IBC Revisions To Enhance Efficiency Of Resolution Process
When filing for insolvency, the creditors will need to provide minute details to avoid delays at the pre-admission stage.
In a bid to ensure a more structured resolution process under the IBC, the Insolvency and Bankruptcy Board of India has brought in amendments detailing the duties and responsibilities of stakeholders involved in the process.
The new changes aim to fix procedural inefficiencies in the resolution process. The changes range from expanding the duties of an authorised representative towards its creditors to requiring additional information to be furnished while filing an insolvency application.
A Glimmer Of Hope
To facilitate homebuyers as a class of creditors, the amendments enhance the duties of an authorised representative to provide assistance to the creditors in evaluating the resolution plan, to regularly update the creditors in a class on the progress of the Corporate Insolvency Resolution Process, and to assist in modifications of the resolution plan on behalf of the class of creditors represented by the representative.
The duties have been increased so that the difficulties faced by creditors-in-class (usually homebuyers or small individual creditors) in participation, understanding and decision-making during CIRP are suitably addressed, Misha, partner at Shardul Amarchand Mangaldas, told BQ Prime.
This is a welcome change and it will help lay persons participate effectively in the process, Misha said.
According to Soumitra Majumdar, partner at JSA, unintended information asymmetry between the smaller creditors—forming part of the class of creditors and represented by an Authorised Representative—and the institutional members of the CoC can prove to be prejudicial for all stakeholders. This change should remedy this, said Majumdar.
Increasing Efficiency At The Pre-Admission Stage
To help in expeditious disposal of cases, the amendments specify submitting details of the chronology of debt, default and limitation along with other evidence at the stage of filing an insolvency application. This will ensure that the requisite details are available to the tribunal in a comprehensive manner and help curb delays at the pre-admission stage.
Earlier, the creditors were allowed to file their claims 90 days from the insolvency commencement date. According to the amendments, a creditor will now be allowed to file claims up to the date of the issue of a request for resolution plan or 90 days from the insolvency commencement date, whichever is later.
As per current practice, the Resolution Professionals usually reject belated claims and such claimants are then constrained to approach the tribunal for acceptance of their claims. Some of these litigations remain pending during the pendency of the plan approval application and cause delay in the adjudication, Madhav Kanoria, partner at Cyril Amarchand Mangaldas, told BQ Prime.
The enhanced timeline will ensure that multiple litigations, that are usually filed in many CIRPs, for rejection of belated claims will not be required going forward, Kanoria said.
Lastly, the changes allow the committee members to have a corporate debtor audited, and the cost of this audit will be added to the cost of the CIRP. Previously, the committee members had a right to get a forensic audit done, but at their own expense.
The provision is intended to enable better asset discovery and financial diligence by the CoC, Majumdar said.
Misha said that the audit provision now introduced appears to be for a larger purpose and will certainly enhance the transparency of the resolution process.
