IBBI efforts towards refinement of the insolvency resolution framework

The circular provides detailed instructions for the uploading of orders of different categories forum-wise. To elaborate, in terms of the circular, in relation to the NCLAT and the NCLTs, specific categories of orders are to be uploaded, inter alia, including the corporate insolvency resolution process (CIRP) admission order, liquidation order, approval of resolution plan order, closure of insolvency process through withdrawal under section 12A, appeal, review, or settlement, stay of insolvency process, dissolution order, final order on preferential, undervalued, fraudulent, extortionate credit transaction, and fraudulent and wrongful trading.

For the Supreme Court and the High Court, all orders that relate to categories for NCLTs/NCLAT, as mentioned above and where the IBBI/Ministry of Corporate Affairs is a party, are to be uploaded. The circular also includes an annexure detailing the step-by-step process for accessing and uploading orders, making it user-friendly and straightforward for insolvency professionals (IPs) to comply with the new requirements.

The IBC mandates a liquidation process that involves inviting stakeholder claims, forming a liquidation estate, selling assets, and distributing proceeds. IPs are responsible for ensuring compliance with legal requirements and reporting to the Adjudicating Authority. In view thereof, the IBBI has developed an electronic platform (at https://www.ibbi.gov.in/) for liquidation assignments, requiring IPs to access the platform using a unique username and password.

The responsibility is to submit forms, information, and records on time, ensuring accurate and complete filing of records. The introduction of these electronic forms aims to streamline the process, allowing for systematic record-keeping and seamless reporting.

The discussion paper, inter alia, suggests reducing the amount of information and data that the IPs are currently required to submit. This includes eliminating duplication and simplifying the reporting process to make it more efficient. Further, to alleviate the pressure caused by numerous and overlapping submission dates, the IBBI proposes adjusting compliance deadlines. This change would allow IPs to manage their resources more effectively.

The paper also recommends simplifying the compliance process by combining various reporting systems on the Insolvency Professional Agencies and the IBBI websites into a single, centralized IBBI website. This would eliminate duplication and make it easier for stakeholders to access and use the information.

The IBBI is implementing a singular platform on its website to streamline compliance procedures, ensuring a centralized approach to regulatory operations. This initiative aims to make the reporting process more efficient and less time-consuming by streamlining, auto-populating data, and adopting a monthly reporting cycle.

The discussion paper further emphasizes on the need for electronic forms and filing to minimize errors and omissions, ensuring accurate and reliable information. IPs would be able to upload/submit forms along with relevant information and electronically signed records on the IBBI website.

It has been pointed out by the IBBI that while the CIRP Regulations point towards appointment of separate registered valuer in each asset class, rule 8(2) of the Companies (Registered Valuers and Valuation) Rules, 2017 (Valuation Rules) point toward valuation to be carried out by a single valuer as a whole. Due to inconsistency in the provisions of Valuation Rules and CIRP Regulations, divergent practices are being observed in the market.

In order to streamline the process and remove ambiguities around the present framework of appointment of valuers for the purpose of valuation of the CD and to align the regulations with the valuation rules, the IBBI has proposed that the CIRP Regulations may be amended to specify that the RP shall assign for carrying out the valuations of the CD as a whole to the registered valuers. The registered valuers may conduct the valuation as per rule 8(2) of the Valuation Rules taking inputs for other asset classes or get the valuation for an asset class conducted from another registered valuer, if required.

By way of the paper, the IBBI has also proposed a single valuation estimate for companies up to a certain asset size and for micro, small, and medium enterprises (MSME) companies. This proposal aims to simplify the valuation process for smaller entities, which may not have the resources or the need for multiple valuations.

Another issue addressed is the voting by the AR before their appointment by the Adjudicating Authority. The paper discusses the potential benefits and drawbacks of allowing ARs to vote on behalf of creditors before formal appointment. The paper also delves into the release of guarantors upon approval of a resolution plan. To ensure that there is clarity on the rights of the financial creditor to enforce recovery under guarantee agreements, the IBBI has proposed suitable amendments to the CIRP Regulations to clarify that the resolution plan submitted by the resolution applicant shall not extinguish the rights of the creditors to proceed against guarantors and enforce realization of guarantees governed through various guarantee agreements.

The major changes introduced by the new guidelines are reflective of the IBBI’s proactive approach in addressing the challenges faced in the insolvency domain. The establishment of a panel system, where IPs are required to express their interest and consent to act in the specified roles, introduces a transparent and systematic method for appointments. This panel, valid for a six-month period, will serve as a ready reckoner for the Adjudicating Authority, thereby expediting the appointment process and reducing the time lag between the initiation of insolvency proceedings and the appointment of IPs.

The eligibility criteria provided therein exclude IPs with pending disciplinary proceedings or recent convictions, ensuring that only those with unblemished records are considered for these critical roles. This change is indicative of the IBBI’s unwavering focus on maintaining the sanctity of the insolvency resolution process. Additionally, the requirement for IPs to have an Authorization for Assignment valid for the duration of the panel’s validity is a strategic move to ensure that IPs are not only qualified but also duly authorized to undertake assignments. The guidelines also emphasize sectoral expertise, allowing IPs to indicate their areas of specialization. This nuanced approach ensures that IPs with relevant experience are matched with assignments that align with their expertise, thereby increasing the likelihood of successful resolution outcomes.