The Insolvency and Bankruptcy Board of India ("IBBI”) has, vide gazette notification dated June 14, 2022 notified the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022 (“Amendment Regulations”) to further amend the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“Regulations”), with effect from June 14, 2022.
By way of the Amendment Regulations, following amendments have been made to the Regulations:
a. A new Regulation 2B has been inserted, which provides that an operational creditor along with application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), should also furnish relevant extracts of Form GSTR-1 and Form GSTR-3B filed under the provisions of the relevant laws relating to Goods and Services Tax and the copy of e-way bill wherever applicable. However, the provisions of Regulation 2B will not apply to those operational creditors who do not require registration and to those goods and services which are not covered under any law relating to Goods and Services Tax.
b. A new Regulation 2C has been inserted, which provides that a financial creditor or an operational creditor while filling application under Section 7 or 9 of the IBC, should also furnish details of: (a) Permanent Account Number; and (b) Email-ID.
c. Regulation 4(2) has been inserted, which puts an obligation on the personnel of the corporate debtor, its promoters and any other person associated with the management of the corporate debtor to provide information, within such time and in such format as sought by the interim resolution professional or the resolution professional, as the case may be.
d. Regulation 4(3) has been inserted , which puts an obligation on the creditor to provide to the interim resolution professional or resolution professional, as the case may be, the information in respect of assets and liabilities of the corporate debtor from the last valuation report, stock statement, receivables statement, inspection reports of properties, audit report, stock audit report, title search report, technical officers report, bank account statement and such other information which shall assist the interim resolution professional or the resolution professional in preparing the information memorandum, getting valuation determined and in conducting the corporate insolvency resolution process.
e. Regulation 7(2)(b) provides for other relevant documents on the basis of which the existence of debt due to the operational creditor may be proved. The Amendment Regulations have now added copies of relevant extracts of Form GSTR-1 and Form GSTR-3B filed under the provisions of the relevant laws relating to Goods and Services Tax and the copy of e-way bill, wherever applicable, under the list of relevant documents as aforesaid. However, this will not apply to those creditors who do not require registration and to those goods and services which are not covered under any law relating to Goods and Services Tax.
f. Earlier, Regulation 35(1)(b) of the Regulations provided that if in the opinion of the resolution professional, the two estimates of a value are significantly different, he may appoint another registered valuer who shall submit an estimate of the value. Pursuant to the Amendment Regulations the earlier provisions have been substituted to provide that if the two estimates of a value in an asset class are significantly different, or on receipt of a proposal to appoint a third registered valuer from the committee of creditors, the resolution professional may appoint a third registered valuer for an asset class for submitting an estimate of the value. Further, the following explanation has been added for the purposes of the substituted clause (b):
(i) “asset class” means the definition provided under the Companies (Registered Valuers and Valuation) Rules, 2017;
(ii) “significantly different” means a difference of twenty-five per cent. in liquidation value under an asset class and the same shall be calculated as (L1-L2)/L1, where,
L1= higher valuation of liquidation value
L2= lower valuation of liquidation value.”
g. Regulation 35A(4) has been inserted, which puts an obligation on the creditor to provide to the resolution professional, relevant extracts from the audits of the corporate debtor, conducted by the creditors such as stock audit, transaction audit, forensic audit, etc.
h. Regulation 36(3A) has been inserted, which puts an obligation on the creditors to provide to the resolution professional the latest financial statements and other relevant financial information of the corporate debtor available with them.
i. Regulation 38(2)(d) has been inserted, which now provides that the resolution plan should provide 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 IBC, will be pursued after the approval of the resolution plan and the manner in which the proceeds, if any, from such proceedings shall be distributed. However, the clause will not apply to any resolution plan that has been submitted to the Adjudicating Authority on or before the date of commencement of the Amendment Regulations.
Please find a copy of the Amendment Regulations, here.
This update has been contributed by Aastha (Partner) and Rohit Singh (Assoicate).
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