Amendments will be applicable to those cases that commenced on or after July 25, which is when the changes came into effect
The Insolvency and Bankruptcy Board of India (IBBI) has clarified that the recent amendments to the norms on the liquidation process under the Insolvency and Bankruptcy Code (IBC) will be applicable to those cases that commenced on or after July 25, which is when the amendments came into effect. The IBBI’s clarification comes after stakeholders expressed difficulty in applying the amendment regulations to a liquidation process which commenced before July 25.
As reported earlier by FE, the amendments to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations stipulated that the liquidation process of any corporate debtor under IBC will have to be completed within a year of its commencement.
Further, the amendments called for financial creditors to contribute towards the liquidation cost in case the corporate debtor does not have adequate liquid resources to complete liquidation. In instances where the committee of creditors hasn’t approved a plan on such contribution during the corporate insolvency resolution process, financial creditors would have to contribute in proportion to the financial debts owed to them by the corporate debtor.
Such contributions, along with interest at bank rate thereon will form part of liquidation cost, which is to be paid in priority. The amendments also delved into specifics of process over the sale of corporate debtor as a going concern under liquidation, where the process ‘shall be closed without dissolution of the corporate debtor’.
“In the ongoing cases, implementing the amended liquidation regulations were becoming a challenge for the stakeholders. For instance, in a case where more than a year is gone in the liquidation process and the process is not yet over, the timeline of completion of the process within a year is not possible for all the stakeholders,” Ashish Pyasi, associate partner with Dhir and Dhir Associates, said.
“Similarly, cases where the liquidation process has started and 90 days are over, completion of scheme of arrangement as per the revised timeline was not possible,” he added. Listing other instances of challenges faced by stakeholders, Pyasi said in the liquidation process where assets have been already sold, constitution of a stakeholders’ consultation committee to advise the liquidator would be a futile exercise. Cases where the creditors have filed their claim in liquidation but haven’t decided about relinquishing their security, applying these regulations retrospectively was becoming difficult, he added.