Insolvency regulator IBBI has brought in several changes to the existing regulations around Corporate Insolvency Resolution Process (CIRP) as part of its efforts to streamline and strengthen the process.

The latest changes seeks to bring clarity in the statutory framework and mandates the adoption of uniform practices, said experts.

Significant among the changes are the move to require financial or operational creditor filing an insolvency application for initiation of CIRP to submit along with evidence, necessary details such as chronology of the debt and default (including the date when the debt became due), dates of part payments, if any, date of last acknowledgment, and the limitation applicable. 

This will not only assist in effective adjudication under the Act but will also aid in weeding out applications which are barred by time at the very threshold, said Tahira Karanjawala, Partner, Karanjawala & Co, a law firm.

Sushmita Gandhi, Partner, Induslaw, said that the creditors will now be required to give more and clearer details about the default and limitation in the application under Sections 7,9 and 10. “In the recent past, there has been a surge of cases where issues relating to default, dates of default, limitation etc have surfaced and delayed the entire hearing of insolvency petitions,” she said.

Streamlining insolvency

Another significant change in CIRP regulations is that IBBI has additionally laid down a process for the smooth handover of records and assets from the erstwhile management to the resolution professional.

IBBI has also now provided that  a creditor can submit its claim with proof even beyond the period stipulated in the public announcement, up to the date of issue of the request for resolution plans or ninety days from the insolvency commencement date, whichever is later. 

Also financial creditors in a class, representing not less than ten percent voting share, represented through an authorised representative, have now been given the right to change the said representative, and the procedure for the same has been prescribed. 

Also the Committee of Creditors (CoCs) have been given the right to propose the conduct of an audit of the corporate debtor and the amended regulation provides the procedure for the same. 

Nishant Singh, Partner, Luthra and Luthra Law Offices India said that the new amendment significantly bolsters creditor’s right, as the Resolution Professional (RP) will have to provide a reasoned order to reject any creditor’s claim. 

“And, this would arm the creditor to take more effective judicial action against any arbitrary decision by the RP. 

Moreover, RP has now power to verify and admit claim beyond 90 days as long as the creditor can provide genuine reason for the delay, which would reduce potential litigation for any creditor’s claim after the 90 days deadline under the Code”, Singh said.

Anoop Rawat, Partner, Shardul Amarchand Mangaldas & Co., said that the latest amendments to CIRP regulations reflect the IBBI’s regulatory pro-activeness in its endeavours to further streamline the insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. 

Mukesh Chand, Senior Counsel, Economic Laws Practice, said that now IRP and management of the corporate debtor would have to prepare list of assets and records while handing over their custody and control to the interim resolution professional (IRP). “It was seen in many cases that while on paper the assets are given custody to IRP/RP but the actual possession and control remains with the promoter. It is a serious problem as the successful resolution applicant, in many cases, face difficulties in gaining control of assets from erstwhile promoters and it leads to litigation”, Chand said.