Comments on IBBI Discussion Paper on Streamlining the Liquidation Process
Team Resolution | resolution@vinodkothari.com
The Insolvency and Bankruptcy Board of India (‘IBBI’/ ‘Board’) issued Discussion Paper on Corporate Liquidation Process, dated 14th June, 2022 [1](‘Discussion Paper’) which envisages -(a) Streamlining the constitution of SCC (b) Expanding power of SCC; (c) Relinquishment of security interest by the Secured Financial Creditors; (d) Reduction of timeline of compromise or arrangement process; (e) Clarification regarding submission of progress reports to Board; (f) Event based timelines of Auction; (g) timeline for successive auction, (h) treatment of avoidance application before closure of liquidation process, and (i) consideration of claims submitted during CIRP, and the Board has solicited comments of the same.
Following are our general and specific comments on the proposals made in the Discussion Paper and other aspects of liquidation processes –
A. General Comments
The following are our general comments/suggestions on the proposals made in the Discussion Paper:
1. The general suggestions with respect to various issues faced by liquidators and suggested solutions are as listed below:
1.1. Lightening litigation burden
1.1.1. Infrastructure issues – NCLTs need to be strengthened in terms of benches and bench members;
1.1.2 Continuing engagement with professionals as quite often there are serious gaps in alignment
1.1.3. NCLT members to have strong incentive for better time management
1.1.4. De-clogging NCLTs
a. Remove operational creditors’ claim beyond a hard timeline
b. Move extension application or other matters not requiring adjudication from the domain of NCLTs
c. Create expert advisory cell in IBBI/IPA (similar to informal guidance scheme of SEBI), which the IPs can approach for clarifications/interpretations pertaining to law
d. Identify other non-adjudicative matters, not need exercise of judicial discretion, and move them out of NCLTs
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