IBBI amends Liquidation Process Regulations, 2016

The Insolvency and Bankruptcy Board of India (IBBI) notified significant amendments to the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) on January 28, 2025. The key changes brought in by way of the amendment have been briefly stated hereinunder:

1. The requirement of filing of a final report, including form-h, with the Adjudicating Authority, under Regulation 45, has now been extended to cases where a compromise or arrangement has been sanctioned under Section 230 of the Companies Act, 2013;
2. Regulation 46(1) has been substituted, and a new provision has been added which mandates the IBBI to hold and operate a Corporate Liquidation Account in a scheduled bank; and
3. Regulation 47B has been added, mandating liquidators to file all details pertaining to the liquidation processes by way of certain electronic forms (for relevant periods), with necessary enclosures, on IBBI’s platform, within the specified timelines. The amendment follows an earlier circular issued by the IBBI on June 28, 2024. The amendment also includes provisions to ensure the accuracy and completeness of filings. In case of default, updation or correction of information etc., the Regulation specifies a penalty of Rs. 500.

In addition to the above, the following amendments to Schedule I, para (1) have been made:

• Clause (1D) has been deleted, eliminating the provision requiring a liquidator to provide at least fourteen days from issuance of public notice for submission of eligibility documents by prospective bidders.
• Clause (1E) has also been amended to make it mandatory for the liquidators to make the assets under auction available to prospective bidders to facilitate inspection and due diligence.
• Clause (5A) has been added mandating liquidators to specify in the auction public notices that prospective bidders shall submit an undertaking that they do not suffer from any ineligibility under section 29A of the Insolvency and Bankruptcy Code, 2016 (IBC) to the extent applicable and that if found ineligible at any stage, the earnest money deposit (EMD) shall be forfeited.
• Clause 12A mandates that liquidators are to confirm the highest bidder’s eligibility within three (3) days of declaration of the highest bidder;
• Clause 12B mandates that liquidators are to present the auction results, details of highest bidder, and the due diligence conducted on it to the Stakeholders’ Consultation Committee (SCC) under regulation 31A;
• Clause 12C mandates that liquidators are to declare the highest bidder as the successful bidder or reject such bid, after consultation with the SCC under regulation 31A;
• Clause 12D provides that if a bidder is found ineligible, the earnest money deposited by him shall be forfeited.
• Clause 12E provides that in case the highest bidder is found ineligible, the liquidator may, in consultation with the SCC, declare the next highest bidder as the successful bidder after following the same process as provided under clauses (12A) to (12E).

Further, in view of the amendment, liquidators are now required to provide detailed disclosures regarding tax deductions before depositing unclaimed dividends and undistributed proceeds into the Corporate Liquidation Account. The relevant forms have now been revised to include fields for confirming tax deductions, citing applicable statutory provisions, and explaining the reasons for unclaimed dividends or undistributed proceeds.

The amendment brings significant changes designed to enhance the efficiency and transparency of liquidation proceedings. The changes are anticipated to encourage wider participation in the auction processes and speed up liquidation proceedings by eliminating unnecessary delays and ensuring timely compliance.