CHAPTER II - CORPORATE INSOLVENCY RESOLUTION PROCESS
Section 17 of the Insolvency and Bankruptcy Code 2016: Management of Corporate Debtor by Interim Resolution Professional
Section 17 transfers management of the corporate debtor to the interim resolution professional from the date of the IRP's appointment. The powers of the board of directors or partners are suspended, officers and managers must report to the IRP, and financial institutions maintaining the corporate debtor's accounts must follow the IRP's instructions in relation to those accounts.
Section 17(1): Management From the Date of IRP Appointment
From the date of appointment of the interim resolution professional, management of the affairs of the corporate debtor vests in the IRP.
This provision implements the management shift that follows commencement of CIRP. The IRP does not merely supervise the existing management; Section 17 expressly vests management in the IRP and suspends the management powers described in the section.
Section 17(1)(b): Powers of Directors or Partners Stand Suspended
The powers of the board of directors, or the partners of the corporate debtor where applicable, stand suspended and are exercised by the interim resolution professional. The provision concerns the exercise of management powers during CIRP; it does not state that the directors or partners cease to hold their underlying office merely because CIRP has commenced.
Section 17(1)(c): Officers and Managers Must Report to the IRP
Officers and managers of the corporate debtor must report to the interim resolution professional and provide access to documents and records of the corporate debtor as required by the IRP. This obligation works with Section 19, which contains the statutory cooperation framework.
Section 17(1)(d): Bank and Financial Institution Accounts
Financial institutions maintaining accounts of the corporate debtor must act on the instructions of the interim resolution professional in relation to those accounts and furnish to the IRP all information relating to the corporate debtor available with them.
Section 17(2): Powers and Authority of the IRP
An interim resolution professional vested with management of the corporate debtor has the following statutory authority:
Section 17(2)(e): Compliance With Applicable Law
Section 17(2)(e), inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 with effect from 6 June 2018, makes the interim resolution professional responsible for complying with requirements under any law for the time being in force on behalf of the corporate debtor.
This clause is important because CIRP does not place the corporate debtor outside the general legal and regulatory framework. The IRP, while exercising management under Section 17, must attend to applicable statutory compliance on behalf of the corporate debtor.
Definitions Relevant to Section 17
| Provision | Term | Meaning |
|---|---|---|
| Section 3(8) | Corporate debtor | A corporate person who owes a debt to any person. |
| Section 3(21) | Information utility | A person registered with the Board as an information utility under Section 210. |
| Section 5(12) | Insolvency commencement date | The date of admission of an application for initiating CIRP by the Adjudicating Authority under the applicable provision. |
| Section 5(15) | Interim resolution professional | An insolvency professional appointed under Section 16. |
| Section 5(27) | Resolution professional | An insolvency professional appointed to conduct CIRP and includes an interim resolution professional. |
For additional Part II definitions, see Section 5 of the IBC.
Section 17 and Related CIRP Provisions
| Provision | Relationship with Section 17 |
|---|---|
| Section 16 | Provides for appointment and tenure of the interim resolution professional. |
| Section 17 | Vests management of the corporate debtor in the IRP and defines core management authority. |
| Section 18 | Prescribes the IRP's duties, including collection of information, claims work, constitution of the Committee of Creditors and control of assets. |
| Section 19 | Requires assistance and cooperation with the IRP and provides a remedy for non-cooperation. |
| Section 20 | Requires preservation of value and management of operations as a going concern. |
Official Legal Resources
For the current Code and insolvency regulations, refer to the India Code portal, IBBI Legal Framework, IBBI Acts, IBBI Notifications, IBBI Regulations and IBBI Orders.