IBBI (Liquidation Process) (Second Amendment) Regulations, 2022 – IBBI Notification No. No. IBBI/2022-23/GN/REG094 dated 16.09.2022

Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022

INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
NOTIFICATION
New Delhi, the 16th September, 2022

No. IBBI/2022-23/GN/REG094.- In exercise of the powers conferred by clause (t) of sub-section (1) of section 196 read with section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Insolvency and Bankruptcy Board of India hereby makes the following regulations further to amend the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, namely: –

1. (1) These Regulations may be called the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter referred to as ‘the principal regulations’), in regulation 2B, in sub-regulation (1), after the proviso, the following proviso shall be inserted, namely: –

“Provided further that where the recommendation to explore proposal of compromise or arrangement has been made by the committee under regulation 39BA of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the liquidator shall file the proposal within thirty days of the order of liquidation.”

3. In the principal regulations, in regulation 4,

(i) after sub-regulation (1), the following sub-regulation shall be inserted, namely: –

“(1A) Where no fee has been fixed under sub-regulation (1), the consultation committee may fix the fee of the liquidator in its first meeting.”

(ii) in sub-regulation (2), after the figure and brackets “(1)”, the word, figure, letter and brackets “ and (1A)” shall be inserted.

4. In the principal regulations, in regulation 12, in sub-regulation (2), after clause (b), the following shall be inserted, namely:-

“(c) provide that where a stakeholder does not submit its claims during the liquidation process, the claims submitted by such a stakeholder, and duly collated by the interim resolution professional or resolution professional, as the case may be, during the corporate insolvency resolution process under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, shall be deemed to be submitted under section 38.”

5. In the principal regulations, after regulation 12, the following shall be inserted, namely: –

“12A. Process email ID.

The liquidator shall operate the process email account handed over to him by the resolution professional in accordance with regulation 4C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,2016 and in the event of his replacement, the credentials of such email ID shall be handed over to the new liquidator.”

6. In the principal regulations, in regulation 15, in sub-regulation (1), for the words “Progress Reports to the Adjudicating Authority”, the words “Progress Reports, in the format stipulated by the Board, to the Adjudicating Authority and the Board” shall be substituted.

7. In the principal regulations, in regulation 15, in sub-regulation (4), the proviso shall be omitted.

8. In the principal regulations, in regulation 30, the following proviso shall be inserted, namely: –

“Provided that the liquidator shall also verify the claims collated during the corporate insolvency resolution process but not submitted during the liquidation process, within thirty days from the last date for receipt of claims during liquidation process and may either admit or reject the claim, in whole or in part.”

9. In the principal regulations, in regulation 31A,

(i) for sub-regulation (1), the following shall be substituted, namely:-

“(1) The liquidator shall constitute a consultation committee, comprising of all creditors of the corporate debtor, within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on matters relating to-

(a) remuneration of professionals appointed under regulation 7;

(b) sale under regulation 32, including manner of sale, pre-bid qualifications, reserve price, marketing strategy and auction process.;

(c) fees of the liquidator;

(d) valuation under sub- regulation (2) of regulation 35;

(e) the manner in which proceedings in respect of preferential transactions, undervalued transaction, extortionate credit transaction or fraudulent or wrongful trading, if any, shall be pursued after closure of liquidation proceedings and the manner in which the proceeds, if any, from these proceedings shall be distributed.”

(ii) after sub-regulation (1), the following shall be inserted, namely: –

“(1A) The committee of creditors under section 21 shall function as the consultation committee with same voting rights till constitution of the consultation committee under sub-regulation (1)”

(iii) for sub-regulation (2), the following shall be substituted, namely: –

“(2) The voting share of a member of the consultation committee shall be in proportion to his admitted claim in the total admitted claim:

Provided a secured creditor who has not relinquished his security interest under section 52 shall not be part of the consultation committee;

Provided that the promoters, directors, partners or their representatives may attend the meeting of the consultation committee, but shall not have any right to vote.

Provided further that a financial creditor or his representative, if he is a related party of the corporate debtor, shall not have right to vote.”

(iv) for sub-regulation (3), the following shall be substituted, namely: –

“(3) The liquidator may facilitate the stakeholders of each class namely financial creditors in a class, workmen, employees, government departments, other operational creditors, shareholders, partners, to nominate their representative for participation in the consultation committee.”

(v) after sub-regulation (4), the following shall be inserted, namely: –

“(4A) the representative under sub-regulation (3) or (4) shall vote in proportion to the voting share of the stakeholders it represents.”

(vi) for sub-regulation (6), the following shall be substituted, namely: –

“(6) The liquidator shall convene the first meeting of the consultation committee within seven days of the liquidation commencement date and may convene other meetings, if he considers necessary, on a request received from one or more members of the consultation committee:

Provided that when a request is received by the liquidator from members, individually or collectively, having at least thirty three percent of the total voting rights, the liquidator shall mandatorily convene the meeting.”

(vii) in sub-regulation (9), for the words “present and voting”, the word “voting” shall be substituted.

