional safeguards, lack proper oversight, and mirror the abuses seen under TADA and POTA. Either these provisions should be repealed, or significant reforms are needed to ensure fair legal processes.

Guidelines for Committee of Creditors

In their infinite wisdom, the guardians of insolvency have issued “Guidelines” for the Committee of Creditors (CoC) on 06.08.2024. A quick read of the 3-page document reveals that the IBBI expects the CoC to demonstrate: (i) objectivity and integrity, (ii) independence and impartiality, (iii) professional competence and participation, (iv) cooperation, supervision, and timeliness, (v) confidentiality, and (vi) the sharing of information. Essentially, the IBBI has tossed around a bunch of action verbs reminiscent of the jargon MBA graduates throw around during vague consulting interviews.

 

This contrasts with the numerous other guidelines, circulars, notifications, and amendments to regulations that the IBBI periodically issues, often leaving everyone unclear about the current state of the law. The IBBI operates on a principle: the best way to train goalkeepers is by constantly changing the rules of the game. And in this grand game of insolvency, Insolvency Professionals are the goalkeepers.

 

However, in every other publication, the IBBI first mentions the specific section of the Code that empowers it to issue such documents. Then the IBBI mentions why such a publication was necessary, often in an accompanied press release. Then there’s a breakdown of steps to be taken to give effect to the publication. However, when it comes to the CoC, the IBBI merely issues guidelines without referring to a single section or regulation in the legal framework. Why? Because the IBBI was never empowered to assign responsibility (blame) to any of the various stakeholders in the insolvency process – CoC, SCC, NCLT, SBoD, or the auditors. So all the “responsibility” falls on the Insolvency Professional who is the country’s new favourite scapegoat. This often leads to professionals being unfairly scrutinized while the real decision-makers remain insulated.

 

This is reminiscent of IBBI’s circular dt. 10.08.2018 which quotes various judgements from benches of the NCLT which mention that the members of the CoC attending the meetings of the CoC should be empowered to take decisions during the meetings. The NCLT had also directed the IBBI to form appropriate regulations on the matter. In this view, the IBBI had issued this circular directing the IRP / RP to include a note in the agenda for the meeting that the meeting must be attended by persons who are competent and authorized to take decisions on the spot without deferring to internal approval. Here again, the responsibility was thrown on the shoulders of the IRP / RP. Interestingly, this circular was rescinded by circular dt. 23.05.2022 which said that the 10.08.2018 circular was no longer necessary as it had been incorporated in regulation 17 of the CIRP Regulations. But regulation 17 made no such requirement for the CoC. And once again, the insolvency process was left at the mercy of the CoC.

 

To be fair to the IBBI, it is not their fault that they do not exercise any control over the CoC / SCC. The Code simply does not provide the IBBI any power to regulate the actions of the CoC, as it gives to regulate the actions of IPs. But the Code does give the power to the IBBI regarding the constitution of the CoC and SCC. IPs face a regular problem of non-contribution of funds from the CoC / SCC. However, the regulations do not provide the IPs any power to take any penal measures against the CoC / SCC. Instead, the IP is left as a beggar at the heels of the CoC / SCC in hopes of future fee payments and new assignments.

 

The past decade of insolvency has indoctrinated a culture where any lacuna in the insolvency process automatically becomes a fault of the IP. When the CoC does not approve a resolution plan for months in hopes of a higher resolution value through negotiations, it is the RP who has to take repeated extensions, exclusions, and enlargements from the NCLT. When the CoC does not furnish its confidentiality undertaking, the RP has to explain to the Board why the Information Memorandum was issued belatedly to the CoC. In doing so, we have built an expectation of the CoC to be cajoled by the IP at every stage of the insolvency process – right from the choice of the RP by the CoC.

 

The legislature, judiciary, and IBBI have consistently failed to assign real responsibility to the CoC and SCC. This has left IPs as the lone rangers in the vast landscape of insolvency. Being the only class of stakeholders that can be regulated by the IBBI, the IP becomes a natural scapegoat in the insolvency process. Perhaps it's time to empower the CoC with responsibilities—or at least some mild consequences—for their inaction. Otherwise, we may soon find that the only IPs left standing are those who couldn't secure employment elsewhere. And that might not be the vision of the profession that the IBBI is trying to create. Isn't it time we redefined the responsibilities of the CoC before we run out of capable Insolvency Professionals?

