IBC Section 120: Standard of conduct

Section 120 of Insolvency and Bankruptcy Code, 2016: Standard of conduct

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

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

Legal Commentary & Landmark Judgments: Section 120

Section 120 obligates the resolution professional to maintain the highest standards of professional conduct, integrity, and objectivity while discharging functions under Part III.

Fiduciary Duty: The resolution professional acts in a fiduciary capacity toward both the debtor and the collective body of creditors, requiring complete impartiality and independence.
Adherence to IBBI Code of Conduct: The professional must strictly comply with the Code of Conduct specified in the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016.
Disciplinary Liability: Any material misrepresentation, bias, conflict of interest, or gross negligence renders the resolution professional liable to disciplinary actions, fines, or removal under the Code.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court emphasized that the resolution professional is an independent officer of the court governed by stringent statutory standards under Section 120 and IBBI regulations.
ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2019) 2 SCC 1: Reaffirmed that the insolvency professional acts as an impartial facilitator ensuring statutory integrity rather than acting as an adjudicator or partisan agent.

Courtroom Practice & Strategic Litigation Guidance:

If a debtor or creditor suspects a conflict of interest or partiality on the part of the resolution professional, an immediate challenge should be mounted before the Adjudicating Authority under Section 120 supported by verifiable documentary evidence rather than vague allegations.