To facilitate more effective representation of certain classes of creditors like home buyers during the corporate insolvency resolution process (CIRP), the regulator has allowed them to use the services of an additional aide – interim representative (IR)– during the deliberations of the Committee of Creditors.
Experts say this would help address concerns about delays in insolvency resolution and ensures a more transparent process.
The interim representative will act as a representative for a class of creditors during the period when the application for appointment of the “authorised representative” (AR) is under consideration of the Adjudicating Authority (AA) for approval.
The services of IR, who will act as a bridge between the creditors concerned and the CoC, can be used by all types of creditors including financial and operational creditors. In practical terms, however, their services will be availed the most by creditor classes which are more heterogenous in nature, and consists of larger number of stakeholders, like home buyers.
The IR will have the same rights and duties as an authorised representative in meetings of the CoC, sources said.
An authorised representative under the Insolvency and Bankruptcy Code (IBC) is a registered insolvency professional who represents financial creditors in the Committee of Creditors (CoC).
The Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency Resolution Process for Corporate Persons Regulations, 2016 (CIRP Regulations) to bring the change into effect.
Earlier, the interim resolution professional was required to file an application to the AA for appointment of authorised representative who has mustered the highest number of votes of financial creditors in a class, to act as the authorised representative of the financial creditors. The regulations were silent on the rights and obligations of the financial creditors in a class during the time when the application of its authorised representative was pending before the AA.
To fill up the said vacuum and to allow representation of the financial creditors in a class in the CoC, the newly amended CIRP Regulations provides that till the application for appointment of the authorised representative for a class of creditors is under consideration before the AA, the insolvency professional selected by the FCs shall act as an interim representative, explained Anoop Rawat, partner, Shardul Amarchand Mangaldas & Co.
Aishwarya Kaushiq, advocate-disputes practice, BTG Advaya said that the amendments are expected to strengthen creditor representation, particularly for sectors with large-scale financial exposure. “As seen in real estate and infrastructure projects, where multiple stakeholders are involved, having interim representation enhances decision-making efficiency,” she added.
Divyanshu Pandey, partner, JSA Advocates and Solicitors said that given the volume of cases in NCLT, with this provision, interest of a stakeholder in a class will be protected.
A class of creditors, like homebuyers, have varied interests, and it is important to find a consensus so that insolvency resolution is effective and no one feels short changed. “This amendment will facilitate intervention by a class of creditors and will enable them to watchout for their interest in the early stage of insolvency resolution proceedings,” Pandey added.