Audit Requirements under IBC

• U/r 7(2)(ca) and 13(2)(ca) of the IP Regulations, both an IP and IPE are required to pay 1% of their annual turnover to the Board within 30 days of the end of each financial year
  
  
• U/r 7(2)(cb) of the IP Regulations r/w 31A(2) of the CIRP Regulations, a fee of 1% of the cost incurred in a CIRP must be paid to the Board within 30 days of the end of each quarter
  
  
• U/r 15(1)(b) and 15(5) of Liquidation Regulations, the progress report of a Corporate Debtor will contain audited accounts of the liquidator’s receipts and payments for the financial year. This report needs to be filed with the Adjudicating Authority within 15 days of the end of the fiscal year
  
  
• Tabulating all costs and revenues of the IP, IPE, and the Corporate Debtors at the end of every year / quarter is often a huge task that requires at least an internal audit and ideally a statutory audit
  
  
• Due to the incomplete audit, IPs and IPEs are compelled to submit fees to the Board based on provisional financials to comply with the Board's regulations
  
  
• However, these provisional figures are subject to change, resulting in fees being paid to the Board based on inaccurate revenue and cost estimates
  
  
• It is reasonable to expect that any fee levied by any statutory authority, including the Board, should be calculated based on audited financial statements. That is why most taxes and levies are also based on audited financial statements
  
  
• Surprisingly, the Board only requires IPs to complete audits of themselves, IPEs, and Corporate Debtors within tight timelines of 15 or 30 days
  
  
• This expectation is unrealistic and places undue burden on IPs, leaving room for potential misrepresentation to the Board and potential penalties in the future
  
  
• Therefore, the Board may reconsider its timelines for fee levies until audits of IPs, IPEs, and Corporate Debtors can be appropriately completed

Early Warning Signals of Stress in a Corporate

Stress in the world of banking and finance is associated with sign of  incipient sickness in the conduct of business of borrower. To know the concept of  stressed asset in corporate  we need to look back to couple of decades after  bank nationalization. 

In the early ninety’s of last century prudential norms of asset classification and capital adequacy  were introduced in the country under Banking and Financial sector reforms which together with the industrial sector reforms made a paradigm shift from age old banking practice in India. Prior to that in two tranches nationalization of banks took effect leading to fast expansion of banking throughout the length and breadth of the country. The resultant surge of industrial activities in India due to relatively easy access to fund, deregulation in industrial sector and liberal industrial policies and encouragement by way of incentives & subsidy from both the central and  state governments altogether changed the sloth, slow moving underdeveloped  economy to a rapidly growing developing economy.

The resultant economic activities brought sea changes in social sector gradually shifting large chunk of population from agriculture towards micro, medium and large industries. As a natural consequence service sector started growing by leaps and bounds and India freed itself from  dependence of first world country  in matters of food grains, machineries etc.

In the above back drop, banks, more particularly Public Sector Banks which were the only players gradually shifted their preference in urban and metros from trade and small priority sector lending to industrial advances, advances to service sectors and retail lending. 

To regulate the fast growing  banking activity Reserve Bank of India  was focussed towards honest implementation of  income recognition and asset classification, tight provisioning norms and capital adequacy in banks besides the traditional credit management approach. With the formation of separate Tribunal under the prescription of Narasimham Committee for recovery of Non Performing Assets,  the credit discipline from the point of view of lenders and borrowers were satisfactory. The system started wilting with time as there were stiff competition within the banks for sharing chunk of the pie.

In the midst of unhealthy competition among banks inadequate credit appraisals of new industrial and infrastructure advances became a new norm leading to acceptance of small, medium and large advances proposals from dubious entities having little exposure, knowledge and inadequate investible funds with them. The generous approach of banks by way of relaxations in various norms and securities encouraged fly by night operators to encash the opportunity. The unfortunate result of dilution of norms was quick mortality ( means slippage of an advance facility within one year of disbursement). As a result there were unmanageable pile of suits in   Debt  Recovery Tribunal and locking up of bank funds necessitated new enactment SARFAESI Act 2002 to enable bankers to encash their enforceable securities. 

