Committee of Creditors Functions as Stakeholder’s Consultation Committee For First 60 Days of the CIRP

The Insolvency and Bankruptcy Code, 2016 (‘Code’) reconceptualised the framework for insolvency resolution in India. It provides a mechanism for the insolvency resolution of debtors in a time bound manner to enable maximisation of the value of their assets, with a view to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders.

As a matter of fact, it would take several years for any economic law to settle down and getting complete clarity on the working of the new legislation.

The IBBI Board, Adjudicating Authority, the Appellate Authority, and judiciary have been at the forefront of the implementation of the Code and have settled or provided clarity to so many contentious issues for the purpose of streamlining the process for the future. One such recent amendment is Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022 which was notified on 16.09.2022 which are primarily aimed to streamline certain processes to augment better recovery. [Notication No.: IBBI/2022-23/GN/REG095 and No. IBBI/2022-23/GN/REG094]

To enable better participation of stakeholders and streamline the liquidation process to reduce delays and realise better value, the amendment in Liquidation Regulations make the following major modifications:

• The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as the Stakeholders Consultation Committee (SCC) in the first 60 days. After adjudication of claims and within 60 days of initiation of the process, the SCC shall be reconstituted based upon admitted claims.
• The liquidator has been mandated to conduct the meetings of SCC in a structured and time bound manner with better participation of stakeholders.
• The scope of mandatory consultation by liquidator, with SCC has been enlarged. Now, SCC may even propose replacement of liquidator to the Adjudicating Authority (AA) and x the fees of liquidator, if the CoC did not x the same during CIRP.
• If any claim is not led during liquidation process, then the amount of claim collated during CIRP shall be veried by the liquidator.
• Wherever the CoC decides that the process of compromise or arrangement may be explored during liquidation process, the liquidator shall le application only in such cases before Adjudicating Authority for considering the proposal of compromise or arrangement, if any, within thirty days of the order of liquidation.
• Specic event-based timelines have been stipulated for auction process.
• Before filing of an application for dissolution or closure of the process, SCC shall advice the liquidator, the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after closure of liquidation proceedings.
• The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations further lay down the manner and period of retention of records relating to liquidation and voluntary liquidation of a corporate debtor or corporate person, respectively.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations further lay down the manner and period of retention of records relating to liquidation and voluntary liquidation of a corporate debtor or corporate person, respectively.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations are effective from 16th September, 2022. These are available at www.mca.gov.in and www.ibbi.gov.in.