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IBBI proposes changes in insolvency resolution process regulations

Business Line  

The Insolvency and Bankruptcy Board of India (IBBI) has proposed four changes to corporate insolvency resolution process (CIRP) regulations to reduce delays. Firstly, it is proposed that operational creditors file copies of GSTR-1 and GSTR-3B returns along with the e-way bill as additional documentary evidence which can help establish that the supply of goods and services to the corporate debtor has actually taken place. Next, it is proposed to impose an obligation on the Committee of Creditors (CoC) to provide all the relevant information they possess regarding the assets of the corporate debtor (CD) from independent valuation exercises or stock audits that they may have conducted, and the relevant extracts from transaction or forensic audits. Thirdly, under the IBC, the RP or the liquidator is obliged to file applications with the adjudicating authority in respect of avoidance transactions, that is preferential transactions, undervalued transactions, fraudulent transactions etc. found during the CIRP or liquidation process seeking appropriate relief. It has been proposed that the regulations be amended to provide that the manner in which avoidance applications and proceedings are to be pursued should be specifically provided in the resolution plan. Further, if in the RP's opinion the two estimates are significantly different, then another registered valuer shall be appointed, and the average of the closest of the two shall be considered. To make this process less ambiguous and reduce potential litigation, a threshold of 25% difference for appointing a third valuer has been proposed.