Experts on insolvency-related matters have suggested reform measures to strengthen the IBC, including clubbing of similar regulations, simpler supervision of insolvency professionals, and a more streamlined liquidation process, in response to a discussion paper by the Insolvency and Bankruptcy Board of India (IBBI) seeking comments and feedback on regulation and compliance.
Last week, the IBBI had floated a discussion paper seeking comments from stakeholders and experts on all regulations notified under the IBC with an aim to ‘simplify, ease and reduce cost of compliance’. In total, the board sought views on 13 regulations including 'IBBI (Insolvency Professional Agencies) Regulations, 2016', 'IBBI (Insolvency Professionals) Regulations, 2016', 'IBBI (Liquidation Process) Regulations, 2016', and 'IBBI (Information Utilities) Regulations, 2017' among others.
Experts said although IBBI over the years has ensured the IBC’s regulatory framework is aligned with constantly evolving jurisprudence, the presence of multiple regulations and regulatory prescription is a hindrance to the resolution process, impacting time-bound closures.
The IBC mandates the Corporate Insolvency Resolution Process (CIRP) should conclude within 330 days, however, the process takes over 700 days to complete. In FY24, the average time taken by CIRP to complete was 716 days, up from 654 days in FY23.
Clubbing of Regulations
Experts have backed the need for simplification and consolidation of regulations, which would lead to faster completion of CIRP, and suggested that the IBBI should club all regulations pertaining to administrative matters such as IBBI (Inspection and Investigation) Regulations, 2017, IBBI (Mechanism for issuing regulations) Regulations, 2018 etc. under one set.
“There are certain regulations that deal with similar concepts/topics, and can be clubbed together under one set of regulations for streamlining the process. These may include (a) IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 and the IBBI (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019; (b) IBBI (Insolvency Professional Agencies) Regulations, 2016 and IBBI (Insolvency Professionals) Regulations, 2016; and (c) IBBI (Liquidation Process) Regulations, 2016 and IBBI (Voluntary Liquidation Process) Regulations, 2017,” said Abhishek Mukherjee, partner, Cyril Amarchand Mangaldas.
The Pre-packaged Insolvency Resolution Process (PPIRP) Rules, the Annual Report Rules and the Registered Valuers Rules may be subsumed within the CIRP Regulations, Mukherjee added.
Other experts suggested that the new IBC amendment Bill, likely to be tabled during the monsoon session, should remove the requirement of NCLT’s approval for extension of timeline for the CIRP to 330 days. Instead, the CoC’s approval should be enough in this regard, they said.
Insolvency Professionals
On insolvency professionals (IPs), some said the dual regulation mechanism of IPs should be done away with. Currently, the functioning of IPs is regulated and supervised by both the IBBI and the Insolvency Professional Agencies (IPAs), resulting in increased cost of compliance.
“Considering that all insolvency professionals are required to mandatorily be enrolled with an IPA in terms of Section 206 of the IBC, one key change could be that the task of regulating the IPs could be delegated to the IPAs to the extent possible and the IBBI can exercise indirect control through their control over the bye-laws of the insolvency professional agencies in terms of Section 205 of the IBC,” said Anoop Rawat, partner, Shardul Amarchand Mangaldas & Co.
Easing Liquidation Process
To streamline the liquidation process under the IBC, experts recommended including an affirmative provision in the regulations, clarifying that the Stakeholders Consultation Committee (SCC) has the final authority on the sale of a corporate debtor as a going concern. “This would eliminate the need for liquidators to seek NCLT’s permission unless specific reliefs and concessions are required, thereby reducing unnecessary filings and expediting the process,” said Abhishek Swaroop, partner, Saraf and Partners.
Swaroop said that the requirement to file progress reports with the NCLTs under Regulation 15 of the Liquidation Regulations should be eliminated. “Instead, progress reports should be uploaded directly on the IBBI portal in a standardized format. This change will reduce delays, cut unnecessary legal costs, and enhance overall efficiency of the IBC process,” he added.
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