Public Announcement of CIRP under Section 15 of IBC

The Insolvency and Bankruptcy Code, 2016 (IBC) was introduced to create a consolidated framework for insolvency resolution in India. One of its important features is the Corporate Insolvency Resolution Process (CIRP), which provides a time-bound mechanism to address defaults by corporate debtors.

Once an application for initiation of CIRP is admitted by the Adjudicating Authority, certain immediate steps must follow to ensure transparency and participation of stakeholders. Among these, the public announcement of CIRP under Section 15 of the IBC plays a crucial role. It acts as an official notice to the world that insolvency proceedings have commenced against a corporate debtor and invites creditors to submit their claims.

This article provides a detailed explanation of Section 15 of the IBC, its scope, requirements, procedures, and significance.

Legal Provision: Section 15 of IBC

Section 15, effective from 1 December 2016, mandates the public announcement of CIRP. It lays down what details must be included and the manner of publication.

Contents of the Public Announcement

According to Section 15(1), the announcement must contain the following particulars:

1. Corporate Debtor Information: Name and address of the corporate debtor under CIRP. This ensures that stakeholders are aware of which entity has entered insolvency.
2. Registration Details: The name of the authority with which the corporate debtor is incorporated or registered. For example, the Registrar of Companies in case of a company.
3. Deadline for Submission of Claims: The last date within which creditors must submit their claims. This creates certainty and enables proper collation of claims by the Interim Resolution Professional (IRP).
4. Interim Resolution Professional (IRP) Details: Information about the IRP who will take over the management of the corporate debtor. The IRP becomes responsible for receiving claims and running the affairs during the interim period.
5. Penalties for False Claims: A warning that making false or misleading claims will attract penalties under the Code. This discourages frivolous or fraudulent claims.
6. Closure Date of CIRP: The date on which CIRP will end, which is the 180th day from the date of admission of the application under Section 7, 9, or 10. This highlights the time-bound nature of the process.

Mode of Announcement

Section 15(2) states that the public announcement shall be made in the manner specified by regulations. This includes:

• Publication in newspapers (both English and regional language).
• Posting on the official website of the Insolvency and Bankruptcy Board of India (IBBI).
• Any other medium as directed by the Adjudicating Authority.

Responsibility for Making the Announcement

The Interim Resolution Professional (IRP) is responsible for making the public announcement. According to the Code, the IRP must make the announcement within three days of their appointment.

Failure to make the announcement within the prescribed time may attract consequences, as it undermines transparency and could affect the rights of creditors.

Costs of Public Announcement

The initial costs of making the announcement, such as publication in newspapers, are to be borne by the applicant who filed for initiation of CIRP. However, these expenses are later treated as part of the insolvency resolution process costs and can be reimbursed by the Committee of Creditors (CoC).

Purpose of the Public Announcement

The public announcement serves multiple purposes within the insolvency framework:

1. Transparency: It ensures that the initiation of CIRP is known to all stakeholders, including creditors, employees, government authorities, and the general public.
2. Call for Claims:  It provides an opportunity to creditors, both financial and operational, to submit their claims to the IRP within the stipulated time.
3. Preventing Secrecy: By mandating publication in newspapers and websites, it prevents the process from being conducted privately or secretly.
4. Protection of Stakeholder Interests:  It safeguards the rights of all stakeholders by ensuring that no interested party is left uninformed about the insolvency proceedings.
5. Clarity on Process Timeline: The announcement specifies the closure date of CIRP, emphasising the strict 180-day timeline, subject to permitted extensions.

Regulatory Framework

The Insolvency and Bankruptcy Board of India (IBBI) has issued detailed regulations governing the manner in which public announcements are to be made. For example:

• IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 outline the format of the announcement and the platforms for publication.
• The announcement must be in Form A, which is prescribed under these regulations.

Form A – Standard Format

Form A is the standard template for making a public announcement under Section 15. It typically contains the following:

• Name of the corporate debtor.
• Date of incorporation.
• Authority with which registered.
• Details of IRP including address, email, and phone number.
• Last date for submission of claims.
• Classes of creditors who can submit claims.
• Penalties for false claims.
• Estimated date of closure of CIRP.

This uniform format ensures consistency across announcements and makes it easier for stakeholders to access required information.

Case Law on Public Announcement under Section 15

Indian courts and tribunals have repeatedly emphasised the importance of strict compliance with Section 15.

1. Surendra Trading Company v. Juggilal Kamlapat Jute Mills Co. Ltd. (2017): The Supreme Court stressed that timely actions under IBC are essential to meet the objective of resolution in a time-bound manner. Public announcement within prescribed time is one such step.
2. ICICI Bank v. Unimark Remedies Ltd. (NCLT, Mumbai Bench): The Tribunal noted that the public announcement is a statutory requirement and cannot be ignored, as it forms the basis for inviting claims from creditors.
3. Alchemist Asset Reconstruction Co. v. Hotel Gaudavan Pvt. Ltd. (2017): The Supreme Court reiterated the significance of CIRP being conducted transparently. Public announcement was considered an important measure to achieve this goal.

Conclusion

The public announcement of CIRP under Section 15 of IBC is a cornerstone of the insolvency resolution framework. It provides transparency, ensures participation of all creditors, and sets the stage for a fair and efficient resolution process.

By mandating details such as corporate debtor information, IRP details, claim deadlines, penalties, and closure dates, Section 15 ensures that the insolvency process is conducted in an open and accountable manner.

While challenges like publication costs and limited reach exist, the provision plays a vital role in protecting stakeholder interests and upholding the integrity of the IBC.

In sum, Section 15 reflects the spirit of the IBC: resolution through transparency, fairness, and participation within a strict timeline.