(viii) in sub-regulation (10), in the proviso, for the words “mention it in the next progress report”, the words “submit the records relating to the said decision, to the Adjudicating Authority and to the Board within five days of the said decision; and include it in the next progress report” shall be substituted.

(ix) after sub-regulation (10), the following shall be inserted, namely :-

“(11) The consultation committee, after recording the reasons, may by a majority vote of not less sixty-six per cent., propose to replace the liquidator and shall file an application, after obtaining the written consent of the proposed liquidator in Form AA of the Schedule II, before the Adjudicating Authority for replacement of the liquidator :

Provided that where a liquidator is proposed to be replaced, he shall-

(a) continue to work till his replacement; and

(b) be suitably remunerated for work performed till his replacement.

Provided that where a consultation committee under Regulation 31A has been constituted before the commencement of Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022, the liquidator within thirty days of the commencement of the said Regulations, shall re-constitute the consultation committee as required under the said Regulations and provisions provided under amended Regulation 31A shall come into effect only after such constitution.”

10. In the principal regulations, in regulation 32A, for sub-regulation (4), the following shall be substituted, namely: –

“(4) The liquidator may sell the assets of the corporate debtor under clause (e) of regulation 32 exclusively only at the first auction.”

11. In the principal regulations, after regulation 32A, the following shall be inserted, namely:-

“32B Conduct of meetings of the consultation committee.

Save as otherwise provided under Chapter III of Part II of the Code and these Regulations, the provisions of regulations 18 to 26 of Chapter VI and Chapter VII of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 shall apply mutatis mutandis to meetings of the consultation committee under liquidation proceedings.”

12. In the principal regulations, in regulation 34,

(i) for sub-regulation (1), the following shall be substituted, namely:-

“(1) For cases under sub-regulation (1) of regulation 35, the liquidator shall, within thirty days from the liquidation commencement date, prepare an asset memorandum in accordance with this regulation based on the information memorandum prepared under section 29, with suitable modifications.”

(ii) after sub-regulation (1), the following sub-regulation shall be inserted, namely:-

“(1A) For cases covered under sub-regulation (2) of regulation 35, the liquidator shall prepare an asset memorandum in accordance with this Regulation within seventy-five days from the liquidation commencement date.”

(iii) for sub-regulation (5), the following shall be substituted, namely:-

“(5) The liquidator shall share the asset memorandum with the Board and members of the consultation committee having voting rights after receiving an undertaking from each member that such member shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other person.”

13. In the principal regulations, in regulation 44, in sub regulation (1), the proviso shall be omitted.

14. In the principal regulations, after regulation 44, the following shall be inserted, namely:-

“44A. Treatment of avoidance of transaction.

The liquidator shall, on the advice of the consultation committee, provide in the application along with the final report filed under regulation 45 for the manner in which proceedings in respect of avoidance transactions, if any, under Chapter III or fraudulent or wrongful trading under Chapter VI of Part II of the Code, will be pursued after the dissolution or closure of liquidation process and the manner in which the proceeds, if any, from such proceedings shall be distributed.”

15. In the principal regulations, after regulation 45, the following regulation shall be inserted, namely: –

“45A. Preservation of records.

(1) The liquidator shall preserve copies of all such records which give a complete account of the liquidation process.

(2) Without prejudice to the generality of the provisions of sub-regulation (1), the liquidator shall preserve copies of records relating to or forming the basis of:-

a) his appointment as liquidator, including the terms of appointment;

b) handing over and taking over of the assignment;

c) admission of corporate debtor into liquidation;

d) public announcement;

e) the constitution of consultation committee and minutes of consultation committee meetings during liquidation process;

f) claims, verification of claims, and list of stakeholders;

g) details of relinquishment or otherwise by secured creditors in liquidation process;

h) engagement of professionals, registered valuers, etc. including work done, reports etc., submitted by them;

i) Invitation, consideration and approval of plans / proposals / scheme received, in case of going concern sale in liquidation process or compromise or arrangement under section 230 of the Companies Act, 2013;

j) all filings with the Adjudicating Authority, Appellate Authority, High Courts, Supreme Court, whichever applicable and their orders;

k) statutory filings with Board and insolvency professional agencies;

l) correspondence during the liquidation process;

m) cost of liquidation process;

n) all reports, registers, documents such as preliminary report, asset memorandum, progress reports, asset sale report, annual status report, final report prior to dissolution, various registers and books, etc. mentioned in regulations 5 and 6 of these Regulations.

o) preferential, undervalued, extortionate credit transactions or fraudulent or wrongful trading.

p) any other records, which is required to give a complete account of the process.

(3) The liquidator shall preserve:

a. electronic copy of all records(physical and electronic) for a minimum period of eight years;and

b. a physical copy of records for a minimum period of three years;

from the date of dissolution of the corporate debtor or closure of the liquidation process or the conclusion of any proceeding relating to the liquidation process, before the Board, the Adjudicating Authority, Appellate Authority or any Court, whichever is later.

