IBC Section 16: Appointment and tenure of interim resolution professional

Section 16 of Insolvency and Bankruptcy Code, 2016: Appointment and tenure of interim resolution professional

Official Bare Act Text

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

(1) The Adjudicating Authority shall appoint an interim resolution professional within fourteen days from the insolvency commencement date.

(2) Where the application for corporate insolvency resolution process is made by a financial creditor or the corporate debtor, as the case may be, the resolution professional, as proposed respectively in the application under section 7 or section 10, shall be appointed as the interim resolution professional, if no disciplinary proceedings are pending against him.

(3) Where the application for corporate insolvency resolution process is made by an operational creditor and-

(a) no proposal for an interim resolution professional is made, the Adjudicating Authority shall make a reference to the Board for the recommendation of an insolvency professional who may act as an interim resolution professional;

(b) a proposal for an interim resolution professional is made under sub-section (4) of section 9, the resolution professional as proposed, shall be appointed as the interim resolution professional, if no disciplinary proceedings are pending against him.

(4) The Board shall, within ten days of the receipt of a reference from the Adjudicating Authority under sub-section (3), recommend the name of an insolvency professional to the Adjudicating Authority against whom no disciplinary proceedings are pending.

(5) The term of the interim resolution professional shall continue till the date of appointment of the resolution professional under section 22.

Legal Commentary & Landmark Judgments: Section 16

Section 16 regulates the appointment and tenure of the Interim Resolution Professional (IRP), establishing the statutory mechanism for appointing the IP proposed by financial creditors or nominated by the IBBI.

Appointment on Admission Date: The Adjudicating Authority shall appoint an Interim Resolution Professional on the insolvency commencement date.
Appointment on Creditor Proposal: Where application is made by a financial creditor or corporate applicant, the proposed IP is appointed if no disciplinary proceedings are pending.
Reference to IBBI: Where an operational creditor does not propose an IRP, the NCLT refers to the IBBI for recommendation within ten days.
Tenure of IRP: Section 16(5) (as amended in 2018) provides that the term of the IRP continues until the appointment of the Resolution Professional under Section 22.

Key Landmark Precedents:

Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: The Supreme Court emphasized that the IRP appointed under Section 16 is an officer of the court and a designated statutory trustee, required to act with complete independence from both promoters and creditors.
ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2019) 2 SCC 1: Affirmed that the IRP takes charge of the corporate debtor immediately upon appointment under Section 16, ensuring uninterrupted business preservation.

Courtroom Practice & Strategic Litigation Guidance:

Financial creditors must always attach Form 2 (written consent of proposed IRP) along with the Section 7 petition. Verify from the IBBI website that the proposed IRP possesses a valid Authorization for Assignment (AFA) and has no pending disciplinary actions.