New Delhi: The Enforcement Directorate (ED) last month arrested former resolution professional (RP) Arvind Kumar, who worked for Richa Industries during its insolvency proceedings from December 2018 to June 2025, for allegedly siphoning off company assets and laundering proceeds of crime. The incident marked the rare arrest of an RP in India.
An RP is appointed to conduct the insolvency resolution process and manage negotiation between creditors and debtors of a company under the corporate insolvency resolution process (CIRP). They also take over management control from the board of directors.
Kumar is accused of diverting substantial funds from Richa Industries through layered transactions to individuals and entities connected to him, including associates and employees linked to his own business interests.
“Under the IBC (Insolvency and Bankruptcy Code), the company goes out of the promoter’s hands on day one, once the NCLT (National Company Law Tribunal) admits the case. It is that immediate transfer of control that makes the role of the resolution professional so powerful, and so sensitive,” senior advocate Sunil Fernandes told ThePrint.
According to the ED, large payments were routed from Richa Industries’ accounts to intermediaries, who then transferred significant sums back to Kumar’s personal bank accounts. Kumar’s arrest came weeks after the company’s former promoter and now-suspended managing director, Sandeep Gupta, was arrested under the Prevention of Money Laundering Act (PMLA) for fraud causing loss of Rs 236 crore to public sector banks.
In a statement, the ED alleged that Kumar was responsible for “personal enrichment” and had a “direct and active” role in laundering funds linked to the company.
The agency has stated that findings show the former RP was a beneficiary of proceeds of crime generated from the original bank fraud, and allegedly projected illicit funds as legitimate receipts under the guise of CIRP-related operations. “The investigation is ongoing to trace the full flow of funds and identify all involved parties,” the ED said.
Such arrests remain rare in India. Before the Richa Industries case, one of the better-known instances was that of Subrata Monindranath Maity, an interim resolution professional (IRP) for Guardian Homes Pvt Ltd, who was arrested by the CBI in May 2022 for allegedly demanding a bribe of Rs 20 lakh to settle an NCLT matter linked to Guardian Homes.
The CBI alleged that he was caught accepting an initial payment as part of the larger demand. Soon after, the Insolvency and Bankruptcy Board of India (IBBI) suspended his registration on an interim basis, citing serious concerns about his fitness to continue handling ongoing insolvency processes. On 10 January 2023, the IBBI disciplinary committee suspended Maity’s registration as an RP for a period of one year.
Another is the infamous case of Arun Mohan, an insolvency professional arrested in 2020 for allegedly receiving a bribe of Rs 3.5 lakh.
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Who is a resolution professional
Neither a creditor nor a debtor, an RP is meant to be an independent person appointed to conduct the CIRP and ensure a lawful and successful resolution of the corporate debtor.
The law places an RP in a unique position: as soon as any company enters the CIRP, the first order of business under the IBC is the appointment of an insolvency professional—initially as an Interim Resolution Professional (IRP), and then, if confirmed by the committee of creditors (CoC), as the resolution professional. From this moment on, the management of the corporate debtor is suspended and is vested in the IRP/RP.
Whenever an order of CIRP is issued, that is when the creditors make an application for initiating CIRP and the same is accepted by a court, the court gives an order of initiation of CIRP and in the very same order, the RP is appointed.
In essence, the RP is the person responsible for all major decisions during the CIRP: receiving and verifying claims, convening and conducting CoC meetings; even managing the corporate debtor’s affairs. The board of directors is displaced, and the RP takes over it.
Even the custody of the company’s accounts and operations goes to the RP.
The RP also invites and processes resolution plans, and places compliant plans before the CoC, expected to meet the company’s legal and regulatory obligations even while it is financially distressed.
Not merely administrative, under the IBC and CIRP regulations, the RP is expected to act as a watchdog against value erosion. That includes appointing professionals such as valuers, forensic auditors, transaction auditors and legal experts where necessary, and identifying suspect transactions, including preferential, undervalued, extortionate or fraudulent transactions that may have taken place before insolvency.
In all, the RP is not just a facilitator of a sale process, but is also tasked with spotting wrongdoing and moving the adjudicating authority for appropriate relief.
As for eligibility, an RP must be a registered insolvency professional (IP) under the IBC framework. Typically, insolvency professionals come from backgrounds such as chartered accountancy, company secretaryship, cost accountancy, law, or senior management.
They must pass the relevant IBBI examination, enrol through an insolvency professional agency, and comply with IBBI’s regulations and code of conduct.
A 2025 review by the Insolvency and Bankruptcy Board of India (IBBI) indicated that roughly 69.5 percent of insolvency professionals managed three or fewer assignments, and roughly 1.3 percent handled 16-30 assignments.
Till December 2024, there were 4,431 individual insolvency professionals registered but active assignments were skewed towards those with high experience.
According to an IBBI study of the total registered insolvency professionals in India, around 55 percent are chartered accountants, 18 percent are company secretaries, and 15 percent are professionals with managerial experience; besides another 5 percent who are lawyers and cost accountants.
