Ethics Case Studies for Insolvency Professionals
Six marks, decided by matching the facts to the right clause of the Code of Conduct.
The Limited Insolvency Examination has one case study on business and professional ethics: three two-mark questions, 6 marks. Ethics also turns up inside the CIRP case studies, as in IBBI's model paper, where an interim resolution professional discovers that a member of his team has a cousin on the corporate debtor's board.
These questions are decided by the Code of Conduct for insolvency professionals in the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016. The skill tested is matching a fact to the right clause, and spotting when the best answer is the broad principle (independence) rather than a narrow rule.
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Eight Scenarios and the Clause That Decides Each
Clause numbers are from the First Schedule as in force on the exam's law cut-off.
A senior member of the IRP's team has a cousin on the debtor's board
Clause
3A, 5
What the IP must do
Disclose the conflict and keep the process independent: in IBBI's model paper the answer is that the team member leaves, however distant the relationship seems.
The IP has a relationship with the corporate debtor
Clause
8B
What the IP must do
Disclose it to the insolvency professional agency within three days of appointment.
The IP wants to appoint his brother's firm as valuer
Clause
23B
What the IP must do
Not allowed: an IP shall not engage or appoint relatives or related parties for any work on the assignment.
Six months after the CIRP ends, the successful resolution applicant offers the IP a consultancy
Clause
23A
What the IP must do
Barred until one year from cessation, for the IP and relatives, other than services under the Code or employment through open competitive recruitment.
A liquidation asset is cheap and the IP's spouse wants to bid
Clause
4, 6
What the IP must do
Neither the IP nor a relative may knowingly acquire the debtor's assets, except where objectivity was not impaired and the required approval is obtained.
A registered valuer appointed in the process offers to share part of his fee
Clause
26A
What the IP must do
Refuse: an IP shall not accept or share fees from a professional or support service provider appointed under the process.
A licence lapses after commencement because the IP missed the renewal, and a penalty follows
Clause
27B
What the IP must do
The penalty or loss cannot be included in insolvency resolution process costs.
A prospective resolution applicant calls the RP privately to discuss the evaluation
Clause
17
What the IP must do
No private communication with stakeholders unless the Code, regulations or an NCLT order require it.
| Scenario | Clause | What the IP must do |
|---|---|---|
| A senior member of the IRP's team has a cousin on the debtor's board | 3A, 5 | Disclose the conflict and keep the process independent: in IBBI's model paper the answer is that the team member leaves, however distant the relationship seems. |
| The IP has a relationship with the corporate debtor | 8B | Disclose it to the insolvency professional agency within three days of appointment. |
| The IP wants to appoint his brother's firm as valuer | 23B | Not allowed: an IP shall not engage or appoint relatives or related parties for any work on the assignment. |
| Six months after the CIRP ends, the successful resolution applicant offers the IP a consultancy | 23A | Barred until one year from cessation, for the IP and relatives, other than services under the Code or employment through open competitive recruitment. |
| A liquidation asset is cheap and the IP's spouse wants to bid | 4, 6 | Neither the IP nor a relative may knowingly acquire the debtor's assets, except where objectivity was not impaired and the required approval is obtained. |
| A registered valuer appointed in the process offers to share part of his fee | 26A | Refuse: an IP shall not accept or share fees from a professional or support service provider appointed under the process. |
| A licence lapses after commencement because the IP missed the renewal, and a penalty follows | 27B | The penalty or loss cannot be included in insolvency resolution process costs. |
| A prospective resolution applicant calls the RP privately to discuss the evaluation | 17 | No private communication with stakeholders unless the Code, regulations or an NCLT order require it. |
Two Rules That Changed on 20 November 2025
Both changes came after the exam's law cut-off of 4 February 2025, so the exam uses the earlier versions. First, the Clarification to clause 22 capping an IP at ten CIRP assignments as resolution professional, no more than three with admitted claims above ₹1,000 crore each, was omitted and the same cap moved to new regulation 7B, which now counts IRP, RP and liquidator assignments together. Second, clause 6's exception for acquiring assets in liquidation or bankruptcy now needs the prior approval of the Adjudicating Authority, where it earlier needed the approval of the Board.
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Worked Example From the Model Paper Pattern
An advocate files insolvency applications before the NCLT and proposes his wife, a newly registered IP, as the interim resolution professional in each. Within six months she holds 15 assignments, charges fees the NCLT calls exorbitant, and IBBI issues her a show cause notice.
Three questions follow. Was accepting the assignments proper? The best answer rests on clause 5: an IP must maintain complete independence in professional relationships, and her husband sourcing every appointment compromises it. Could IBBI act on the NCLT's remarks alone? Yes, IBBI may proceed where it has reasonable grounds to believe an IP has contravened the Code. Was 15 assignments within limits? At the cut-off, no: the clause 22 Clarification capped her at ten.
How the Limited Insolvency Examination Tests This
Ethics options are written so that two look right. One cites a narrow rule that does not quite fit the facts ("the Code bars an IP from an assignment undertaken by a relative"); another states the principle that does ("independence is compromised"). Check whether the narrow rule really applies to the facts before you choose it.
The other trap is softening a strict rule because the facts look harmless: a distant cousin, no recent contact, a skilled team member. The Code of Conduct does not weigh convenience. When the facts raise a question about independence, pick the answer that protects it.
FAQs
How many marks is the ethics case study in the IBBI exam?expand_more
6 marks: three two-mark questions on business and professional ethics, as set out in IBBI's syllabus dated 4 February 2025. Ethics also appears inside the CIRP case studies.
Which document should an ethics case-study answer cite?expand_more
In the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016. Regulation 7(2)(h) makes compliance with it a condition of registration.
In an ethics case study, can the IP take a consultancy from the successful resolution applicant?expand_more
Not for one year from ceasing the process, under clause 23A. The bar covers the IP and relatives, and employment or professional services with the corporate debtor, the successful resolution applicant, a creditor with over 10% voting power, or their related parties.
Is there a limit on how many assignments an IP can hold?expand_more
For the exam, yes: ten CIRP assignments as resolution professional, no more than three with admitted claims above ₹1,000 crore each. Since 20 November 2025 the same ten-and-three cap sits in regulation 7B and counts IRP, RP and liquidator assignments together; clause 22 still requires an IP not to take on more assignments than he can give adequate time to.
Next steps
- IP Code of Conductarrow_forward
- AFAarrow_forward
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65 questions, case-study format, negative marking.