Resolution professionals (RPs) cannot henceforth reject requests of Committee of Creditors (CoC) members (who represent at least 33 per cent voting rights) as regards convening of meetings or placing their proposal in such meeting under the Corporate Insolvency Resolution Process (CIRP). Insolvency regulator IBBI has now stipulated that RPs have to place proposals moved by such CoC members in the meetings of the CoCs. With this move— which has been introduced as an amendment to Corporate Insolvency regulations, RPs have lost their discretionary powers on this front as the amended regulation will have force of law, said insolvency law experts.

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There have been instances in the past — especially in the case of home buyers— where the RPs in the absence of specific regulation ignored the requests of the creditors in convening the CoC meeting or consider their proposals for placing them before the meetings. Now that situation has been taken care of by the regulator through an amendment in corporate insolvency regulation, say experts, adding that this will bring clarity on enforceability and compliance.

‘Some dilution’ over clarification

However, this latest regulation amendment is seen as “some dilution” over the clarification (which anyway did not have force of law) that IBBI issued in April last year as regards consideration of matters/issues by the CoC on requests of members of the committee. While the earlier clarification covered the situation of requests of members having less than 33 per cent voting rights, the latest regulation amendment is silent on this front. The IBBI clarification then required the RP to consider the requests from such members “expeditiously on merits” and place the proposal for consideration in the ensuing meeting of the CoC. Pritika Kumar, Founder & Counsel, Cornellia Chambers, said this latest amendment will create more room for the members of the committee to express their opinion and feel heard thereby aiding in effective and efficient management of the insolvency resolution process.

Preservation of records

The IBBI has now amended the corporate insolvency regulations to stipulate that RPs have to preserve copies of all the records which give a complete account of the corporate insolvency resolution process. The electronic copy of the records is now to be preserved for a minimum period of eight years and physical copies of the records for three years. 

Prior to this amendment, the regulation provided that the resolution professional is required to preserve the physical as well as the electronic copy of the records as per the retention schedule which would be notified by the Board and Insolvency Professional Agencies. This retention schedule has now been specified clearly through this amendment.

Ruby Singh Ahuja, Senior Partner, Karanjawala & Co, said the amendment to IBC Code requiring IRP and RP to keep records will help to bring transparency in the resolution process and shall also help in effective adjudication of disputes between the stakeholders.

Sonam Chandwani, Managing Partner, KS Legal & Associates, said that requiring Interim Resolution Professional (IRP) or a Resolution Professional to maintain record of significant physical papers for three years would be “somewhat laborious” given that the professional would be supervising numerous cases and archiving that many files would pose difficulties.