NEW DELHI: Even as the amendments to be Insolvency and Bankruptcy Code (IBC) are getting delayed, the Insolvency and Bankruptcy Board of India (IBBI) has made a slew of regulatory changes in the past 18 months to enhance the efficiency of the resolution process.
“Until amendments to the IBC are carried out, it’s only logical for the IBBI to make regulatory changes,” an official source told FE. Going forward too, the IBBI will be making significant changes to regulations to improve the efficiency, transparency, and effectiveness of the resolution process, the person added.
In a discussion paper issued in February, the IBBI proposed to empower the Committee of Creditors (CoCs) to request the Adjudicating Authority(AA) for a two-stage approval process of resolution plans, where the financial bid and basic implementation framework may be approved early. “This would enable the Resolution Applicant to take over the corporate debtor and proceed with plan implementation early,” it said.
The IBBI also proposed a mechanism for coordination of CIRP of interconnected entities. This would include provisions for joint hearings, appointment of a common resolution professional, and information sharing protocols to increase efficiency, reduce costs, and improve outcomes in cases involving multiple interconnected entities undergoing CIRP simultaneously.
These changes are likely to take effect without much delay, even as it unclear when the IBC (Amendment) Bill will be tabled in Parliament.
FE had reported earlier that the amended Code may introduce provisions related to group insolvency, laws needed to tackle cross-border cases, and the creditor-led resolution process (CLRP). The Bill may also remove interim moratorium provisions for personal guarantors’ assets.
The CLRP might be similar to the pre-packaged scheme (for MSMEs), and will be initiated by the financial creditors, after the occurrence of default by the corporate debtor (CD), but with minimum interference of the adjudicating authority (AA).
The IBBI, in the past 18 months, has introduced key tweaks, which includes tightening procedural safeguards, and improving disclosure norms for resolution professionals and creditors, to create a more structured and accountable framework in the IBC.
Further, provisions for appointment of authorized representative in real estate projects; requirements for disclosures regarding pending proceedings, assessments, and litigations involving the corporate person, has been introduced by the IBBI.
For liquidation, the regulator IBBI proposed several amendments to streamline the process by addressing the timely appointment of liquidators, facilitating the deposit/withdrawal of unclaimed dividends, mandating the use of the ‘eBKray’ auction platform for conducting auctions and undistributed proceeds etc.
One significant provision, introduced as recently as February, was the handing over of possession of the plots, apartments, or buildings, to the real estate allottees–which have been agreed to be transferred by a Corporate Debtor–even when the resolution process is ongoing.
“This amendment ensures that no real estate allottee, who has already performed his part of the obligation, on completion of the unit, suffers the fate of CIRP (corporate insolvency resolution process,” said Abhirup Dasgupta, partner, HSA Advocates. “This will certainly reduce the load of litigation on the AA and enhance the efficiency of the insolvency regime,” he added.
The IBBI also made it mandatory for the resolution professional (RP) to file a status report of a real estate project (on the status of development rights and permissions of the project) before the NCLT, so as to ensure transparency in the CIRP.
While many of these regulatory changes have been introduced without corresponding amendments to the Code, it is important to recognize that insolvency law must remain dynamic, say experts.
The absence of statutory backing can create interpretational challenges, especially when tested in courts and tribunals, they say. “To ensure long-term stability, key regulatory developments should eventually be codified into the IBC itself,” said Dasgupta.
Another official told FE: “If anyone challenges the regulatory tweaks, or questions the IBBI’s authority, the ministry of corporate affairs will incorporate the same in the IBC.”
Anjali Jain, partner at Areness Law said that a comprehensive list of directions/regulations issued till date by IBBI may anytime be effectively included in a single amendment act to prevent any “potential overreach issues”. Kalpit Khandelwal, partner, Aekom Legal, however, points to an “urgency” to amend the IBC given the several challenges and inefficiencies being observed such as delay in approval of resolution plans by NCLT “due to inter-se creditors dispute on distribution of proceeds, challenges associated with cross border insolvency, and pre-packaged insolvency being available only to MSMEs.”
Source: The Financial Express
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