IBC Section 98: Replacement of resolution professional

Section 98 of Insolvency and Bankruptcy Code, 2016: Replacement of resolution professional

Official Bare Act Text

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

(1) Where the debtor or the creditor is of the opinion that the resolution professional appointed under section 97 is required to be replaced, he may apply to the Adjudicating Authority for the replacement of such resolution professional.

(2) The Adjudicating Authority shall within seven days of the receipt of the application under sub-section (1) make a reference to the Board for replacement of the resolution professional.

(3) The Board shall, within ten days of the receipt of a reference from the Adjudicating Authority under sub-section (2), recommend the name of the resolution professional to the Adjudicating Authority against whom no disciplinary proceedings are pending.

(4) Without prejudice to the provisions contained in sub-section (1), the creditors may apply to the Adjudicating Authority for replacement of the resolution professional where it has been decided in the meeting of the creditors, to replace the resolution professional with a new resolution professional for implementation of the repayment plan.

(5) Where the Adjudicating Authority admits an application made under sub-section (1) or sub-section (4), it shall direct the Board to confirm that there are no disciplinary proceedings pending against the proposed resolution professional.

(6) The Board shall send a communication within ten days of receipt of the direction under sub-section (5) either-

(a) confirming appointment of the nominated resolution professional; or

(b) rejecting appointment of the nominated resolution professional and recommend a new resolution professional.

(7) On the basis of the communication of the Board under sub-section (3) or sub-section (6), the Adjudicating Authority shall pass an order appointing a new resolution professional.

(8) The Adjudicating Authority may give directions to the resolution professional replaced under sub-section (7).

(a) to share all information with the new resolution professional in respect of the insolvency resolution process; and

(b) to co-operate with the new resolution professional in such matters as may be required.

Legal Commentary & Landmark Judgments: Section 98

Section 98 provides statutory rules empowering the debtor or creditor to apply to the Adjudicating Authority for the replacement of the Resolution Professional in individual insolvency proceedings.

Right to Seek Replacement: The debtor or creditor may apply to the Adjudicating Authority for replacing the resolution professional appointed under Section 97.
Reference to IBBI: The Adjudicating Authority shall direct the IBBI to nominate another resolution professional within seven days.
Appointment of Successor RP: Upon receiving nomination from the Board, the court appoints the successor RP who assumes all pending Chapter III duties.

Key Landmark Precedents:

Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 436: The Supreme Court noted that Section 98 provides an essential procedural check, allowing parties to replace an RP who acts with bias or fails to discharge statutory duties impartially.
Lalit Kumar Jain v. Union of India (2021) 9 SCC 321: Affirmed that the replacement mechanism under Section 98 ensures that the resolution process maintains collective stakeholder confidence.

Courtroom Practice & Strategic Litigation Guidance:

If an RP appointed under Section 97 exhibits blatant bias, refuses to consider repayment proofs, or fails to file the Section 99 report within 10 days, move an application under Section 98 before the NCLT for immediate replacement.