IBC Section 204: Functions of insolvency professional agencies

Section 204 of Insolvency and Bankruptcy Code, 2016: Functions of insolvency professional agencies

Official Bare Act Text

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

An insolvency professional agency shall perform the following functions, namely:-

(a) grant membership to persons who fulfil all requirements set out in its bye-laws on payment of membership fee;

(b) lay down standards of professional conduct for its members;

(c) monitor the performance of its members;

(d) safeguard the rights, privileges and interests of insolvency professionals who are its members;

(e) suspend or cancel the membership of insolvency professionals who are its members on the grounds set out in its bye-laws;

(f) redress the grievances of consumers against insolvency professionals who are its members; and

(g) publish information about its functions, list of its members, performance of its members and such other information as may be specified by regulations.

Legal Commentary & Landmark Judgments: Section 204

Section 204 outlines the statutory functions of Insolvency Professional Agencies in enrolling, monitoring, educating, and disciplining insolvency professionals.

Enrollment of Professionals: Enrolls individuals as its members who fulfill the prescribed educational and examination criteria.
Code of Conduct Enforcement: Enforces the code of conduct, monitors member performance, and ensures high standards of professional ethics.
Grievance Redressal and Discipline: Suspends or cancels membership of members on grounds of misconduct through specialized monitoring and disciplinary committees.

Key Landmark Precedents:

Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: The Supreme Court recognized that IPAs function as frontline gatekeepers ensuring that only competent and ethical individuals practice as insolvency professionals.
Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: Held that disciplinary functions performed by IPAs under Section 204 provide immediate institutional accountability.

Courtroom Practice & Strategic Litigation Guidance:

Stakeholders with verifiable grievances against an insolvency professional's conduct should file a formal complaint before the grievance cell of the concerned IPA under Section 204 alongside moving the IBBI.