The central government on 20 September said it has amended certain rules concerning the insolvency and bankruptcy code (IBC) process to further streamline the liquidation process.
One of the critical changes that has been brought in is constitution of a stakeholders consultation committee (SCC) to ensure participation of all stakeholders.
The Government said the Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) will 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 IBC process, which came into existence in 2016, is seen as a critical reform step in the history of Indian banking. The IBC replaced a clutch of redundant loan recovery mechanisms including the erstwhile corporate debt restructuring plans.
While IBC has made the whole recovery process faster, there is a view that the process still lacks the desired effectiveness as a significant number of cases are ending up in liquidation rather than resolution.
The fresh changes, the government said, is aimed at streamlining the whole process and help creditors realise better value.
As per the latest amendments, the liquidator has been mandated to conduct the meetings of SCC in a structured and time-bound manner with better participation of stakeholders. This was a grey area with many cases facing delays in meetings, resulting in delayed resolution.
Further, the scope of mandatory consultation by the liquidator, with SCC has been enlarged. Now, SCC can even propose the replacement of the liquidator with the Adjudicating Authority (AA) and fix the fees of the liquidator, if the CoC did not fix the same during CIRP, the government said.
Also, i f any claim is not filed during the liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator.
Wherever the CoC decides that the process of compromise or arrangement may be explored during the liquidation process, the liquidator can file an application before adjudicating authority within thirty days of the order of liquidation, the latest amendment says.
Also, the latest amendment clearly stipulates specific event-based timelines for the auction process. "Before filing an application for dissolution or closure of the process, SCC shall advise the liquidator, the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after the closure of liquidation proceedings," the amendments say.