The first order objective of the Insolvency and Bankruptcy Code, 2016 (Code) is insolvency the resolution, as evident from the long title to the Code, which reads as: “An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, ...”. Thus, the Code enables a stakeholder to file an application for initiating Corporate Insolvency Resolution Process (CIRP) first and only upon failure of the CIRP to yield a resolution plan, the liquidation process commences.
During the liquidation process, the liquidator makes a public announcement inviting the filing of claims and verifies them. He takes into his custody or control of all the assets of the corporate debtor (CD) and forms a liquidation estate. He endeavours to sell the assets of the liquidation estate through a public auction, in consultation with the Stakeholders’ Consultation Committee (SCC) and wherever required, avails assistance of professionals in the discharge of his duties, obligations and functions. He distributes the realized proceeds among the stakeholders as per the waterfall mechanism provided under section 53 of the Code. On completion of the liquidation process, the liquidator submits an application, along with the final report, to the Adjudicating Authority (AA) for either closure of the liquidation process or dissolution of the CD.
Insolvency and Bankruptcy Board of India (IBBI) invites public comments on the Discussion Paper on “Strengthening Regulatory Framework of Liquidation Process”.
It is proposed to provide in the Liquidation Regulations that if the secured creditors having 60% of the value in the secured debt decide to relinquish or realize the security interest, such a decision shall be binding on the other pari-passu charge holders.
The proposals in the preceding paragraphs aim at achieving the objectives of the Code by expediting the liquidation process and balancing the interest of all stakeholders. This is issued in pursuance of regulation 4 of the Insolvency and Bankruptcy Board of India (Mechanism for Issuing Regulations) Regulations, 2018. The Board accordingly solicits comments on points mentioned in Para 69.
Comments may be submitted electronically by 17th September 2021. For providing comments, please follow the process as under:
(i) Visit IBBI website, www.ibbi.gov.in;
(ii) Select ‘Public Comments’; and then select ‘Discussion paper – Liquidation Process August 2021';
(iii) Provide your Name, and Email ID;
(iv) Select the stakeholder category, namely, -
a) Corporate Debtor;
b) Personal Guarantor to a Corporate Debtor;
c) Proprietorship firms;
d) Partnership firms;
e) Creditor to a Corporate Debtor;
f) Insolvency Professional;
g) Insolvency Professional Agency;
h) Insolvency Professional Entity;
j) Investor; or
(v) Select the kind of comments you wish to make, namely,
a) General Comments; or
b) Specific Comments.
(vi) If you have selected ‘General Comments’, please select one of the following options:
a) Inconsistency, if any, between the provisions within the regulations (intra regulations);
b) Inconsistency, if any, between the provisions in different regulations (inter
c) Inconsistency, if any, between the provisions in the regulations with those in the rules;
d) Inconsistency, if any, between the provisions in the regulations with those in the Code;
e) Inconsistency, if any, between the provisions in the regulations with those in any other
f) Any difficulty in implementation of any of the provisions in the regulations; and
g) Any provision that should have been provided in the regulations, but has not been
h) Any provision that has been provided in the regulations but should not have been provided.
And then write comments under the selected option.
(vii) If you have selected ‘Specific Comments’, please select the para number and then sub-para
number and write comments under the selected para/sub-para number.
(viii) You can make comments on more than one para/sub-para number, by clicking on More
Comments and repeating the process outlined above from point 71(v) onwards.
(ix) Click ‘Submit’, if you have no more comments to make.