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IBBI Amends CIRP Regulations Regarding Timeline Of Filing Claims, Co-operation By Corporate Debtor Etc.

IBBI has amended IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) with effect from 18th September, 2023.

DETAIL OF DEBT, DEFAULT AND LIMITATION

Regulation 2D has been inserted in the CIRP regulations, which provides for mentioning of   chronology of debt and default, date of default, dates of part payments, if any, date of last acknowledgment of debt and limitation applicable in Applications made under Section 7 or Section 9 IBC. This amendment will help in reducing delay in admission process.

CO-OPERATION BY PERSONNEL OF CORPORATE DEBTOR

There were provisions in the Code under Section 19 for co-operation by the personnel of the Corporate Debtor but the procedure for handing over of assets and records was not well defined. Regulation 3A has been introduced in CIRP regulations which streamlines procedure for handing over custody of assets and records by personnel of the Corporate Debtor.

The IRP/RP has to take custody of the records of information relating to the assets, finances and operations of the corporate debtor referred in Section 18 (a) and CIRP Regulation 36 and the assets recorded in the balance sheet of the Corporate Debtor or any other records referred in Section 18 (f).

The personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor has to provide to the IRP /RP  a list of assets and records while handing over their custody and control.

If personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor do not provide list of assets, the IRP /RP ,  has to  prepare list of assets.

Each list of assets has to be signed by parties present and by two witnesses.

The IRP/RP will requisition from the personnel of the Corporate Debtor, its promotors or any other person associated with the management of the Corporate Debtor referred in Section 18 (a) and Information under Regulation 36 which were required to be maintained by the corporate debtor but have not yet been handed over.

The IRP/RP will also requisition the assets which are recorded in the balance sheet or in any other records of Section 18 (f) and whose custody has not been handed over.

An application under Section 19 (2) seeking co-operation has to show presence of such assets and records in notice of requisition and absence of such assets or records in the list of assets and assets/records taken in control and custody.

EXTENSION OF TIMELINE FOR FILING CLAIMS

The timeline for filing of claim has been extended. Earlier claim could have been filed up to ninety days. Many of the creditors were filing claims after Ninety days. Non- admission of such delayed claims by IRP/RP was causing many litigations before NCLT.

CIRP Regulation 12 (1) has been now been substituted. As per newly amended Regulation claim can be filed up to ninety days from Insolvency Commencement Date or up to date of issue  request for resolution plan, whichever is later.

The Creditor has to give reasons for filing claims beyond ninety days from Insolvency Commencement Date.

Regulation 1A, 1B and 1C have also been inserted to Regulation 13.

Regulation 1A provides that if IRP/RP does not collate claim after verification, he has to provide reasons for the same.

Regulation 1B provides that if IRP /RP receives claims after ninety days or issue of RFRP, which ever is later and up to seven days before the date of CoC meeting for voting on the Resolution Plan or initiation of Liquidation, as the case may be, IRP/RP has to verify all such claims and categorize them as acceptable or non-acceptable.

Regulation 1C provides that IRP/RP has to inform the creditor within seven days of categorization and if the claims has been categorized as non-acceptable, reason for the same has to informed.  Such claims have to placed before the Committee of Creditors in next meeting for its recommendation for inclusion in List of Creditors and its treatment in Resolution Plan. Thereafter the IRP/RP has to  submit such claims before the Adjudicating Authority for condonation of delay and adjudication whereever applicable.

REPLACEMENT OF AUTHORISED REPRESENTATIVES

There was no provision for replacement of Authorised Representatives of Financial Creditors in a Class under the existing regulations.  Regulation 3A,  3B and 3C have been added to the Regulation 16A.

Regulation 3A provides that Financial Creditors in a class representing not less than 10% voting share may seek replacement of Authorised Representative  by requesting to the IRP/RP. The IRP/RP will circulate such request to Financial Creditors in a Class and announce a voting window open for at least twenty four hours.

IRP/RP has to  give choices of three Insolvency Professionals to the Financial Creditors in a Class along with existing Authorised Representative.

The IRP/RP has also to apply to the Adjudicating Authority for appointment of Authorised Representative who receives highest percentage of voting share.

REVISION OF FEE OF AUTHORISED REPRESENTATIVES

Regulation 8 (a) has been substituted. The fee of the Auhtorised Representative has been increased in the following manner for attending every meeting of CoC :

Number of Creditors in a ClassFee per meeting of Committee (In Rupees)
10-10030,000/-
101 – 100040,000/-
More than 100050,000/-

The Authorised Representative has to be paid following fee for every meeting of Financial Creditors in a Class:

Numbers of Credtitors in a ClassFee per meeting of FC in a Class (In Rupees)
10- 10010,000/-
101- 100012,000/-
More than 100015,000/-

The payment of fee to Authorised Representative will be part of Insolvency Resolution Process cost in respect of two meeting with the creditors he represents corresponding to a meeting of the Committee of Creditors.

The fee for any additional meeting beyond two meetings corresponding to a meeting of the committee of creditors shall be part of insolvency resolution process cost subject to approval of committee of creditors

THE FUNCTIONS OF THE AUTHORISED REPRESENTATIVES

Sub-regulation 10 has been added to Regulation 16A which provides for functions of the Authorised Representative which are as under:

  • assist the creditors in a class he represents in understanding the discussions and considerations of the committee meetings and facilitate informed decision-making;
  •  review the contents of minutes prepared by the resolution professional and provide his comments to the resolution professional, if any;
  • help the creditors in a class he represents during the consultations made by the resolution professional to prepare a strategy for marketing of the assets of the corporate debtor in terms of sub-regulation (1) of regulation 36C;
  • work in collaboration with the creditors in a class he represents to enhance the marketability of the assets of the corporate debtor in terms of sub-regulation (3) of regulation 36C;
  • assist the creditors in a class he represents in evaluating the resolution plans submitted by resolution applicants;
  • ensure that the creditors in a class he represents have access to any information or documents required to form an opinion on issues discussed in the committee meetings;
  • update regularly the creditors in a class he represents on the progress of the corporate insolvency resolution process;
  • make suggestions for modifications of the resolution plan as may be required by the creditors in class he represents;
  • record proceedings and prepare the minutes of the meeting with the creditors in a class he represents; and
  •  act as a representative for the creditors in a class he represents in representations before the Adjudicating Authority, National Company Law Appellate Tribunal, and other regulatory authorities.

AUDIT OF THE CORPORATE DEBTOR

Regulation 30B has been introduced which provides for the audit of the Corporate Debtor.

Any member of the CoC can propose for audit of the Corporate Debtor along with objectives, scope, estimate of the costs, timeframe and names of the proposed auditors.  Such audit will be conducted if approved by CoC.  The Auditor has to prepare a report which will be placed before CoC alongwith comments of IRP/RP. The expenses of such audit will be part of Insolvency Resolution Process Costs.

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

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