Post Global Financial Crisis in 2008 saw another new development with the introduction of regulatory forbearance by RBI. The asset classification norms were tweaked in restructured accounts to give relief for temporary mismatch in cash flow in the existing economic slow down throughout the world. The bankers, particularly the PSBs allowed all and sundry including insolvents within the facility thus deferring identification of potential NPAs. At withdrawal of the regulatory forbearance there were flood of slippage and the NPA level of all banks and particularly PSBs went to new height not experienced in previous two decades.

Meanwhile, during the last decade RBI felt urgent necessity of implementing stringent credit monitoring mechanism to curb the disproportionate growth of impaired assets and introduced stressed assets concept within the standard asset category based  on period of default in payment of either the principal or interest or for continuous excess of balance outstanding over limit or drawing power or for non renewal of accounts within a definite time frame. Depending upon time period of overdue the stressed assets other than NPA are SMA 0( 1 to 30days default), SMA 1 (31to 60 days default) and SMA 2 (61 to 90 days default). If the default persist on 91^st day accounts turned to NPA. The periodical AQR(Asset Quality Review) of RBI for big advances of Banks to recognise incipient sickness in accounts and prescribe immediate corrective measures is a step towards this direction.

Finally, the Insolvency and Bankruptcy Code 2016 is based on default concept of corporate and has given free hand to bankers to quickly move to the NCLT to save upon time and   value of the impaired assets.   

Insolvency and Bankruptcy Code, 2016 (“IBC”) has been primarily used for Corporate Debtors. 4,593 Corporate Debtors have undergone the Corporate Insolvency Resolution Process (“CIRP”) with initiation of 4,708 CIRPs, closure of 3,068 CIRPs, and ongoing 1,608 CIRPs as on 30.09.2021 as depicted as depicted adjacent.

 

Particularly worrying is the increase in ongoing cases which might soon run to unmanageable levels. This is also because that many cases for which IBC is not an ideal fit get dumped in the IBC process indiscriminately.

 

We see from the adjacent figure that most of the CIRPs discussed above end in liquidation which is not the end of the IBC process nor is it the end of the litigation process. In fact, many cases linger on without end in liquidation offering no exit since unlike CIRP liquidation is not a time-bound process. Only 14% of the closed CIRP cases have seen resolution.

 

Of all the CIRPs admitted, there is wide variation in the admission, settlement, resolution, and liquidation in terms of the sectoral distribution. This is well shown in the adjacent graph.

 

We see that while the manufacturing sector is most likely to get resolved, and the real estate sector is most likely to enter into settlement and withdrawal. The electricity sector is also highly likely to get resolved and undefined sectors are most likely to be liquidated, seeing no resolution. Most of the discussion of the IBC has been centered around big real estate and manufacturing units since they form the bulk of the cases. However, the efficacy of the IBC as a blanket solution for distressed assets is really tested in the face of other sectors. We see that even though the real estate sector is most likely to be settled, accounts which are not settled are highly likely to enter liquidation thus causing distress to many home buyers.

 

Of the 4,708 CIRPs admitted till September 2021, 1,419 have concluded in liquidation with 1,640 still ongoing. Of the 1,419 liquidations, only 164 have been concluded accounting for only 5% of the total CIRP closures. Hence, liquidation is a limbo process not beneficial for every kind of corporate debtor. However, the very kind of corporate debtor which is most likely to enter into liquidation is the same kind which should not have been admitted into CIRP in the first place.

