Section 120: Standard of Conduct

Section 120 of the Insolvency and Bankruptcy Code, 2016 requires the resolution professional to perform functions and duties in compliance with the code of conduct provided under Section 208. The provision links the conduct of the resolution professional in the individual insolvency resolution framework directly to the professional standards imposed by the Code.

Text of Section 120

Meaning and scope of Section 120

Section 120 is a short but important professional-conduct provision. It does not create a separate list of duties for the resolution professional. Instead, it incorporates the professional standards applicable under Section 208 into the performance of the resolution professional's functions and duties under the relevant insolvency resolution process.

The expression resolution professional is defined in Section 79(21) for Part III as an insolvency professional appointed under Part III as a resolution professional for conducting the fresh start process or insolvency resolution process. Section 120 requires such a professional to perform statutory functions consistently with the code of conduct applicable under Section 208.

Section 208: functions and obligations of insolvency professionals

Section 208 deals with the functions and obligations of insolvency professionals. It provides the statutory framework under which an insolvency professional may undertake assignments under the Code and requires insolvency professionals to comply with prescribed professional obligations and the applicable code of conduct.

Accordingly, the reference to Section 208 in Section 120 means that professional conduct is not separate from the resolution professional's statutory role. Compliance with the applicable ethical and professional framework accompanies the exercise of powers and performance of duties throughout the process.

Core professional standards

The detailed code of conduct is contained in the regulatory framework governing insolvency professionals. In practical terms, the professional standards address matters such as:

• integrity and objectivity in carrying out the assignment;
• independence and impartiality in professional decision-making;
• professional competence and due care;
• proper maintenance and preservation of records;
• confidentiality of information obtained during the assignment;
• avoidance and disclosure of conflicts of interest;
• timely performance of statutory and regulatory duties; and
• compliance with the Code, rules, regulations and lawful directions of the competent authority.

Why Section 120 matters in a repayment plan

Sections 105 to 119 assign substantial responsibilities to the resolution professional in relation to a repayment plan, including examination of the plan, meetings of creditors, reports to the Adjudicating Authority, implementation and supervision, completion, premature termination and discharge. Section 120 makes professional-conduct compliance an express requirement while those functions are performed.

For example, Section 116 concerns implementation and supervision of the repayment plan, Section 117 concerns completion, Section 118 concerns premature termination, and Section 119 concerns the discharge order. Section 120 overlays those statutory functions with the applicable professional code of conduct.

Regulatory compliance

Insolvency professionals are regulated by the Insolvency and Bankruptcy Board of India. Professional conduct may therefore have consequences not only for the particular insolvency proceeding but also under the regulatory and disciplinary framework applicable to insolvency professionals. The exact duties applicable to an assignment should be checked against the current Code, regulations, circulars and directions in force at the relevant time.

This page is an informational statutory reference. For a live proceeding or professional assignment, verify the current Code, applicable commencement provisions, IBBI regulations, circulars, directions and judicial orders.