The Insolvency and Bankruptcy Board of India has notified the revised norms for the resolution of insolvency process and has paved way for home buyers to seek relief as financial creditors, putting in place clear timelines to be followed by resolution professionals and permitting withdrawal of insolvency applications subject to certain conditions.
The board has mandated that a resolution professional needs to determine whether a corporate debtor had indulged in fraudulent transactions within a specified time period during the resolution process.
The IBBI (Insolvency Resolution Process for Corporate Persons) Regulations were amended, pursuant to an ordinance amending the Insolvency and Bankruptcy Code (IBC).
In cases where there is no agreed-upon interest rate between the parties, the voting share of such a creditor would be in proportion to the financial debt, including an interest rate of eight percent per annum. This becomes significant, especially for home buyers, as it provides clarity on the calculation of total financial debt.
As a result, a resolution professional would now have to form an opinion on whether or not the corporate debtor was involved in preferential, undervalued, extortionate or fraudulent transactions. The professional would also be required to make a determination of any such activity within a specified time period, as per the release.
Further, the revised regulations have put in place a clear roadmap to be followed by the resolution professionals. Now, they have to publish an invitation for Expression of Interest by the75th day from the insolvency commencement date and the resolution professionals have to publish a provisional list of prospective applicants within 10 days from the Expression of Interest submission deadline. 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.
An application seeking withdrawal of insolvency proceedings would be accepted under this law if the same has been approved by the Committee of Creditors concerned with 90 per cent voting share. Once the Committee of Creditors’ nod is in place, then the resolution professional has to submit the application to the adjudicating authority on behalf of the applicant within three days of such an approval.