IBBI discussion to enhance integrity of the Corporate Insolvency Resolution Process (CIRP)
The Insolvency and Bankruptcy Board of India (IBBI) has issued a discussion paper inviting public comments on proposals aimed at enhancing the integrity of the Corporate Insolvency Resolution Process (CIRP). The key measures proposed include:
Recording of Deliberation on Eligibility under Section 29A: The Committee of Creditors (CoC) may now be required to formally record its deliberations on the resolution applicant’s eligibility under section 29A. To enable this, a new sub-regulation 39 (C) is sought to be added mandating such perusal of eligibility, the due diligence report, affidavit and other information provided in the resolution plan and record the deliberations in the minutes of the meeting.
The proposed measure seeks to encourage CoC members to engage more deeply in the due diligence process, reduce potential litigation on eligibility-related issues, and promote fair and lawful participation.
Enhanced Disclosure under Section 32A: Prospective Resolution Applicant (PRA) may be required to disclose their ultimate beneficial owners along with an affidavit confirming the eligibility for the benefit of Section 32A. The impugned section grants immunity to the corporate debtor (CD) and its property from past offences only if control changes hands, excluding prior owners or related parties involved in the wrongdoing. The move addresses challenges faced by RPs/CoCs to establish the identity of potential beneficiaries when PRAs used intricate holding arrangements to obscure actual beneficiaries. In Manish Kumar v. Union of India, the Supreme Court examined the constitutionality and scope of Section 32A, prompting calls for greater clarity and disclosure requirements in resolution plans.
Digital Platform: The Board may notify an online portal for inviting and submitting resolution plans, thereby extending the digitalization benefits currently realized in liquidation processes through eBkray portal (now Baanknet) to the broader resolution framework.
These measures seek to boost due diligence, transparency, and technological adoption in the insolvency resolution framework.