(4) In case of replacement of liquidator, the outgoing liquidator shall handover the records under sub-regulation (1) and (2) to the new liquidator and be responsible for preserving the records not handed over, for any reason, to the new liquidator.

(5) Where the corporate debtor has been sold as a going concern under clause (e) of regulation 32, the general records of the corporate debtor shall be handed over to the successful buyer.

(6) The records of the corporate debtor shall be preserved by the liquidator as per the applicable laws.

(7) The liquidator shall preserve the records at a secure place and shall be obliged to produce records as may be required under the Code and the Regulations made thereunder.

Explanation – The records referred to in this regulation include records pertaining to the period of a liquidation process during which the liquidator acted as such, irrespective of the fact that he did not take up the assignment from its commencement or continued the assignment till its conclusion.”

16. In the principal regulations, in regulation 47, in the Table,-

(i) after serial number 3, the following entries shall be inserted, namely:-

Sl. No. Section / Regulation Description of Task Norm Latest Timeline
(Days)
(1) (2) (3) (4) (5)
3A. Reg. 31A (6) First meeting of SCC Within 7 days of LCD T+7

(ii) in serial number 12,

(a) in column 4, for the figure “75” the figures and mark “30/75”, shall be substituted.

(b) in column 5, for the figure “75” the figure and mark “30/75”, shall be substituted.

17. In the principal regulations, in Schedule I, in para (1),

(i) after clause (1), the following shall be inserted, namely:-

“(1A) Subject to provisions of regulation 2B, the liquidator shall issue a public notice of an auction for sale under regulation 32 within forty-five days from the liquidation commencement date unless the consultation committee advises to extend the timeline.

(1B) The liquidator shall issue public notice for the next auction, in case of failure of the auction, within fifteen days from the last failed auction unless the consultation committee advises to deviate from the specified time period.

(1C) Notwithstanding anything contained in this Schedule, the liquidator shall complete an auction process within thirty-five days from the issue of public notice for auction.

(1D) The liquidator shall provide at least fourteen days from issue of public notice for submission of eligibility documents by prospective bidder.

(1E) The liquidator shall provide to qualified bidder at least seven days, for inspection or due diligence of assets under auction, from the date of declaration of qualified bidder.

(1F) A prospective bidder in an auction process shall deposit earnest money deposit at least up to two days before the date of auction.”

(ii) for the clause (7), the following shall be substituted, namely: –

“(7) From a date to be notified through circular by the Board, the liquidator shall sell the assets only through an electronic auction platform empanelled by the Board.”

18. In the principal regulations, in Schedule II, after Form A, the following shall be inserted, namely:-

“FORM AA
WRITTEN CONSENT TO ACT AS LIQUIDATOR
(Under regulation 31A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016)

[Date]

From
[Name of the insolvency professional]
[Registration number of the insolvency professional]
[Address of the insolvency professional registered with the Board]

To
The Stakeholders’ Consultation Committee
[name of corporate debtor]

Subject: Written Consent to act as liquidator.

I, [name], an insolvency professional enrolled with [name of insolvency professional agency] and registered with the Board, note that the consultation committee proposes to appoint me as liquidator under regulation 31A of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 for conducting liquidation process of [name of the corporate debtor].

2. In accordance with aforementioned regulation, I hereby give consent to the proposed appointment.

3. I declare and affirm as under: –

a. I am registered with the Board as an insolvency professional.

b. I am not subject to any disciplinary proceedings initiated by the Board or the Insolvency Professional Agency.

c. I do not suffer from any disability to act as a liquidator.

d. I am eligible to be appointed as liquidator of the corporate debtor under regulation 3 and other applicable provisions of the Code and regulations.

e. I shall make the disclosures in accordance with the code of conduct for insolvency professionals as set out in the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016;

f. I am having the following processes in hand

Sl .No. Role as No .of Processes on the date of Consent
1 Interim Resolution Professional  
2 Resolution Professional of
a. Corporate Debtors
b Individuals
 
3 Liquidator of
a. Liquidation Processes
b. Voluntary Liquidation Processes
 
4 Bankruptcy Trustee  
5 Authorised Representative  
6 Any other (Please state)  

 

Date: 
Place:

(Signature of the insolvency professional)
Registration No. …….”

19. In the principal regulations, in Schedule II, in Form B, before the words “Name and signature of liquidator”, the words and expression “In case a stakeholder does not submit its claims during the liquidation process, the claims submitted by such a stakeholder during the corporate insolvency resolution process under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, shall be deemed to be submitted under section 38.” shall be inserted.

RAVI MITAL, Chairperson
[ADVT.-III/4/Exty./276/2022-23]

Note : The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 were published vide notification No. IBBI/2016-17/GN/REG005 dated 15th December, 2016 in the Gazette of India, Extraordinary, Part III, Section 4, vide No. 460 on 15th December, 2016 and were last amended by Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2022 vide notification No. IBBI/2022-23/GN/REG082 dated the 28th April, 2022 in the Gazette of India, Extraordinary, Part III, Section 4, vide No. 231 on 28th April, 2022.


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