The Insolvency and Bankruptcy Board of India (IBBI) has notified changes to IBC (Insolvency and Bankruptcy Code), under which a person, who is not eligible under the Code to submit a resolution plan, will not be a party to a compromise in the process. The Union Cabinet, chaired by Prime Minister Narendra Modi, in December had agreed to promulgate an ordinance for further amend the IBC. The changes have been incorporated to make the resolution process more effective and to promote ease of doing business. Also, amendments seek to protect the bidders in IBC cases against the reopening of claims and threat to the assets acquired by them.
As per the amendment, a creditor can't sell or transfer an asset, which is subject to a security interest, to any person, who is not eligible under the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2020, to submit a resolution plan for insolvency process.
"The creditor, who proceeds to realise its security interest, will contribute its share of the insolvency resolution process cost, liquidation process cost and workmen's dues in 90 days of the start of the process. It will also pay the excess of realised value of the asset over the claims admitted in 180 days of the liquidation," says the new notification.
If the creditor concerned fails to pay such amount to the liquidator in 90 days or 180 days, the asset will become part of liquidation estate, it adds.
A liquidator will "deposit the amount of unclaimed dividends, and undistributed proceeds, in along with any income earned thereon into the Corporate Liquidation Account before he submits an application for dissolution of the corporate debtor," it says.