Acting tough, IBBI moves to rein in undue delays in corporate insolvency resolution

KR Srivats New Delhi | Updated on November 12, 2019

MS Sahoo,Chairman, IBBI   -  PTI

Asks insolvency professionals to report status of all ongoing processes by Nov 21

Insolvency regulator IBBI is serious about enforcing a recently enacted legal provision to ensure completion of the corporate insolvency resolution process (CIRP) in a time-bound manner.

It has asked registered insolvency professionals to furnish details of all ongoing CIRP, which is not completed within 330 days. Reasons for non-compliance and details of persons responsible for non-completion have to be furnished to the regulator to enable it to take appropriate legal remedy.

The details have to be furnished in a specified form which has to be submitted by November 21, the Insolvency and Bankruptcy Board of India (IBBI) has said.

When contacted, IBBI Chairman MS Sahoo said the latest move is part of normal monitoring function of IBBI. It is necessary to ensure that the processes are completed on time, Sahoo told BusinessLine. It may be recalled that Section 12 of the IBC mandates that CIRP of a corporate debtor must conclude within 330 days from the insolvency commencement date. Several CIRPs, including the infamous Essar Steel matter (which has now run into over couple of years), have been been marred by undue delays, affecting the perception on the efficacy of the IBC. The Government had this year brought amendments to IBC to ensure that the CIRPs are completed in 330 days.

Charanya Lakshmikumaran, Partner, Lakshmikumaran & Sridharan, a law firm, said it appears that the IBBI — without waiting for a complaint — has now decided to seek information regarding those matters where the prescribed time limit has passed, to identify infractions by the RPs.

“The IBBI of course, will only penalise RPs to the extent that the delay or lack of diligence is squarely attributable to the RPs. It is unlikely that the RPs would get penalised for delays caused due to circumstances beyond their control, such as when the case is pending before any court or tribunal,” she said.

‘Difficult to complete’

Manisha Rawat, an Insolvency Professional and Head-Compliance of Felix Advisory, said : “By limiting the overall CIRP to 330 days, indirectly, we are allowing only 60 days period for judicial proceedings. With limited benches at NCLT and number of pending cases, it seems difficult for professionals to complete CIRP within 330 days”.

After the recent amendment of the IBC, two provisos were introduced to Section 12(3) of the Code to provide overall time limit to all CIRP. As per the provisions of the amended Act, CIRP has to be completed within a period of 330 days from the insolvency commencement date, including any extension of the period granted under the section by Adjudicating Authority, and the time taken in legal proceedings in relation to such resolution process.

Amendment Act

The Amendment Act 2019 further provided that where the Insolvency Resolution Process of a Corporate Debtor is pending and has not been completed within the period of 330 days, such resolution process have to be completed within 90 days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment Act) 2019 i.e. August 16, 2019.

Accordingly, every ongoing insolvency Resolution process as on August 16, 2019 which exceeded CIRP period of 330 days from the Insolvency Commencement Date, should be completed on or before November 14, 2019. “Although the Amendment Act provided one-time window of additional 90 days to those resolution process which exceeded 330 days as on August 16, 2019, no such grace period (Act is silent) was provided to those ongoing resolution process which did not exceed 330 days as on that date (August 16),” Rawat said.

Illustratively, if resolution process of Corporate Debtor “A” completed 325 days on August 16, 2019, resolution professional will get only 5 more days to complete the resolution process and thereafter liquidation process will start. On the other hand, if Resolution Process of Corporate Debtor “B” completed 335 days as on August 16, 2019, the resolution professional will get another 90 days period for completion of resolution process.

“It will be unfair to the committee of creditors of Corporate Debtor “A”. Amendment Act should have provided additional period of 90 days to all the ongoing resolution process as on date of commencement of IBC Amendment Act 2019”, she added.

Published on November 12, 2019

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