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Insolvency & Bankruptcy Board of India is Eager to fill in the Gaps

Gigantic legislation like IBC,2016 will definitely face hurdles, bumps, pits in its journey towards implementation.  Insolvency & Bankruptcy Board of India (IBBI)has shown enormous anticipation in appreciating the improvements required from time to time on the basis of experience it got through judgments of NCLT, NCLAT, and Supreme Court. Besides, there is a continuous system of feedback from other stakeholders like IPs, IPEs, IPAs and Legal fraternity, Insolvency Law Committee for either removal of defunct clauses or amendment for the better.

In its latest endeavor Insolvency & Bankruptcy Board of India, the Regulator has sought comments from the public on some major proposed changes to Corporate Insolvency Resolution and  Liquidation Framework. The very first issue that is being addressed is to cure delays in admission of Section 7 applications at NCLTs. Recognizing that the longer time taken in the admission of applications evaporates the asset value of the Corporate Debtor, the admission of applications is being proposed on the basis of records available with Information Utilities (IU).

The Financial Creditors need only to submit IU authenticated records to establish the default and Adjudicating Authority (AA) only will be required to consider such records without Adjucating on default. It is pertinent to mention that here the big Corporate Debtors deploy a battery of lawyers to prevent or delay admission of section 7 applications to which wastes the considerable time of NCLTS.

The next correction aimed by IBBI is streamlining the avoidance transactions process and wrongful trading. 

The types of transaction are:

  • Preferential (Sec 43- 44)
  • Undervalued (Sec 45-47)
  • Extortionate Credit Transactions (Sec 50-51)
  • Fraudulent or wrongful trading (Sec 66)

For this purpose Sec 91 is purposed to widen the scope to make sure that Interim Resolution or  Resolution Professional is able to get co-operation from any other person deemed necessary. Further, Section 25(i)(i) may be amended to explicitly make resolution professionals responsible for investigating the affair of the corporate debtor for identification of Avoidance Transactions or wrongful trading. Similar responsibility may also be thrust upon the Liquidator through amendment of section 35(i)(i)

The lookback period for examining under this starts from the filing of the application and also will cover the period up to the admission of the application. More importantly, Resolution Plan would address the future course of avoidance proceedings, sharing of proceeds and make Resolution Professional or any other person responsible for pursuing it after the closure of CIRP. Amazingly, through another amendment, the resolution plan is to be approved or rejected by AA within 30 days. 

In the last move closure of the voluntary liquidation process is required to be made through public announcement. 

Kudos to IBBI for much-needed improvement.
 

 

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