 

The starkest difficulty of IBC is seen in the case of infrastructure companies. Generally these are large corporate houses building infrastructure projects for various government undertakings such as road, railways, bridges etc. The banking facility availed by such companies is a non-fund based facility viz. a “Bank Guarantee”. In case of default, this bank guarantee comes due as a liability providing no relief on the asset side of the corporate debtor. The assets are future receivables from the project which has failed. So the possibility of any receivables are remote. The government generally has a clause inherent to the contract of such companies that in case of insolvency or bankruptcy of such a company, the contract gets automatically terminated. The infrastructure asset being an immovable construction is seized by the government along with its roadways and waterways and the company is left without any recourse. In this scenario, the company enters the IBC with nothing but a myriad of litigation and a bank guarantee liability running at least hundreds of crores in rupees. This is an impossible situation to navigate through and the company inevitably falls into unsolvable litigation and liquidation, with some scrap value getting preserved. Certainly IBC is not the appropriate way to go about resolving such a company.

 

Contrast that with a real estate company without any liquidity to service its bankers. The bankers invoke the IBC which risks this real estate borrower to lose not only the project at hand, but also the control of all lands acquired in the company. The company has value and it has been seen that the management becomes surprisingly resourceful in finding the liquidity in view of incoming insolvency. Where even the threat of a “creditor in control” model results in the resolution of the corporate debtor.

Effectiveness of IBC’s institutional structures – IBBI, IPs, AA, and IUs

As per IBBI Newsletter of June, 2021, IBC had enabled recovery of Rs. 2.5 lakh crore, against admitted financial claims of Rs. 7 lakh crore – translating to a recovery rate of 36% – for the 396 cases resolved out of the total 4,541 admitted. Of the remaining cases, 1,349 were under liquidation; 1,114 were closed under appeal/ review/ settled or withdrawn, and 1,682 were outstanding. A closer look at the data shows, however, the recovery rate and resolution timelines have a lot more room for improvement. This makes a continuous strengthening of the Code and stabilisation of the overall ecosystem imperative. In respect of 396 resolved cases, actual recovery rate was 36%.

Firstly, out of these 396 cases, the recovery rate, excluding the top 15 of the 396 resolved cases, estimated actual recovery rate was 18% in respect of remaining 381 cases. Estimated actual recovery rate for 1349 liquidation cases was 5%. Secondly, average resolution time for the aforementioned resolved cases is 419 days compared with the stipulated maximum of 330 days. About 75% of outstanding cases have already been pending for more than 270 days.

Notwithstanding these challenges, the IBC has played a key role in resolution of stressed assets so far. Its effectiveness will continue to be tested given the elevated level of stressed assets² in the Indian financial system. In this milieu, the government has been proactive in addressing issues being faced by various stakeholders. In August this year, the Standing Committee on Finance made recommendations to reinforce the IBC and the associated ecosystem. The critical recommendations include: 1) developing specialised National Company Law Tribunal (NCLT) benches to hear only IBC matters; 2) establishing professional code of conduct for committee of creditors (CoC); 3) strengthening the role of resolution professionals; and 4) digitalising IBC platforms in order to make the resolution process faster and maximise the realisable value of assets.

 

However, after all said and done, there seems to be a lot to be done at the Code enforcing agencies, which are IBBI, IPA, CoC, IPs, IU and AA.

Firstly, some words about AA may be stated. IBBI has been a silent spectator of the AA encroaching into its jurisdiction. While IBBI has been stressing the need of observing timeline of the IBC processes, the AA never seems to be bothered about the timeline when it comes to their obligation in the adherence to timeline. AA liberally allows adjournments on flimsy grounds or blank requests by the parties or on its own accord without any reasons. AA liberally allows time for filing pleadings in spite of the non-compliance by delinquent parties to the case. AA entertains arguments by senior counsels for hours together on a particular law point when the IBC is all about the necessity of the business-like attitude of all concerned in resolving the cases. AA frequently takes views beyond the IBC on the pretext of natural justice and even dares to remove the RP on the application of the Suspended BOD, ignoring that RP had filed application under section 66 of the IBC for several hundred crores of rupees  and also ignoring the specific direction of the Supreme Court. It seems that the AA acts more on the wisdom of the judge than on the letter and spirit of the statute. AA even delays the cases where CoC files application for replacement of RP and also when the RP files application for liquidation. Even after the completion of timeline, the AA does not pass the order of liquidation even when the case is fixed for the same for hearing and adjourns abruptly.

