IBC Section 208: Functions and obligations of insolvency professionals

Section 208 of Insolvency and Bankruptcy Code, 2016: Functions and obligations of insolvency professionals

Official Bare Act Text

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

(1) Where any insolvency resolution, fresh start, liquidation or bankruptcy process has been initiated, it shall be the function of an insolvency professional to take such actions as may be necessary, in the following matters, namely:-

(a) a fresh start order process under Chapter II of Part III;

(b) individual insolvency resolution process under Chapter III of Part III;

(c) corporate insolvency resolution process under Chapter II of Part II;

(d) individual bankruptcy process under Chapter IV of Part III; and

(e) liquidation of a corporate debtor firm under Chapter III of Part II.

(2) Every insolvency professional shall abide by the following code of conduct:-

(a) to take reasonable care and diligence while performing his duties;

(b) to comply with all requirements and terms and conditions specified in the bye-laws of the insolvency professional agency of which he is a member;

(c) to allow the insolvency professional agency to inspect his records;

(d) to submit a copy of the records of every proceeding before the Adjudicating Authority to the Board as well as to the insolvency professional agency of which he is a member; and

(e) to perform his functions in such manner and subject to such conditions as may be specified.

Legal Commentary & Landmark Judgments: Section 208

Section 208 sets forth the core statutory functions, fiduciary obligations, and standard of conduct governing Insolvency Professionals in all Code processes.

Statutory Roles: An insolvency professional may act as an interim resolution professional, resolution professional, liquidator, or bankruptcy trustee across corporate and individual processes.
Fiduciary Care and Diligence: Must take reasonable care and diligence, maintain complete independence, avoid conflicts of interest, and protect estate assets.
Obligation to Comply with Code: Bound to comply with the Code of Conduct in the IBBI regulations, submit timely statutory disclosures, and maintain confidentiality of sensitive corporate data.

Key Landmark Precedents:

ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2019) 2 SCC 1: The Supreme Court held that the resolution professional is an officer of the court bound by stringent statutory duties under Section 208 to act as an impartial facilitator.
Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: Underlined that Section 208 establishes high standards of fiduciary conduct, ensuring that the professional does not act as an adversary to any stakeholder.

Courtroom Practice & Strategic Litigation Guidance:

Insolvency professionals must maintain contemporaneous audit trails of every communication, inspection, and valuation meeting; complete documentation is the best defense against frivolous Section 208 misconduct allegations.