‘With great power comes great responsibility’
Since the RP effectively takes over the management of a distressed company, the role carries unusually wide powers for a private professional functioning within a statutory framework. That is precisely why experts say the role demands a high degree of integrity and honesty. Advocate Sumant Batra, who has more than three decades of experience as an insolvency lawyer, argues that India’s insolvency profession is still maturing.
In his 2025 book Corporate Insolvency: The Road to Viksit Bharat—Law, Policy and Practice, Batra notes that while India has several success stories to show for the IBC, “the wrongdoing by some members of the profession” in a number of high-profile matters has also created an adverse impression about insolvency professionals.
His larger point is that in developed jurisdictions, it took decades for the insolvency profession to evolve into a deeply institutionalised, trusted and highly sought-after field.
India, by contrast, is still in the early years of building that culture.
“The greater the power, the greater the possibility of misuse. Resolution professionals are virtually running the company during CIRP, and if an unscrupulous professional wants to game the system, the process can be tailored to favour a particular party. Because the resolution professional effectively runs the company during CIRP, the scope for misuse exists,” said Fernandes.
That concern is now sharper because an RP’s autonomy under the IBC is not unfettered.
Section 25 of the IBC clearly sets out the duties of the RP, including preserving and protecting the assets of the corporate debtor, continuing its operations as a going concern, inviting prospective resolution applicants, presenting resolution plans to the CoC, and filing applications for avoidance transactions where necessary.
The RP is therefore not merely answerable to creditors but bound by statute.
The Supreme Court’s intervention in the Bhushan Power & Steel Ltd (BPSL) matter reinforced that point. In May 2025, the top court initially set aside the approved resolution plan and ordered liquidation, finding serious procedural infirmities and lapses by the insolvency administrator and lenders’ committee, before later recalling that order in review proceedings and ultimately restoring JSW Steel’s resolution plan.
This litigation sent a strong message, even though the final outcome changed: the “commercial wisdom” of the CoC and autonomy of the RP can’t override the mandatory framework of IBC and CIRP regulations.
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‘Misuse difficult to detect, even harder to prove’
That wide remit also means that resolution professionals can face consequences when they fail in their duties. For instance, as the adjudicating Authority under the IBC, the National Company Law Tribunal (NCLT) has the powers to pass directions in the insolvency process, record adverse findings, replace the RP, reject applications, or refer conduct to the IBBI.
It also has the power to impose costs in appropriate cases.
But the NCLT itself is not a criminal court and does not jail a person merely because of a process violation under the IBC. Criminal prosecution comes under IPC, BNS or the PMLA or Companies Act and is required to be pursued before the competent special court or sessions court, depending on the invoked statute.
The IBC also has a way for special courts to hand out penalties including imprisonment.
Also, the Insolvency and Bankruptcy Board of India (IBBI) can initiate disciplinary action if convinced of professional misconduct. However, these are non-criminal in nature and include warnings, monetary fines, cancellation or suspension of registration and in some cases restrictions on the professional from taking on new assignments.
In cases like Subrata Maity’s, the IBBI moved quickly with an interim suspension after the CBI arrest, emphasising that such allegations directly affect whether the RP remains “fit and proper” to continue in office.
In the most serious cases, where the allegation is not mere negligence but active collusion or laundering, the RP may also face prosecution under criminal law. That is what makes the Richa Industries case significant: the allegation is not simply that the resolution professional failed to detect wrongdoing, but that he was allegedly part of it.
The ED’s case is that Arvind Kumar, instead of acting as a fiduciary custodian of the corporate debtor’s assets, helped channel funds through layered transactions and personally benefited from the proceeds.
Fernandes told ThePrint that most allegations of misuse are not simple, straight-line bribery cases. More often, the concern is that the process itself is structured or influenced to suit a particular party. That is where misuse of power in insolvency cases usually becomes difficult to detect and even harder to prove. “In insolvency matters, misuse is often not a plain-vanilla ‘under the table’ case. It is usually more complex, where the process is allegedly tailored to suit a particular party,” he said.
A resolution professional has considerable discretion and flexibility under the IBC. Because of that, he can always say that a particular step reflected his commercial judgment, said Fernandes.
“Unless the misconduct is very stark, direct and glaring, it can be extremely difficult to separate a questionable decision from a criminally tainted one…there is a great deal of discretion built into the role. That is why an RP can often defend a decision as a matter of commercial judgment,” he added.
It is very rare for matters involving resolution professionals to reach the stage of criminal prosecution, said Fernandes. He explained that in most cases, the issues arise around process and commercial judgment/wisdom, “which can be challenged before the NCLT or NCLAT but do not automatically translate into criminal liability.”
“Criminal cases against resolution professionals are rare because many disputes arise in the grey area between commercial judgment and misconduct. A decision may be challenged and even set aside, but that does not by itself establish that the professional acted with criminal intent,” he said.
There isn’t any shortage of resolution professionals in India, but as Fernandes put it: “The ones with experience and with integrity, as is the case in most of the sectors around the country, are in massive scarcity.”
(Edited by Nida Fatima Siddiqui)
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