IBBI gives timelines for insolvency process, allows withdrawal of application

Insolvency and Bankruptcy Board of India (IBBI) on Wednesday notified norms to allow homebuyers to get relief as financial creditors, permitted withdrawal of insolvency application and provided clear timelines for the process.

In a major amendment to the Insolvency and Bankruptcy Code (IBC), various classes of creditors, including homebuyers, will be allowed to seek relief under the law as financial creditors.

It mandated that a resolution professional should determine whether a corporate debtor had indulged in fraudulent transactions within a specified time period during the resolution process.

"Wherever the corporate debtor has classes of creditors having at least 10 creditors in the class, the interim resolution professional (IRP) shall offer a choice of three insolvency professionals... to act as the authorised representative of creditors in each class,” the notification said.

The insolvency professional, who is the choice of the highest number of creditors in the class, shall be appointed as the authorised representative of the creditors of the respective class.

This will permit homebuyers to now claim their dues at par with financial creditors such as banks and other financial institutions.

Withdrawal of insolvency application

An application seeking withdrawal of insolvency proceedings would also be accepted now under this law if the same has been approved by the Committee of Creditors (CoC) concerned with 90 percent voting share. Also, the application must be “before issue of invitation for expression of interest”.

This will help facilitate out-of-court settlement of several disputes.

Previously, there was no provision for withdrawal of an application under insolvency process once it has been admitted.

“The committee of creditors (CoC) shall consider the application within seven days of its constitution or seven days of receipt of the application, whichever is later. If the application is approved by the CoC with 90 percent voting share, the IRP shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of such approval, according to the release.

"A meeting of the CoC shall be called by giving not less than five days' notice in writing to every participant.

"The CoC may, however, reduce the notice period from five days to such other period of not less than 48 hours where there is any authorised representative and to 24 hours in all other cases," it said.

The revised norms also come against the backdrop of instances where they have been issues related to resolution professionals and entities involved.

Clear timelines for processes

Besides, the revised regulations have put in place a model timeline of the corporate insolvency resolution process (CIRP) and clear road map to be followed by the resolution professionals.

Now, IRPs have to publish an invitation for Expression of Interest (EOI) by the 75th day from the insolvency commencement date and also publish a provisional list of prospective applicants within 10 days from the EoI submission deadline.

"The resolution professional shall issue the information memorandum, the evaluation matrix and the request for resolution plans (RFRP), within five days of issue of the provisional list to prospective resolution applicants and allow at least 30 days for submission of resolution plans," the release said.

Further, the resolution plan should demonstrate that it addresses the cause of default and that the applicant has the capability to implement the plan, among other factors.

Read the amended document here: Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2018