Secondly, IBBI, itself adds to agony to effective management of the IBC. IPs are being supervised by IPAs and also by IBBI. For same information, multiple information is to be filed by IP separately to IPA and also to IBBI in different time based and event based forms. IBBI, liberally, amends regulations without any value addition to the IBC system. One such example was the introduction of Form CIRP-8 by inserting Regulation 40A in the CIRP Regulations. The RP, who complied with the requirement of intimation of determination to the IBBI as per CIRP Regulation 35A long back, was also required to file the Form. Instead of requiring to file additional information over the earlier or requiring the updation of earlier information, a whole new Form is asked to be filed by both IPAs and IBBI. IP is forced to keep the IBBI informed every 30 days about the delays in the any event of the IBC, even when the delay had nothing to do with the RP’s action, in Form-8 and is made liable for penalty on lapses. IBBI makes a panel of IPs for providing the same to AAs. These empanelled IPs are rendered eligible for allotment for assignment by the AA for a period of 6 months. Most recent such panel has been released on 31.12.2021 for validity from 01.01.2022 to 30.06.2022. Such panel suffers from some inherent discrepancies since it allows only those IPs to apply for empanelment, who hold the valid AFA for the full period of the stated period. Out of 3500 and odd IPs, only about 900 IPs were empanelled. Similarly for the immediately preceding 6 month period, only 500 IPs were empanelled. Such stipulation for AFA holding was illogical and impractical as it denied the opportunity to even an IP, whose AFA was subject to renewal at the far end of the period and the IP could renew the AFA only within 45 days prior to the expiry date. Further, the guidelines for empanelment stated that the IPs with existing assignments were less eligible for assignment than the IPs with no existing assignments, but such information was not forwarded to the AA by IBBI. The CPE hours earned by IPs, have to be claimed by them in the IBBI website within a week. Such information on the IBBI website has to be approved by the IPA. IPA takes 3-4 months’ time in approval and sometimes rejects the claim without any communication to the IP.

Thirdly, the IPA also contributes its own role in the frustration of the IBC system. The IPA enrols the IPs. IBBI registers the IPs. Thereafter, IPA allows the AFA. IPA requires IPs to file monthly returns and half yearly returns. The IPA requires the IPs to file the disclosures of the relationships with the professionals; CoC members etc. even if there are no related parties or connected parties and require that NIL statement has to be filed. At the time of AFA renewals, it requires the IPs to file Forms with IBBI even if those are not required to be filed. These specific requirements are made by the IPAs when renewal of AFA is being applied, delaying the AFA approval, sometimes, leading to missing the important timelines, like IBBI empanelment etc. Such requirements could be asked by the IPAs in more frequent manner and not to delay on such reasons. CPE hours should be approved more regularly as it expects from the IPs.

Fourthly, the CoC is more concerned on recovery and not resolution. In most of the cases, the CoC consciously drives the CIRP to liquidation. CoC is L1 driven and non-committal of reasonable professional fees for the IPs, forensic audit for quality work, interim finance and extending further credit line to prospective resolution applicants. In many cases, the CoC constituents act through their senior employee officers, who delay the CIRP process by not deciding on the matters in the CoC meetings. In some strange cases, it has been found that such senior officers seem to be more on the sides of the Suspended BOD, who bled the CD in the past. 

Fifthly, IP, who acts as IRP or RP, is not less responsible for the effectiveness of the IBC system. A chain is as strong as its weakest link. The RP is required to interact with the Suspended BOD (SBOD), who was primarily responsible for the stressful condition of the CD. The SBOD was not, prima facie, desired that there should be any CIRP or at least the IP, who was in the driving seat, should be rendered helpless by not providing information, records and encumbering the assets etc. aided by the senior lawyers, who represent them forcefully before AA and prove that the IP was not doing his duty properly and unnecessary harassing the SBOD. If the IP was not strong enough to sustain the pressure of the less supporting CoC and over pressurising SBOD, would not be able to prove the fraud and avoidable transactions conclusively, leading to the delinquent SBOD getting scot free.

Last but not the least, the IU, has been moving at snail’s pace in providing the much needed support system to the IBC system. The IU has not been pro-active in spreading the services, which it could extend at economical cost competing with market forces providing similar services.